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RobinHanson comments on Hayekian Prediction Markets? - Less Wrong
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In the absence of decisive empirical evidence, the amount of credence to give to a particular prediction method (whether absolutely or relative to alternative methods) depends in part on what theoretical claims are being made for it, and on how well-supported those claims are. The articles that I linked to don't just say that prediction markets do reasonbly well in aggregating information, or that they do better than the alternatives. Rather, they make explicit reference to Hayek's famous argument which, as I understand it, involves a strong claim of incorporating lots of tiny pieces of information held locally by individuals. And without leaning too hard on a single quote, one of those articles seems to have you agreeing:
I think there is a fairly clear question here of just how strong an absolute "Hayeakian information aggregation" claim you are making.
A standard debating tactic is to attribute overly strong claims to the other side, which seem easy to knock down. You don't have any concrete quotes of such overly strong claims, so you seem to be just assuming someone must have said something overly-strong somewhere. Re the quote from me, that quote doesn't say how much info gets aggregated from any given group.
In the original post, I said regarding our sole conversation on the subject that I can reall:
Then I added:
That sentence had a link to an article that contained the quote in my comment above. Taken all together, does that really strike you as me "attibuting overly strong claims" to you? It sure doesn't strike me that way. I pointed out that you've said some things that seem to lean in a pretty "Hayekian" direction, explicitly acknowledged that I'm not certain to what extent you are making those kinds of claims on behalf of prediction markets (I'm still not), and asking you to clarify. If you think that's a debating tactic, then you and I have very different ideas of what a debating tactic is.
The debating tactic he seems to be referencing is that you seem to claim that large amounts of information will be added, while his claim is only that some information will be added ("don't think he forswore the Hayekian idea entirely" seems pretty weak). It also feels strongly like you are attacking the Hayekian idea, but not providing an attack; saying "I don't believe this" but not substantiating.
In case people are falling to representation bias from your example, here's a way the prediction market could work out:
One extremely ardent organizer or supporter from the town feels that with the amount of popularity she's experienced the candidate has a much better chance (perhaps due to selection bias from seeing the signs and speaking to reporters) than most predictors, she would see the prediction market as a better investment. And if the prediction markets were national in scope but more localized in specialized information (perhaps consider the recent Massachusetts senate race?), a local might have substantial reason to believe that they're local information would be better than national info.