This is a linkpost for https://worksinprogress.co/issue/why-prediction-markets-arent-popular/
I argue with J. Zachary Mazlish that, among other things, regulation is not the primary obstacle to prediction markets, so philanthropic dollars should not be used to lobby for their deregulation.
Thanks for sharing!
Here's the part I found most interesting [emphasis mine]:
Happy to see this discussion moving forward.
Some quick points:
1. I largely agree about being skeptical about conventional prediction markets, compared to their hard-core enthusiasts. I came to similar conclusions a few years back, in part because I noticed that prediction markets were legal in the UK but no one used them.
2. The main value (that we care about) of prediction-markets ultimately is an externality. I'm not very optimistic about subsidies for them.
3. Obviously, prediction tournaments like Metaculus / Good Judgement Project, are not prediction markets, as described here.
4. All that said, I think that formal prediction markets do clearly produce some value and can fill a useful niche. For example, they could allow for hedging in areas that provide useful information to the public. In some of these cases, to the public, this is could be a literal epistemic free lunch. Sure, it's not all the epistemic information you might ever want, but it is something. This is equivalent to the fact that the stock market provides a lot of great information to the public, for free, but that the information is limited+specific.