Wiser

CHAPTER 11

Prediction Markets

Prediction markets, a recent innovation, have proved remarkably successful at forecasting events. Indeed, such markets often seem to do better than deliberating groups. Prediction markets are worth careful attention because they offer important insights into how to make deliberation go better, because they provide general lessons about collective intelligence, and because an actual prediction market can sometimes be a useful device for many private and public organizations.

Hayek and the Price System

To understand prediction markets, we should begin with Friedrich Hayek, the great twentieth-century critic of socialism and economic planning. Hayek emphasized the importance of free markets, above all as a way of ...