Weisenthal: prediction markets are useful measures of collective expectations

Joe Weisenthal said he generally trusts markets, including prediction markets: in his view, most people are unlikely to know more than the collective assessment reflected in bets. He thinks markets do a good job of distilling conventional wisdom and sees that as a strength, not a flaw.

A market’s value, Weisenthal said, is that it gives precision to a vague statement such as “Candidate A is favored”: a 55% probability is meaningfully different from 80%. So if a market gives a Democrat a 40% chance of winning Texas, he thinks that probability should be taken seriously, even though a win remains unlikely. This is Weisenthal’s view about the usefulness of market estimates, not a claim that markets are always right.