Prediction markets can be used not only to predict the future, but to prepare for the future by letting individuals and organizations hedge risk. For example, a Chilean farmer who relies on the weather could protect against the risk of drought by forecasting a low amount of rainfall on a prediction market. If it rains, his crop flourishes, but otherwise, he gets a payout from his hedge.A 2008 paper penned by several Nobel Laureates and Google’s Chief Economist made the case that prediction markets can let governments and businesses make better forecasts and policy decisions. They encouraged regulators to take a tolerant stance toward prediction markets since they can help manage economic risk and enhance social welfare. James Surowiecki’s 2004 book, The Wisdom of Crowds, also championed prediction markets as a means to unleash collective insight.