Jim has written here before about the prediction market of NewsFutures as an example of how, in a market-based situation, a lot of people can not only be wrong, but be illogically dedicated to an obvious error. So much for the genius of the marketplace. Still, NewsFutures is a bit of fun, in the sense of a game of anticipating what other people will do.
There’s another prediction market out there, however, that just isn’t much fun yet. It’s called Memes. Memes has an interesting framework, but it shows another fallacy of market-based politics: When there aren’t very many people actually making decisions in the market, it’s not a good representation of overall opinion, much less wisdom. The problem of Memes is that there just aren’t many people trading in prediction futures there. Not a lot of action equals not a lot of reason to stay around, and not much reason to continue to participate, resulting in even fewer simulated purchases of futures than the membership would imply.
That means that, even as events change, the futures remain static. It also means that the input of just one or two people in a futures market can skew that market dramatically. I set up a market there a few days ago to deal with the question of whether a Democrat would be the next President of the United States or not, and, so far, only 4 people have participated in the market. Another market shows Barack Obama far ahead in the race to become President in 2008, but that’s just because I happened to buy a lot of those futures myself.
Market manipulation goes on in the real world too, and that’s why I just don’t trust market-based solutions to problems like global climate change. If we want something important to be done, we shouldn’t depend upon the marketplace. We ought to get down to work, and use the power of government to make it happen.
