The Enlightenment ushered in a criterion for “knowing” rooted in replicable and externally verifiable evidence. Recently there has been a call to recognize other ways of knowing, those rooted in intuition, tradition, ritual etc. The validity of “other ways of knowing” is a source of debate.
A ubiquitous example of where other ways of knowing have been applied to forecasting is the weather e.g. people claiming they feel it in their bones when rain is due; Groundhog day in the US; St Swithin’s Day in the UK etc.
A 1984 paper in the American Economic Review appears to offer a useful test of whether other ways of knowing contain meaningful information. The paper asks whether the market can better predict the weather than can the US National Weather Service. The logic is that the market distils and aggregates the private information of those who put their money where their mouth is. At a concrete level, someone who truly believes that their idiosyncratic “other way of knowing” reliably forecasts the weather has an incentive to trade on their forecast because, in their view, their forecast is reliably superior to the forecast of most other traders.
The method is to test whether orange juice futures predict the weather in Florida even after accounting for the National Weather Service forecasts. The steps that lead to that method are that the price of orange juice is determined by the supply of oranges; the weather in Florida determines the supply of oranges; if your “other way of knowing” leads you to believe that the weather in Florida is going to more hostile to orange growth than the National Weather Service predicts, then you should anticipate a shortage of oranges; if you anticipate a shortage of oranges you should anticipate the price of orange juice going up and so buy orange juice futures; when you buy, your trade will drive up the price of orange juice futures relative to the price that would be expected given the National Weather Service forecast.
As it happens, the paper supports the hypothesis that orange juice futures predict the weather better than the National Weather Service. In other words, enough individuals make enough trades on the basis of their reliable “other ways of knowing” that they more than offset the noise trades of those whose “other ways of knowing” deliver nonsense forecasts. Given that recent research raises big questions about the reliability of findings in the economics literature, I don’t put so much weight on that result (but if someone knows of a more recent conceptual replication of this research then please post a comment letting me know).
The key point is that, in principle, the market offers an elegant test of whether “other forms of knowing” carry useful information.