Tyler Cowen: prediction

Transcript context

…What would Hayek think of prediction markets? Well, there were prediction markets in Hayek’s time. I don’t know that he wrote about them, but I strongly suspect he would see them as markets that through prices, communicate information. But even around the time of the civil war, there were so-called bucket shops in the US and New York where you would bet on things. They were betting markets with cash settlement, probably never called prediction markets, but they were exactly that. Later on, they were banned. But it’s an old standing thing. There were betting markets on lives in 17th century Britain, different attempts to outlaw them, which I think basically ended up succeeding. But under the table, I’m sure it still went on to some extent. Yeah. The reason it’s interesting to think about this is because his whole argument about the price system is that you can have a single dial that aggregates so much information, but it’s precisely for this, and for that reason, it’s so useful to somebody who’s trying to know based on that information. But it’s precisely for this reason that it’s so aggregated that it’s hard to learn about any one particular input to that dial.…

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