cccd9fdb_brary_of_Economics_and_Liberty__ast_Highlights_HIDE_HIGHLIGHTS
[Time] 45:41
Hayek's "Use of Knowledge in Society" used in Infotopia. Information is dispersed, each of us has a bit; price system is a marvel because it gathers that information in one place. Prediction market has a Hayekian feature. Hayek had that right. Criticism: "The same sorts of problems that can make deliberation go wrong can make the price system go wrong, though there are correctives that make the errors in the price system less robust, less enduring." Fads and fashions in stocks and commodities, so things can for a time get out of whack. Shiller, Irrational Exuberance, vindicated. Not so worrisome for prediction markets. Traders correct for errors. Fads, bubbles do make mistakes. Hayek never claimed prices are right or perfect. Interested in solving the problem of order. "Those who understand Hayek's arguments to suggest that stock markets are always optimally priced... that there is a great deal of truth in what they say and Hayek provides the mechanism to explain it." But errors can persist even though that wasn't what Hayek was talking about. Thesis of Infotopia is that prediction markets are the most successful aggregative mechanism we have for compiling dispersed information. Should public sector be pushed further to use prediction markets? Yes. EPA. Is use of prediction markets growing in the private sector? Yes, but some companies are nervous about talking about it because of disclosure laws.
Sunstein on Infotopia, Information and Decision-Making | EconTalk | Library of Economics and Liberty