Surely such prediction markets are a guarantee of corruption?
That or I just don't understand - if a market exists that takes bets on human actions such as passing laws, how long someone will live etc, the betters will have a very active interest in doing everything they can to make a large profit, of which corruption alone is the most obvious target.
I mean in a way you're right - it is wisdom of crowds, albeit crowds of people that "know" only because they're corrupted the final event.
Like the probability of a smart contract being exploited via a loophole? ;)
It's very frustrating for me to see "probability of a law passing" and "severity of global warming" being thrown in the same basket.
While the first lends itself naturally to be framed as a binary prediction market (and there are good reasons to believe that the market will produce reliable forecasts), "severity" doesn't lend itself to be framed in this way (in Taleb terms, it is a non-linear payoff from a complex domain, "4th quadrant"). Ignoring that there is a lot of ideology involved in defining the exact terms, in my mind it is just unreasonable to expect prediction markets (or any mechanism for that matter) to deliver reliable results in this case.
Even when not accepting the Taleb argument regarding our ability to predict, at least it should be acknowledged that it is not straight-forward to generalize from binary outcomes to open-ended ones.
Consider a business that needs to reason about the probability of a law passing, severity of global warming, or any number of other difficult to predict events. Prediction markets would provide by far the most accurate insight.
It's wisdom of crowds + skin in the game.