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Prediction Markets — Can The Crowd Predict The Economy?

By Adi Gaskell,, September 2, 2013

James Surowiecki’s Wisdom of Crowds was published almost a decade ago now, and in that time his ideas on the power of crowds have helped spawn the crowdsourcing movement. The idea that under the right conditions the crowd is more intelligent than the smartest of experts is a simple yet beguiling one.

Prediction markets are one manifestation of this theory, with organisations allowing people to bet on a particular issue, and the aggregation of those bets used to predict the outcome. The CrowdMed site for instance use prediction markets to try and improve medical diagnosis.

Can the crowd successfully predict arguably the most complex system on the planet though? That was what the Adam Smith Institute and Paddy Power have set out to discover.

They have launched a prediction market to try and use the wisdom of crowds on economic planning. The market will ask participants to place bets on what they believe the rates of inflation and unemployment will be in June 2015.

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