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HonoreDB comments on Histocracy: Open, Effective Group Decision-Making With Weighted Voting - Less Wrong
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If smart money keeps coming in, then over time, Idiot Jed's opinions get discounted more and more, asymptotically (with exceptions like the one I mention in the other thread, where it's actually not smart to bet against him even though he's wrong). But if you're looking at one time-slice of a market-state, and you know that Idiot Jed is buying, you should always adjust in the opposite direction.
This is false. What makes you think you are better at accounting for Jed's idiocy than the other people in the market are? You need to abandon your equivocation between markets and an arithmetic mean of participant estimates. It really is more complicated than that.
At time t, the market hasn't adjusted yet. The other people in the market are noticing that the contract is overvalued because of Jed, so they're preparing to short it, which is how the market will adjust. Meanwhile, I'm noticing the same thing, so I'm making a prediction that's better than the market's current prediction.