"How could markets possibly be able to predict things like where a hurricane will strike? In part because they aggregate information well, says David Pennock, who studies how economic theory can be expressed via computation. Pennocks research underlies not only predictive markets but also the enormously successful sponsored search functions featured on Yahoo, Google, and elsewhere. Recommendation engines like those on Amazon.com also draw from Pennocks work. Most recently, Pennock designed a new type of market, the ""dynamic pari-mutuel market,"" now being offered at Yahoo Tech Buzz. Part horse racing, part futures market, it lets people bet on whether a product is a fad or for real."
