With error-prone and biased individual traders, can markets aggregate trade
r information and produce efficient outcomes? We review election stock mark
et evidence that suggests this does happen. Individual traders appear biase
d and error-prone consistently, yet these markets prove quite efficient in
predicting election outcomes. We also review work which documents comparabl
e, but substantially different, phenomena in related laboratory markets. In
addition, we report the results from a new laboratory session which shows
how we can create particular biases that mirror those in election stock mar
kets. Finally, we discuss how combined laboratory and field experiments can
help us understand trader/market interactions. (C) 1999 Elsevier Science B
.V. All rights reserved. JEL classification: C9; D4; G1.