Can prediction markets be good for society?

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Miles Bryan (1:05)

I'm Miles Bryan sitting in for Sean today. Our guest is Finn Brunton. He's a professor and writer who has a great new piece in Harper's about prediction markets like Polymarket or Kalshi. We talked about the roots of these prediction markets, how they're currently making American life feel like a never-ending casino, and how much we all stand to gain if we can ever get them right.

Finn Brunton, welcome to The Gray Area.

Finn Brunton (1:37)

Thank you for having me, Miles.

Miles Bryan (1:39)

We asked you to come on the show to talk about a really great piece you wrote for Harper's Magazine about prediction markets. But you're not a journalist full-time, right? You're a professor at UC Davis. How does this writing fit into your larger project?

Finn Brunton (1:54)

The perennial problem that professors have is that we work on things that we are deeply passionate about, but we work on them for a very, very small audience.

Miles Bryan (2:02)

Dozens of interested people.

Finn Brunton (2:04)

Yes. The opportunity to take some of what I have discovered about this history and share it with the larger world was not one that I would say no to, especially because the topics that I work on are, and this is not necessarily a good thing, is becoming more relevant as time goes by rather than less.

Miles Bryan (2:25)

Yeah. What else do you cover? What else do you study or cover academically?

Finn Brunton (2:30)

So my background is originally as a historian of science and technology. And then I became really fascinated by the particular technology of networked computers, how we started to build computer networks, and then what they did to us as a consequence.

So I do a lot of work around the ways that our visions and hopes for the future got embedded in the internet machinery that we made and how that played out. There's a lot of sort of lost or failed utopias that are buried in the technologies that we use every day, visions of how society could have been different, how the future could be.

And I think a lot of the technologies make more sense if you understand the utopian agendas of the people who built them.

Miles Bryan (3:22)

Wow, that's really interesting. So let's use that to segue into your piece today. Utopia and prediction market are not terms I usually put together.

So it's a little awkward to try. But for those in the audience who maybe are lucky enough to not know, what is a prediction market?

Finn Brunton (3:40)

I want to answer this question in two ways, because we have prediction markets in the abstract as they were designed, and then we have prediction markets as they actually exist.

Miles Bryan (3:53)

Give me the utopia before we get to the reality.

Finn Brunton (3:56)

Yes, okay. So the utopian vision of the prediction market, the original concept is one that, when you think about it, is sort of a brilliant idea.

Let's take a group of people who have some expertise, some insight into the future.

And you could also add lots of people who don't necessarily have that expertise but who are interested and engaged in a particular question. And then you have them bet on an outcome. You have them bet on something that's going to happen. And you use those bets as ways to get odds for potential future events, right? That's why we take these two terms, prediction and market, and we put them together, right? It's a prediction because we are speculating about something that we don't know across many different domains, right? And then the market, because arguably, and we can get more into this, arguably, it's actually really efficient and really effective to use a market to aggregate everyone's opinions together.

Miles Bryan (5:03)

And people are probably familiar with this from the stock market, the market thinks, the market reacts, the market is worried about the rising price of oil. That's the collected wisdom of thousands and thousands of traders and pension funds and hedge funds and all that.