One common theme which I come across quite a bit in the prediction market space is:

Prediction markets would solve [x][1]

And the proposal for "solving" [x] is:

Set up prediction market
???
Profit

These people need to consider the idea that "prediction markets aren't as popular as think think because they aren't as good as you think". (And I say this as a person who is a big fan of prediction markets!) If you think prediction markets are valuable it's likely because you think they price things well - probably due to some kind of market efficiency... well why hasn't that efficiency led to the creation of prediction markets...

Where are all the prediction markets?

Maybe if prediction markets aren't popular for your specific usecase, it's because prediction markets are less efficient.

The cost to markets of acquiring information is high

Prediction markets are very good at [...]

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Outline:

(00:59) The cost to markets of acquiring information is high

(01:15) Simple example - all information from same source

(02:54) Additional theoretical justification

(03:34) Concrete Example - Manifold.Love

(04:52) Where should we expect to see prediction markets?

The original text contained 4 footnotes which were omitted from this narration.

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First published:
December 21st, 2023

Source:
https://www.lesswrong.com/posts/zLnHk9udC28D34GBB/prediction-markets-aren-t-magic

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Narrated by TYPE III AUDIO.

“Prediction Markets aren’t Magic” by SimonM

LessWrong (30+ Karma)