What do stock markets produce?
The way resources are allocated is very important, but getting it optimal is very hard. Stock market is one of structures which helps to create long-term incentives to optimize resource allocation.
You can directly see how it works if you compare market-based economies to e.g. a planned economy Soviet Union: a lot of goods produced by Soviet industry were not in demand, especially consumer goods. When Soviet Union was no more a lot of factories were closed because they were producing some utterly irrelevant shit.
> Is any of this liquidity going to actual (replication) research, because if it is not, again: what are these markets tangibly producing?
Many economic concepts work in practice only at scale. E.g. if there's a one-off $1000 incentive, it might not attract people capable of doing that. But if there's an opportunity to make $1000 every second, people might put an effort into taking that opportunity.
Prediction markets create incentives to do particular stuff, as all markets do.
If there was enough money at stake, it could definitely incentivize replication research.
There are two scenarios.
Scenario 1: Suppose you have a lab with all necessary equipment and materials. Normally you would use it for your own research (i.e. research new materials). But if there's e.g. $100M prediction market on replication of a particular result, you might consider redirecting it to replicating that research instead.
If you do it before others, you can sell your replication proof to a hedge fund which will then get a position on prediction market before revealing the proof.
Scenario 2: If there's enough money in replication markets, hedge funds might specifically fund laboratories which replicate stuff.