There's been a lot of buzz about prediction markets recently:
- A McKinsey & Co. report on prediction markets quotes James Surowiecki: "I wouldn’t be surprised to see prediction markets used in many more companies than today, not least as a tool to forecast sales. Consumer-facing companies should be particularly interested."
- Knowledge Management gurus Tom Davenport and Dave Snowden jumped into the fray to cool easy enthusiasm.
- An article in the New York Times introduces the concept of futarchy. According to Robin D. Hanson, an economist at George Mason University and a fan of alternative institutions, futarchy is "a form of government enhanced by prediction markets. Voters would decide broad goals of national welfare, but betting in speculative markets would determine the policy steps to achieve those goals."
Is "futarchy" a viable option for enhancing bottom-up participation in setting development policies? So, far, to my knowledge, Globalgiving has been the only entity to experiment with decision markets in a development context. I look forward to learn about the results of its pilot.
PS: After this post was published the Financial Times published an article with a number of intersting examples of applications of predictions market to the non-profit sector.