Yet another argument for prediction markets: "Reputation and Forecast Revisions: Evidence from the FOMC"
I am already spamming my readers today so this will not be a long post. But take a look at this working paper - "Reputation and Forecast Revisions: Evidence from the FOMC" by Peter Tillmann. Here is the abstract: "This paper investigates how FOMC members revise their forecasts for key macroeconomic variables. Based on a new data set of forecasts from individual FOMC members between 1992 and 2000 it is shown that FOMC members intentionally overrevise their forecasts at the ﬁrst revision and underrevise at the ﬁnal revision date. This pattern of rationally biased forecasts is similar to that of private sector forecasters and is consistent with theories of reputation building among forecasters. The FOMC’s shift towards more transparency in 1994 had an impact on how members revised their forecasts and intensiﬁed the tendency to underrevise at the later stage of the forecasting process. The tendency to underrevise, i.e. to smooth forecast revisions, is particularly strong for nonvoting members of the committee." HT George Farnon