Long-time readers will remember that I was advocating the Tradesports betting market for predicting political outcomes almost two years ago. Well, now that the President has nominated John Roberts to the Supreme Court it appears that Tradesports picked the winner approximately two hours before he was publically announced. That's earlier than any major news outlet. As Jim Linggren points out, markets do better than experts even when they don't do very well.
My claim is a comparative one. Markets should do a better job than experts who lack actual inside information of the choice for a number of reasons that are raised in the comments to one of Orin's earlier posts. I would think this would be true both for predicting individual decisions and for predicting voting or future big market decisions, though I don't know what the state of the empirical evidence is on this narrower point. ...
I am claiming that markets (however "good" or bad they are in absolute terms) should be better than experts on balance, or at least better than experts who lack actual first-hand knowledge of the forthcoming decision. So Orin and I may be talking past each other. I am asserting that I would expect a comparative advantage for markets over experts; Orin is questioning whether markets would "do a good job" predicting individual decisions compared to group ones.
Some predictions are very hard to make, and markets are often wrong, but in the long run they're going to do better than any individual or group of individuals at predicting the future. Although Orin Kerr dismisses a market's ability to aggregate data, aggregating data and determining its value is the best that any instrument for predicting the future could possibly do.
On a related note, I've put my money where my mouth is and divested myself of most of my niche mutual fund holdings in favor of broad index funds. Mutual fund managers can't beat the market over time.