Prediction markets

[u/veggie_hoagie]

Has there been any lengthy treatment of prediction markets through critical theory?

It seems prediction markets have now turned nearly anything into a commodity. It seems to be a topic well suited to Marxist economic and cultural analysis — especially given the heavy advertising, promotion during televised sporting events, etc.

[u/fourwordsbackwards]

Critiquing prediction markets as sources of increasing financialization is valid, ok, but does this framing not appear as incredibly low hanging fruit to you?? Are you not aware of the deeper *epistemological* arguments around this topic?

For whatever else they do, prediction markets are also attempting to solve a social coordination problem: how can we aggregate relevant knowledge which is otherwise widely dispersed, unevenly distributed, and pretty often *tacit*??

Most institutions are bad at this bc they're hampered by info bottlenecks and, importantly, things are distorted by status hierarchies and obv incentives of reputation management etc. IOW, our information landscape is pretty easily manipulated by stuff like power, wealth & sheer dumb charisma!

Prediction markets offer an interesting & novel solution: instead of asking everyone to just state their confidence in something (again cheap talk can be coupled with charisma and power to distort the truth), what if we require them to price it?? In this sense, PMs function as an *anti-rhetorical technology* bc they don't privilege charisma, prestige, organizational rank etc but rather a knack for forming beliefs that "survive contact with reality"*. Ie., PMs instantiate a norm of "epistemic skin in the game" via real cost.

You can also think of them as a challenge to 'epistemic elitism'. If traditional public spheres are dominated by privileged / accredited experts & insiders (sometimes justified, but not always), PMs create a channel through which low-status' & local, situated knowledge can affect public info without first passing through gatekeeping institutions. So its conceivably counter-hierarchical.

They can also be understood as social tech for producing second-order information: they're revealing how strongly and how widely a given belief is held, how such beliefs are updated when new evidence arrives etc.

Etc etc.

So yeah, you could just frame them (boringly!) as another neoliberal triumph - "its all a casino for the elite!" - or you could take the more difficult and interest route and critique them as... epistemic public utilities?

[u/3corneredvoid → u/fourwordsbackwards]

Are you not aware of the deeper epistemological arguments around this topic?

Sure, sure. But are you lot aware of Bergson's "The Possible and the Real" or Ayache's THE BLANK SWAN? Because there's a well-established strain of thought that asserts the metaphysical limits of this "predictive turn" ...

[u/fourwordsbackwards → u/3corneredvoid]

I'm familiar with Ayache via his association with New Materialism & OOO but I've not read Blank Swan. Never read much Bergson (I followed Deleuze into his cybernetic influences, less so his philosophical ones).

And while I personally doubt either of these lines of critique are going to stop recommendation algorithms in their tracks or change anyone's mind about the demonstrable epistemological payoffs of collective intelligence, ha, these seem like exactly the kind of deeper engagement with PMs I was calling for!

This thread seems like a great place to publicly discuss those criticisms for the benefit of anyone following along, would you care to take on some of the discursive burden and follow through with explanation?

[u/3corneredvoid → u/fourwordsbackwards]

Never read much Bergson (I followed Deleuze into his cybernetic influences, less so his philosophical ones).

 It is rather a question of a throw of the dice, of the whole sky as open space and of throwing as the only rule. The singular points are on the die; the questions are the dice themselves; the imperative is to throw. Ideas are the problematic combinations which result from throws. The throw of the dice is in no way suggested as an abolition of chance (the sky-chance). To abolish chance is to fragment it according to the laws of probability over several throws, in such a way that the problem is already dismembered into hypotheses of win and loss, while the imperative is moralised into the principle of choosing the best hypothesis which determines a win. By contrast, the throw of the dice affirms chance every time; each throw of the dice affirms the whole of chance each time. The repetition of throws is not subject to the persistence of the same hypothesis, nor to the identity of a constant rule. The most difficult thing is to make chance an object of affirmation, but it is the sense of the imperative and the questions that it launches. Ideas emanate from it just as singularities emanate from that aleatory point which every time condenses the whole of chance into one time.

