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Dagon comments on Open Thread: July 2010, Part 2 - Less Wrong
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I have a question about prediction markets. I expect that it has a standard answer.
It seems like the existence of casinos presents a kind of problem for prediction markets. Casinos are a sort of prediction market where people go to try to cash out on their ability to predict which card will be drawn, or where the ball will land on a roulette wheel. They are enticed to bet when the casino sets the odds at certain levels. But casinos reliably make money, so people are reliably wrong when they try to make these predictions.
Casinos don't invalidate prediction markets, but casinos do seem to show that prediction markets will be predictably inefficient in some way. How is this fact dealt with in futarchy proposals?
Casinos have an assymetry: creation of new casinos is heavily regulated, so there's no way for people with good information to bet on their beliefs, and no mechanism for the true odds to be reached as the market price for a wager.
Normally I wouldn't comment on a typo, but I can't read "assymetry" without chuckling.