Public Good

Valuable information generated by prediction markets that benefits society without direct cost to non-participants.

What is Public Good?

In prediction markets, a public good is the accurate, aggregated information produced through trading digital assets, which benefits society broadly without requiring payment from those who use it. Alex Tabarrok emphasizes in the transcript that prediction markets create socially valuable forecasts, such as election outcomes or scientific paper replicability, accessible to all. For example, the 2024 election markets on Polymarket provided more reliable predictions than polls, aiding public understanding without restricting access to the data.

This information acts as a public good because it’s non-excludable (anyone can observe market prices) and non-rivalrous (one person’s use doesn’t diminish its value). The transcript highlights how markets predicting scientific replication save resources by identifying papers worth testing, benefiting the scientific community. However, thin markets or legal restrictions, as Alex notes, can limit this public good by reducing participation and accuracy, as seen in the U.S.’s restricted access to global markets.

Blockchain enhances this public good by ensuring transparent, auditable prices, making the information trustworthy for applications like policy decisions or corporate planning. Legalizing prediction markets, as Alex advocates, would thicken them, amplifying their societal value as a tool for collective forecasting.