A potential downside is that markets about markets are generally easier to manipulate than markets about ground truth. You may even find that second-order markets create an incentive to distort first-order markets to an extent that makes the existing markets less reliable.
I think that higher-order markets definitely make things more complicated, in part by creating feedback loops and couplings that are difficult to predict.
That said, there are definitely a few ways in which higher-order markets could potentially make markets more reliable.
My guess is that useful higher-order markets will take a lot of experimentation, but with time, we’ll learn techniques that are more useful than harmful.
A potential downside is that markets about markets are generally easier to manipulate than markets about ground truth. You may even find that second-order markets create an incentive to distort first-order markets to an extent that makes the existing markets less reliable.
I think that higher-order markets definitely make things more complicated, in part by creating feedback loops and couplings that are difficult to predict.
That said, there are definitely a few ways in which higher-order markets could potentially make markets more reliable.
My guess is that useful higher-order markets will take a lot of experimentation, but with time, we’ll learn techniques that are more useful than harmful.