Simplifying Complexity How can we harness the wisdom of the crowd?
5 snips
Jan 8, 2024 Rajiv Sethi, Professor of Economics at Bernard College at Columbia University, discusses prediction markets and how they harness the wisdom of the crowd. They explore the concept of markets as speculation and aggregation of information, compare prediction markets to epidemiological models, and suggest using prediction markets to capture rare events more effectively.
AI Snips
Chapters
Transcript
Episode notes
Prediction Markets Outperform Models
- Prediction markets let random people bet on outcomes instead of experts building models.
- These markets can outperform expert models, especially in social contexts.
Markets Use Diverse Knowledge
- Prediction markets aggregate diverse models in participants’ heads dynamically through betting.
- This can include variables overlooked by conventional epidemiological and climate models.
Markets Reacted Fast to Bin Laden News
- After bin Laden's killing in 2011, prediction markets quickly raised Obama's re-election odds.
- Models couldn't react as fast or to variables like debate performance later that markets did.