Insurance markets also effectively redistribute wealth from the financially illiterate (people who buy financial products such as endowment life insurance) towards insurance salesmen and owners of the insurance companies.
But this pattern-matches “customers buying products from companies”, which is a context where it is normal that the money goes from the customers to the companies, so no one objects.
But more importantly to the reasons people actually buy insurance, they redistribute comparatively small amounts from the (most people) lucky to pay large amounts to the (few) unlucky. Which, behind the veil of ignorance, you would want, to ensure (insure) that your life is not ruined by bad luck.
Prediction markets, if they ever become popularized, would practically be redistributing wealth from the below average to the above average.
So it’s a critical disadvantage compared to insurance markets.
But that’s also why it sounds so highly appealing.
i.e. Trying to collectively outsmart the bottom sounds like it has better prospects than trying to outsmart the top.
Insurance markets also effectively redistribute wealth from the financially illiterate (people who buy financial products such as endowment life insurance) towards insurance salesmen and owners of the insurance companies.
But this pattern-matches “customers buying products from companies”, which is a context where it is normal that the money goes from the customers to the companies, so no one objects.
But more importantly to the reasons people actually buy insurance, they redistribute comparatively small amounts from the (most people) lucky to pay large amounts to the (few) unlucky. Which, behind the veil of ignorance, you would want, to ensure (insure) that your life is not ruined by bad luck.