NZPA have just issued a story (“Making predictions now online business”, Tuesday 9 Sept), which I read via Stuff about iPredict.co.nz, the new, online prediction market.
There are a few things that need to be corrected about this story. Firstly, prediction markets are not strictly following the wisdom of crowds rules, as outlined in the famous book of that name. For one thing, in a prediction market you can see trends from other people’s choices. You are aware of what the other agents in the market have been/are doing. Which is why prediction markets can be gamed, the prediction market itself going on to influence public opinion. This leads on to the next point and that is, although prediction markets were gaining in academic credence, there has, in fact, been a recent backlash against prediction markets.
But typically the journalist who wrote this piece did not investigate the negative sides of prediction markets, instead relying on the media spin presented to her/him by the founders of iPredict.