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Lumifer comments on [Link] Small-game fallacies: a Problem for Prediction Markets - Less Wrong Discussion
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Not quite. Prediction markets allow you to bet on your forecasts and their aggregate output is just capital-weighted opinion of the participants. They incentivize being honest about one's forecasts, but that's a very different thing from "feeding accurate information".
No. If you forecast that the price of gold will go up, and the price instead goes down, then being honest about your forecast loses you money. Prediction markets reward people for making accurate predictions. Whether those predictions were an accurate reflection of beliefs is irrelevant.
Pretty much everything in life "reward[s] people for making accurate predictions". That's not the issue.
The problem is that to "supply accurate information" you need to know what is "accurate" ex ante and you don't. At the time you submit your bet to a prediction market you're operating on the basis of expectations -- you have no access to the Truth about the outcome, you only have access to your own beliefs. Accordingly, you don't tell the prediction market what is the correct choice, you tell it what you believe is the correct choice. Prediction markets aggregate beliefs, not truth values.