You cannot look at the price and know if the market is full of people who all arrived at an agreeable point, or a market full of extremists who disagree violently.
The primary question that's priced in isn't sometimes (almost always) the actual question that's being answered. It is the effect of a deeper question that influences the outcome of primary.
In late 2002 and early 2003, the firm Tradesports.com enabled online trade in "Saddam Securities," all-or-nothing futures contracts for the event that "Saddam Hussein is not President/Leader of Iraq" by a specified date. Leigh, Wolfers, and Zitzewitz (2003) have interpreted the price of a Saddam Security as a market-generated probability of war with Iraq prior to the specified date. – Interpreting the predictions of Prediction Markets
The question this answers is partially related to the priced prediction. Suppose the probability of a wildfire by the end of this month is 60% and there are 26 data points. If a person thinks the most important data point is X, he will pour more weight on it. If X is generally known, it becomes the overarching factor.
On the other hand, suppose X is not generally available to people, the rational move is to either search for X or give more weightage to any other 25 datapoints. As it turns out, people don’t search for X unless there is incentive that when you find, it genuinely calibrates the prediction closer to true. If there is no such thing as the most important data point that decides outcome for the prediction, people start weighting other factors on belief and available information. This partially tells you about the priced information in prediction. There already is a loss of information.
I will be parroting Hanson and Taleb here.
The important information can be independent or non-independent. Firstly, the information is different, and it also has to be non-independent because otherwise independent information is another independent variable. It becomes the responsibility or accountability of the person who holds that information to come forth and participate.
Independent information is often conflated with insider information. Insider information is banned on stock and “regulated” prediction markets, particularly because people who have information that the company is going to IPO in D days from today, they try to have a competitive edge
Take an example of a prediction market created for “whether you succeed in life”. Success may seem like something that is binary in nature, but when we try to model all the factors that come into play, all the variables of success, all the decisions and their consequences. There is a loss of information in collection and aggregation, just because there are so many details, and success can only be judged in retrospect by connecting the dots. The details are not only not transmissable, but not even knowable.
You have to understand that success is a very murky affair. It is nonlinear. It is fat-tailed in the sense that, if you consider yourself as a prediction-making engine and the road to success as betting on beliefs, taking risks and making judgment calls, you would think about the result of your actions. There are cases such as the probability of you taking this entrance exam is related to being successful in life: it may be 1 in 1000, but it still can have a very huge payoff. The point is normies try to oversimplify the outcome in the face of calibration without considering the consequences.
If you belong to the set of high IQ individuals who believe to know something that very few people know or you are a nerd who bothered to look up a graph, both are missing the point. People pay for information that is new. Information that’s public is already priced in or very quickly concentrates and only the rich guys with lot of compute make money off it. Like how HFTs think they make market resilient but all they do is siphon off money from the middle class and waste compute. On the other hand, if you hold some private information, you are not allowed to participate. But banning insider trading is counterproductive as there are only small number of people who actually have independent information and wisdom of crowds follow those who have insider information.
Insider information is prohibited in collective but rewarded in solitary.
If people who want some information, already knew who holds useful information, they could bypass all the market shenanigans and directly reach out to the individual.