As 2005 draws to its close it is customary to make some predictions about the following year. I won’t do so. The world’s stock markets are ending the year in better shape than I would have expected a year before, notwithstanding the impact of higher oil prices and the devastating hurricanes that hit the U.S. gulf coast. What is interesting to me though is how the market in making predictions has continued to accelerate, spawining exotic derivatives connected even to the weather.
More than two years ago in the United States, some policymakers toyed with the idea of a predictions market to help figure out terrorist threats. The idea was killed off, partly, so it was argued, due to some terrible PR for the idea as well as a cowardly refusal to embrace controversial ideas. Lawrence Lessig takes a different view here.
The market in making predictions has, of course, been around for decades, if one thinks about the commodity futures markets such as the great wheat futures markets in Chicago, for instance. This Wikipedia entry I linked to shows just how broad the prediction market now goes, such as people taking bets on future scientific innovations, and so on. And these markets can be harnessed to garner useful knowledge about where certain things may be headed as well as fund valuable research.
That’s my prediction, anyway.
(Wikipedia link fixed. Thanks to a commenter for pointing out the error).