Prediction markets operate opposite to social media platforms by incentivizing diversity of opinion among participants. The market's incentive structure causes it to be depolarizing, attracting individuals with different views and preventing filter bubbles. This contrasts with social media platforms which tend to reinforce users' existing views. The insight highlights the power of prediction markets in challenging and diversifying opinions by attracting a variety of traders, ultimately leading to a more functional market.
Experts often build models to help predict how systems will behave. But what happens if, instead of asking the experts to build models, we ask laypeople to simply predict outcomes?
This is what happens in 'prediction markets'. And it turns out that in some situations, the 'wisdom of the crowd' often outperforms experts' models.
To break down what prediction markets are and how they work, we're joined by Rajiv Sethi, Professor of Economics at Barnard College at Columbia University and External Professor at the Santa Fe Institute.
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