I was listening yesterday to the Freakonomics hour-long podcast — The Folly of Prediction. The point of the podcast was that (a) all manner of people are making all manner of predictions; (b) most of them are wrong and (c) even the ones that are right were right because they were lucky. Stephen Dubner puzzled over this with many experts interviewed suggesting that the incentives were either to make outlandish predictions and earn a reputation by being right or to make normal predictions and therefore not get punished for being wrong. In other words, the market either does not punish wrong predictions (so that there is an over-supply of them) or it does (in which there is an under-supply of them).
Anyhow, I wondered if the premise of this was all wrong. The notion was that somebody made a prediction and then those hearing it relied on it as an assessment of fact or likelihood or whathaveyou. This is particularly so for predictions on news programs or in the media in general. But I do not think that the premise that people hear predictions as truth is right. Instead, I think they may well hear them as garbage and then, like other entertainment, enjoy thinking about why they are garbage. Entertainment is created but no information is contained.
This alternative premise leads to lots of (ahem) predictions. First, there will be lots of outlandish predictions where people are purchasing content to be entertained. Second, there will be few outlandish predictions where they are not doing that. Three, most predictions will be wrong. And four, those that are right will be right because of pure luck. I think this is a more straightforward theory of the phenomenon than some statement about market failure.