Prediction Markets

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Sir Francis Galton was one of the first to write about the Wisdom of crowds when he found that the the average estimate of villagers as to the weight of an ox was close to the true weight.

Prediction markets have been defined as:

Sometimes called information markets, idea futures, event derivatives, decision markets, or virtual stock markets, prediction markets are exchange-traded markets where individuals trade the outcome of a future event in the form of event contracts. These event contracts specify the different possible outcomes of a future event, the payment structure based on those outcomes, and the contract’s expiration date.

Prediction markets have proven to be a powerful tool in determining the outcome of events. They enable market participants with diverse sets of knowledge to wager on an uncertain outcome, such as who will win the next US election or who will win the FIFA World Cup.

There is a lot of value in being able to quantify estimates of the future. They could even become a cornerstone of government. The concept of futarchy was inspired by the ability of prediction markets to estimate the future:

elected officials define measures of national wellbeing, and prediction markets are used to determine which policies will have the most positive effect
Last but not least, prediction markets are also fun and sometimes even profitable. The online betting and gambling industry is estimated to worth 60 billion dollars.