Prediction Markets: Is it accuracy or efficiency that is most important when it comes to prediction markets?

Prediction Markets / Editor / 18 February 2009 / Leave a comment

One of the most influential bloggers on prediction markets thinks that the accuracy of prediction markets has been exaggerated in the past, and it is in fact efficiency that should be of more interest...

The main benefit of prediction markets is their ability to assimilate information quicker than any other means out there, and certainly quicker than the media, according to Chris Masse on his Midas Oracle blog.

He said: "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 betwteen expectations and omni-science (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."

Alternative arguments are presented in the discussion for that post and are well worth a read for anybody interested in these markets.

Click here to read the full post on Midas Oracle.