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Is it even possible to predict things whose predictions influence the events that are supposed to be predicted? Suppose you did have a perfect way to appraise

Is it even possible to predict things whose predictions influence the events that are supposed to be predicted? Suppose you did have a perfect way to appraise houses by some arbitrary criteria. If the houses are "perfectly" appraised, that would change the values of the houses themselves, no? e.g. magical system predicts 3b/2bath house should cost 500,000. People know the magical system's price is the perfect one. someone who has more money to burn can acknowledge this and still pay even more money, knowing most will not want to "overpay" for a house. house sells for 550,000. prediction is wrong in the end anyway. schrodinger's predictor - it's accurate right until it's observed.

raverbashing 5y ago
Yes. This is one of the fundamental teachings of economics. The ideal price is not knowable
- paganel 5y ago
  Nitpicking here, but it is my understanding that there isn't even a consensus about the existence (or not) of an "ideal price" in economics. Just to make it clear, I'm not an economics major nor do I work in the field, this opinion is just based on my amateurish readings.
JasonFruit 5y ago
Predictions like this work on aggregates, not individual cases. There are also sellers who are in a hurry to move and will settle for $450,000. Magical system is wrong in both cases but right in the aggregate.
rq1 5y ago
Yes it is possible. You can tackle it through different technics like game theory. Cf. also the “market impact” in HFT, for a practical example.
sidr 5y ago
They don't need to predict the actual sale price of every given property perfectly to make money. They need to be able to say that with 99% probability, we will find at least one offer for this house >= 500,000. The errant buyer with loads of cash is free to come in and offer more. As long as they turn a sufficient profit at the 500,000 price point they should be set. In competitive markets, for people familiar with local dynamics, this is very much possible in a short-term time window. The question is doing this at scale in a fully automated way for a much longer time horizon. Zillow tried and failed.

raverbashing 5y ago

Yes. This is one of the fundamental teachings of economics. The ideal price is not knowable

paganel 5y ago
Nitpicking here, but it is my understanding that there isn't even a consensus about the existence (or not) of an "ideal price" in economics. Just to make it clear, I'm not an economics major nor do I work in the field, this opinion is just based on my amateurish readings.

JasonFruit 5y ago

Predictions like this work on aggregates, not individual cases. There are also sellers who are in a hurry to move and will settle for $450,000. Magical system is wrong in both cases but right in the aggregate.

rq1 5y ago

Yes it is possible. You can tackle it through different technics like game theory. Cf. also the “market impact” in HFT, for a practical example.

sidr 5y ago

They don't need to predict the actual sale price of every given property perfectly to make money. They need to be able to say that with 99% probability, we will find at least one offer for this house >= 500,000. The errant buyer with loads of cash is free to come in and offer more. As long as they turn a sufficient profit at the 500,000 price point they should be set. In competitive markets, for people familiar with local dynamics, this is very much possible in a short-term time window. The question is doing this at scale in a fully automated way for a much longer time horizon. Zillow tried and failed.