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9eB1 comments on Prediction Markets are Confounded - Implications for the feasibility of Futarchy - Less Wrong Discussion
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Deciding the outcome based on the price in the betting market is the whole point of futarchy. You seem to be saying that prediction markets in absence of futarchy don't provide good advice on how you should vote. That is an interesting point which I hadn't considered before your post.
I am still uncomfortable with your example, however. If Kim is overthrown prior to the election, the market rates will adjust based on that information. If he's overthrown after the election, then there is no causal link between that and the election results, presumably. Prior to his overthrow, the market simply provides the best estimate of the outcome until that result is known. All that means is you shouldn't make decisions based on outdated estimates that didn't include all known information.
Yes, the point of futarchy is to make the decision based on the price in the prediction market. What I am saying is that if you want participants to provide their best guesses about which decisions will maximize the outcome, you have to make a credible pre-commitment that the only factor that influences the decision is the prediction market that is currently being traded. You can only make such a commitment for one prediction market per decision (but like you say, the outcome measure can be arbitrarily complex)
I think you are right that once it becomes known whether Kim is overthrown, it is no longer a confounder. Therefore, the bias should be expected to get lower the nearer we get to the decision time point. However, some confounders may be unobservable, or unobserved until the time the decision is made. For instance, if this is not a pure futarchy and there is voting going on, you may gain information from the make-up of the electorate. Imagine there is a referendum on a 70% income tax and Bernie Sanders is running for President. Even if he has no influence on whether the referendum passes, his chances of being elected will be correlated with the outcome of the referendum, and you won't know which state you are in until you see the exit polls.