I'm delighted to welcome George Washington Prof. Michael Abramowicz, who will be guest-blogging about his new book Predictocracy: Market Mechanisms for Private and Public Decision Making, being released this week by the Yale University Press. (Michael and I were briefly colleagues, when he was a lawprof at George Mason, and I was visiting there for a semester.)
Michael's book argues that prediction markets should be widely employed in decision making, because -- when properly designed -- they tend to provide a good algorithm for aggregating different points of view into a single forecast. A decisionmaking institution would be better off using this algorithm than relying on individual decisionmakers to develop their own forecasts, whether explicitly or implicitly.
At its most ambitious, the book defends what Michael calls "normative markets," in which the forecast is of a normative assessment by a decision maker to be randomly selected from a group. Sometimes, he argues, it might be better to rely on a forecast of the decision of a single randomly selected member of a group, rather than on an actual decision of all or a subset of the group members.
Michael will start by addressing some common objections to prediction markets and by outlining their institutional advantages. He'll then offer some of his ideas both for innovative designs and applications of prediction markets. And, finally, he'll explain and defend the broader theory behind normative markets. I'm very much looking forward to seeing Michael's posts.