ALTOONA, PA – JUNE 18: A rainbow appears during a rain delay before the game between the Richmond Flying Squirrels and the Altoona Curve at Peoples Natural Gas Field on Wednesday, June 18, 2025 in Altoona, Pennsylvania. (Photo by Aidan Conrad/Minor League Baseball via Getty Images)
Minor League Baseball via Getty Images
Government spending blinds us. See this opinion piece’s title to understand the meaning implied in the previous sentence.
Importantly, government spending isn’t just harmful because it’s the central planning of precious, privately produced resources.
The peril of government spending expands when it’s remembered that no one spends the money of others as carefully as they do their own. Which means government consumption sends false signals to a marketplace reliant on correct signals as an essential guide to what’s ahead.
All of what you’ve read is important to keep in mind as U.S. states like Minnesota ban prediction markets. While the courts have temporarily blocked Minnesota from enforcing it, the ban itself is troubling. To ban prediction markets is to ban crucial information.
The answer for why can similarly be found in this opinion piece’s title. Precisely because markets themselves incorporate the combined knowledge of individuals, they’re incredibly informative about what’s ahead.
With prediction markets, they incorporate the combined knowledge of individuals with their own money on the line.
Which means prediction markets are the producers of information par excellence. The previous truth is rooted in the reality that we individuals are many things with our money, few of them blithe. This is particularly true when we’re trying to get a return on our money.
While Albert Einstein’s assertion about the genius of compounding as the world’s eighth wonder was seemingly apocryphal, few of us need Einstein to know the profound genius of wealth put to work with an eye on building more of it. What we see is that relatively small returns on an annualized basis can turn into large returns over time. Turning the previous sentence upside down, the cost of being wrong with one’s capital commitments is incredibly expensive.
Looked at more expansively, the genius of compounding is a crucial market signal that money is never “easy,” nor is it dumb. That’s why monetary allocations are so informative: with the cost of incorrect allocations being so substantial to the individual misallocating, it’s conversely true that monetary allocations by those same individuals are some of the most careful placements of precious capital as exist.
Which requires the serious among us to hopefully rethink prediction markets, along with governmental attempts to limit their usage. What a mistake. The ban of important information generally is.
Unfortunately, politicians who are expert at spending the money of others and corrupting information in the process have chosen to cast prediction markets as a pejorative. They strive to create the impression that individuals to “gamble.” No, that’s incorrect.
Gambling is designed to reward the house. People know this. Prediction markets are the opposite of gambling exactly because the participating individuals are bringing their own knowledge to the prediction.
To use one of many obvious examples, no reasonable person would bet on the weather in Altoona, PA without a better than reasonable grasp of weather patterns in Altoona. To bet on this blindly would be to give away money foolishly.
Just the same, if you were a climatologist, meteorologist, or if you simply had a long history with the weather vicissitudes in Altoona, you might place a bet on tomorrow’s weather, next week’s, next month’s, or next winter’s. Which is the point.
Prediction markets are information personified given the knowledge implied in betting on specific outcomes. Which means they’re the ultimate form of information in light of the tautology that we bet our own money with incredible, knowledge-driven care.
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