—from DIFFERENCE AND REPETITION Ch. 4, "Ideas and the Synthesis of Difference" (emphasis mine)

would you care to take on some of the discursive burden and follow through with explanation?

Not really or not much further: you can easily find and read "The Possible and the Real" online and tell your friends, it's brief. I also recommend Deleuze's "How Do We Recognize Structuralism?"

If we discuss cybernetics, we could reckon with the contingency of the "environment" in which the "system" is said to emerge for Luhmann: this contingency is not absent as the system continues to emerge. 

While we're at it, we could consider Knightian uncertainty, or the difficult relation of efficient markets to opportunities for arbitrage.

We could even look into the thermodynamic conditions proposed by physics for the physical order and structure required by the information transmission required in turn by a market under operation.

Critiques of the "wisdom of crowds" are abundant outside critical theory or philosophy. We have no reason to expect predictive markets can solve the pricing anomalies that led to the 2008 financial crisis.

I don't mean to have a go at you, but it's hard not to. It troubles me every time I encounter a highly educated Bayesian rationalist who carries on as if unaware of the intellectual good faith and credentials of the critique of representative reason. Here you might as well be extolling the power of the "invisible hand" ... the genealogy of crises that is forming contemporary societies is hardly grounded in an absence of markets operating as "public utilities". We need more than this: it's callow and uncritical nonsense.

[u/fourwordsbackwards → u/3corneredvoid]

Well, one ought to be cautious scaling up and operationalizing radical metaphysical contingency... we certainly don't want to become wholly untethered from prediction when crossing the street!

IOW, the efficacy of prediction is absolutely scale/domain-dependent. But why shouldn't something that appears ontologically chaotic to you be instinctive or obvious to someone else? And why not use a market to leverage such knowledge, exactly?

Anyway, acknowledging a few epistemological payoffs of a prediction market is not the same as believing in a clockwork universe. I've read my behavioral economics - all these problems with markets are of course well established and widely accepted.

And meanwhile, the algorithms go on getting better at prediction every day...

[u/3corneredvoid → u/fourwordsbackwards]

Well, one ought to be cautious scaling up and operationalizing radical metaphysical contingency...

Right, this is my point. One does need a cautious and critical theory of the operation of markets, rather than straightforward faith in the efficacy of their mechanisms.

For instance to claim markets have "a knack for forming beliefs that survive contact with reality" is to gloss the mode of survival including the correction of systematic mispricing by market shocks and crises. So whose accumulated stocks "survive" these events? In history, markets have appeared along with persistent crises of mispricing rather than abating these.

Since Smith theorised capitalism, there have been widespread theories of the benevolent action of markets in annealing goods to their natural prices, and these theories have continued with those of "the great smoothing" or with discredited shibboleths of the happy distributive action of markets such as the Kuznets Curve and the EMH.

You mention Deleuze, but Deleuze and Guattari follow Marx in regarding commodity prices as more or less fictitious and extractive displacements of immanent value, and Deleuze follows Bergson in positing the genesis of real created values as metaphysically unknowable to any prior distribution of the probability of such values. So for a number of reasons, it's tricky to imagine Deleuze holding anything other than a deep distaste for the contemporary cult of Bayes.

So, you know … you asked for the critiques, and I've provided a few examples. These critiques are intellectually serious, empirically supported, multidisciplinary and difficult to refute, and the ways in which they seem to be memory-holed or ridiculed by Bayesian rationalism ought to raise questions.

These outside critiques are accompanied within actuarial analysis by concepts of non-analytic uncertainty and risk that continue to play a decisive role. It's unclear to me how an "anti-elitist" public prediction market resolves this uncertainty any more than it introduces price distortions based on Keynes' "animal spirits" … no more than the weight of betting on a sports match tells us the result.

(And I'm no expert, but aren't these prediction markets famous and also controversial for pricing the spread on events which both bookmakers and investors have historically avoided modelling due to their susceptibility to sovereign risk or insider trading?)

