Prediction Markets Challenge Professional Economists

Online prediction markets such as Kalshi and Polymarket are competing with professional economists on some forecasting tasks. For example, forecasters at major firms expected about 68,000 jobs to be added in the latest report, while Kalshi bettors expected 54,000 — the payrolls figure came in at 130,000, and both groups missed by a wide margin.

Research has found that Kalshi’s crowd has been as accurate on average as trained forecasters for certain economic indicators, and is strong at predicting Fed decisions and inflation. "Getting information from a large pool of people can be a remarkably good form of forecasting," said Jonathan Wright.

Traders’ willingness to sit out bets when they lack conviction also gives them an edge, a lesson Thomas Simons learned when markets correctly signaled a surprising political appointment. Another working paper found Polymarket bettors forecast corporate earnings more accurately than paid analysts.

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