I'm skeptical that market consensus (whatever that really means anyways) is good at predicting events like ecological collapse and deranged authoritarians launching senseless wars of aggression.
> [...] market consensus (whatever that really means anyways) [...]
If we had proper prediction markets for arbitrary events, I would just directly talk about what those prices are. In the real world, we have to look at the prices of existing financial instruments and see which of these can be used as proxies for the events we are interested in.
For some events that fairly easy: if Russian government bonds trade at high prices in 2021, it's unlikely that Russia's dictator will start a senseless war of aggression soon. (In reality, the price of Russia's bonds went down in the runup to the war.)
For other events you have to be more clever: if you want to get a sense of the market estimate for the probability that an asteroid impact (or similar) will erase all life on earth, you can't just look at the price of a straightforward bet that pays out one dollar, if the asteroid hits: most of us would be dead, and the dollar would likely be worthless.
However you can create a bet that has the right structure: Alice gives Bob 100 dollar now, and in five years, Bob gives Alice 500 dollars (but obviously only if the asteroid hasn't killed Alice and Bob). The market price of such a contract can tell you something about the market consensus estimate of a collapse.
My argument wouldn't be that the market consensus is particularly good at prediction, just that it's better than any other prediction mechanism we have; because it can and will incorporate those other prediction mechanisms, and people have a financial incentive to do so.
Btw, why do you think markets would be particularly bad at forecasting ecological collapse? Is there any ecology you are particularly worried about?
> What you describe won't account for a tumour growing in a dictator's head that makes him decide to press the big nuke button one day.
Yes, the market consensus can only reflect the information that available to (at least some) market participants.
Of course, the market mechanisms also give people incentives to acquire that information. Because any informational advantage gets rewarded with money.
> It won't account for a volcano erupting and burying a society in the ashes as happened in Pompeii, or the global equivalent.
It can account for the best estimates we have for the probability of that happening.
Again, I'm not suggesting that market estimates are perfect, nor even necessarily any good. I'm just saying that market estimates tend to be at least as good as any other estimates we have. Ie market estimates tend to be the best ones available.
Over what time horizon? The market consensus is definitely not giving this a big probability any time soon.