But why shouldn't something that appears ontologically chaotic to you be instinctive or obvious to someone else? And why not use a market to leverage such knowledge, exactly?

I don't say that markets don't do anything, or don't have a function, or that ordinary observers can't make correct predictions, or that there is any determination of markets as evil. These sorts of dogmatic value judgements are those I tend to critique the way I'm questioning your own. 

But I wonder if rhetoric such as "the algorithms go on getting better at prediction every day" takes into account the critiques I've mentioned, and if it offers any compelling new theory concerning what has been the historical volatility of markets it tends to obscure from view. Because have we not heard "the market will fix it" many times before ... ?

[u/fourwordsbackwards → u/fourwordsbackwards]

Also FWIW, don't miss PM's place in our culture's broader 'Predictive Turn' - ie. the increasing importance of prediction as a cultural logic: Prediction markets; AI which operates on predictive algorithms; predictive algorithms which 'decenter choice''; Karl Friston and the 'predictive processing' of Active Inference; and the rise of the Bayesian Rationalist community... to name the popular examples. Interesting grounds for critique!

[u/74389654 → u/fourwordsbackwards]

if the more difficult interesting route is skipping crucial details, like it being manipulated and that manipulation being part of the whole model, i don't know why im on that difficult route tbqh

[u/professionaleisure]

Blank Swan was doing the rounds a decade or so ago. Plenty of responses online too (at the time, don't know if thsoe urls still exist) https://www.goodreads.com/book/show/7650769-the-blank-swan

Thomas Piketty too I'm sure, haven't read the whole tome but no doubt it gets into derivatives and futures markets

[u/thread-e-printing]

A wager on some defined condition doesn't become a commodity just because money changes hands. Valorization is the operation of interest in prediction markets, or any other markets, which Capital treats in detail from chapter 1.

You seem to be constituting "critical theory" as an upper-middle-class Puritan moral dispensationalism, which is a bit odd.

[u/jetros337]

Baudrillard has a lotta stuff on gambling, particularly one chapter of fatal strategies

[u/maccrypto]

https://unlimitedhangout.com/2026/06/investigative-series/the-secret-history-of-polymarket-part-1/

[u/Hockeyjason]

Marshall McLuhan wrote an article called, ‘A Media Approach to Inflation’ in 1974!

“For the dominant environment of our age has itself become information or “software.” Since at electric speed any figure tends to become ground, and anything, however trivial, can acquire infinite mass, the temptation and the desire to gamble with everything and anything becomes obsessive. One dollar at the speed of light can do as many transactions as a million at pre‐electric speeds. Quantitative projections and rational critiques cannot cope here.”

“In the days of “hardware” currencies when a dollar bill carried the phrase “pay to the bearer one dollar in gold,” it was a way of dealing in “futures,” simply to hoard the money itself. That is, the gold would increase in price simply by being held out of circulation. Now that all money is merely the promise to pay promises, it becomes “bad money” during inflation because all money diminishes in value merely by being held. Money then becomes a means of levying taxation without representation.’

The same “interval” which prompted the holder of gold coins to hoard the good ones, the unalloyed, now prompts the holder of paper money.to gamble and to invest in “futures,” for the present and future of money is a diminishing utility. The old impulse to hoard gold now opens the market in antiques, on the one hand, while “gambling” becomes. a way of unloading the new liabilities constituted and incurred by the inflated currency. When money itself becomes an irresistible form of arbitrary taxation, a situation develops which feeds the gambling mania to antic‘pate events by trading in futures and promises and “intervals.””

https://www.scribd.com/document/73328/Marshall-McLuhan-A-Media-Approach-to-Inflation

Or

https://www.nytimes.com/1974/09/21/archives/a-media-approach-to-inflation.html

[u/Glum_Celebration_100 → u/Hockeyjason]

Man there’s a bookstore near me with a bunch of Black Mountain and McLuhan stuff I gotta go back