The conventional reply is that noise traders improve markets by making rational prediction more profitable. This is almost certainly true for short-term noise, and my guess is that it's false for long-term noise, i.e., if prices revert in a day, noise traders improve a market, if prices take ten years to revert, the rational money seeks shorter-term gains. Prediction markets may be expected to do better because they have a definite, known date on which the dumb money loses - you can stay solvent longer than the market stays irrational.