Prediction markets: all about velocity, not accuracy?

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Chris Masse writes:

The reality check is that the social utility of the prediction markets is marginal. The added accuracy is minute, and, anyway, doesn’t fill up the gap betweeen expectations and omniscience (which is how people judge forecasters). In our view, the social utility of the prediction markets lays in efficiency, not in accuracy. In complicated situations, the prediction markets integrate facts and expertise much faster than the mass media do. It is their velocity that we should put to work.

Interesting. This relates to other technology-based ways of aggregating information, such as using cell phone traffic to track epidemics.

3 thoughts on “Prediction markets: all about velocity, not accuracy?”

  1. That's a really good point Chris makes. It's always good to remind anyone who mentions prediction models that they are simple a really efficient aggregation algorithm. They handle bias, incentives, and aggregation pretty well. What they don't do it tell the future. 5 years ago most business leaders had never heard of prediction markets. Thanks to "the Wisdom of Crowds" there's a small but earnest group of business folks who think that, if properly implemented, prediction markets can tell the future. The truth is somewhere in between.

    -JD

  2. You mentioned:

    > such as using cell phone traffic to track
    > epidemics.

    Did you have a real reference in mind here? I was only able to find information about the now (in)famous study of 100,000 cell phone users in Europe and a few choice comments about "usage spreading like an epidemic".

    I didn't find any hint that anybody was really going to use cell phone traffic to track epidemics.

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