This article lacks even the most basic understanding of probability and statistics. Slot machines "93 cents on the dollar" return is a statistical certainty of 7% loss. You are playing a repeated game which by the law of large numbers will converge to the 93% probability.

In prediction markets if the markets are fully efficiently priced, in the absence of transaction costs you WILL get 100% back in the long run.

Slots are also unskilled games, prediction markets clearly some participants have a clear market edge, thus not efficiently priced.

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jjmarr a day ago | parent | next [-]

If you read the article:

> Takers pay a structural premium for affirmative "YES" outcomes while Makers capture an "Optimism Tax" simply by selling into this biased flow.

It's still operating like a casino in that there's a "house edge" that comes from taking bets. Unlike a casino, there is nothing stopping the average person from market making, which is why it doesn't make sense this structural inequality exists.

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jonbecker a day ago | parent | prev | next [-]

i understand how probability works. the "93 cents" vs "43 cents" comparison is looking at realized historical data, not theoretical odds. if the markets were efficiently priced, you would get 100% back. the entire point of the paper is showing that, historically, they aren't efficiently priced (longshots return ~43%), and explaining who captures that inefficiency.

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pjc50 a day ago | parent | prev | next [-]

So clearly the market isn't efficiently priced.

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a day ago | parent | prev | next [-]

[deleted]

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chinathrow a day ago | parent | prev | next [-]

Do you work for a prediction market or do you participate in one?

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kibwen a day ago | parent | prev [-]

> In prediction markets if the markets are fully efficiently priced, in the absence of transaction costs you WILL get 100% back in the long run.

This is basically equivalent to the observation that, in a perfectly efficient market, no entity can ever make a profit.

And yet, in the real world, entities make profits all the time. In fact, they make wild, unimaginable, world-changing, history-altering profits. This is a tacit admission that our markets aren't even remotely efficient, and that includes predictions markets. Efficient, rational markets are the exception, not the rule.

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Retric a day ago | parent | next [-]

You misunderstood a basic principle here.

In a perfectly efficient market all entries can make the same profit on a given investment at the same level of risk and time horizon. There’s nothing inefficient about a market having a risk premium etc.

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kibwen a day ago | parent [-]

If you're making nonzero profit that means that it's feasible for anyone else (literally anyone else, assuming zero barriers to entry, which we do assume for an efficient market) to make slightly less profit by selling the same product at a lower price, which iteratively pushes all profits towards zero. An efficient market also assumes perfect information, which includes information of future events, so talking about risk/uncertainty is already out of the question. If that sounds absurd, then yes, that's the point: our assumptions about what it takes in order to achieve an efficient market approaches the absurd. Which isn't to say that markets aren't often useful, especially compared to the alternatives, but rather that appeals to rationality don't survive contact with the enemy.

	▲	Retric a day ago \| parent [-]
		The economy is finite. You can’t infinity add new participants with infinite product to sell. Instead in an efficient market everyone is already occupied making X ROI and gives as much up by entering a new market as they gain. Put another way, if you already own a sock with 10% ROI, you can sell it and buy a sock with 10% ROI but the transaction is pointless so it doesn’t occur. > An efficient market also assumes perfect information, which includes information of future events, so talking about risk/uncertainty is already out of the question. Perfect information means something different here. In Chess both players have perfect information of the game state, they don’t know the future. Poker has randomness and imperfect information but there’s other games with randomness and perfect information.

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dpc050505 a day ago | parent | prev [-]

Free markets aren't even an exception. They're an abstract construction that exists to make economic analysis scientific by removing all confounding variables from the equation. I'd be extremely surprised to find one example where the conditions required of a free market truly existed.

If people knew more about economics than just whatever is being parroted as 'economics' in mainstream media they would know that there's a variety of types of markets that happen in the real world and none of them are the abstraction of a free market that allows econ 201 students to compare what happens when you introduce trade between a country that produces 4 apples for 3$ each and a country that produces 5 oranges for 4$ each.