Irrationality Game

Prediction markets are a terrible way of aggregating probability estimates. They only enjoy the popularity they do because of a lack of competition, and because they're cheaper to set up due to the built-in incentive to participate. They do slightly worse than simply averaging a bunch of estimates, and would be blown out of the water by even a naive histocratic algorithm (weighted average based on past predictor performance using Bayes). The performance problems of prediction markets are not just due to liquidity issues, but would inevitably crop up in any prediction market system due to bubbles, panics, hedging, manipulation, and either overly simple or dangerously complex derivatives. 90%

Hanson and his followers are irrationally attached to prediction markets because they flatter libertarian sensibilities. 60%