This theory also generates the prediction that being ungenerous to one's own kin should be attractive

Isn't that what makes "Romeo and Juliet"-like stories "romantic"? When one forsakes one's own genetic clan to elope with the mate, it signals extreme devotion to the mate and is therefore attractive.

In this comment, I merely want to focus on using the Challenger Disaster Reaction example of market capabilities. I think it's a bad example.

I think it's basically a very interesting story that would be good to tell people at a party or in a TED talk to introduce people to the idea of prediction markets by using an obviously extreme example.

I think it is a mistake to confuse good storytelling with good empirical evidence. I don't think it's valuable empirical evidence about the market being able to make these kinds of predictions.

1. At a quick naive approximation, there's already a 25% chance that 1 out of 4 contractors of the mission would be coincidentally correctly identified as the one with most fault. Very low bar; shouldn't cause you to update much in terms of bayesian evidence.
2. Even after extensive research after the events, analysts could not identify the mechanism by which the market was able to produce this result, if we assume it was not coincidence. The sources linked in this article quotes the researchers thusly:
   
   "a perplexing situation that while markets appear to work in practice, we are not sure how they work in theory."
   
   Which is totally consistent with the null hypothesis of "win 2 coinflips". As far as we can tell, it's either insider info, or coincidence, because there is no causal mechanism to derive this result from public information!
3. It is especially concerning, that this seems like an appeal to the mysticism of markets. It seems like one is handwaving the lack of identifiable causal mechanisms and saying "markets work because they're basically magic, look at this magical-seeming example we found"
4. If it really is that efficient and we simply can't figure out the mechanism because we're too stupid, at least we would see tons of other examples. Can we get like another 100 examples like this one? I just find it suspicious that we're giving so much hype to an example that happened in 1986. Surely there would be some other flashy examples since then as well? If that is the case, it would be more convincing to list all of them instead of focusing on this single example.
   
   I realize that's asking for a lot more effort, but that would be what it would take to actually make this convincing, because I think picking one example from 1986 that could have happened due to 2 coinflips is close to useless in convincing me. But worse, it is using the Dark Art of storytelling which may convince people when they shouldn't be convinced.