New York Times on prediction markets — REDUX

- New York Times.

- Justin Wolfers Interview – by New York Times – (MP3) – 2007-02-14

JOURNALO: InTrade = betting market
JUSTIN WOLFERS: InTrade = Las Vegas bookie meets New York Stock Exchange.
prediction markets: strong track record (example: IEM compared to polls)
historical prediction markets (Strumpf–Rhode)
InTrade: good/bad general election candidate??
JOURNALO: Hillary Clinton, the weakest?? Al Gore??
JUSTIN WOLFERS: Beware small numbers. Discusses Hillary Clinton, Al Gore and Barak Obama. Al Gore’s documentary movie winning an Oscar? Implications? Accuracy of prediction markets & liquidity.

{Apology. Quick notes.}

- Justin Wolfers‘ comment on my “08 is two years away [*]” comment:

Your concern about the accuracy of markets two years out seems entirely well placed. But again – and I think it is worth saying this over and over – the relevant question is whether the markets do a better job than alternative information aggregation devices. My own analysis (with Andrew Leigh) of Australian polling data suggests that any polling done more than a year before an election is essentially useless. That is, you are better off simply guessing that the previous election results will repeat themselves, than you are using early polls.

And I should add one more thing: The markets provide a useful measure of our ignorance. For instance, right now, the markets suggest that the Dems are only slightly more likely to win the election than the Republicans. Perhaps this is a forecast that it will be a close election, but perhaps more usefully, it is a forecast that: If nothing else changes the Dems will win, but it seems likely that a lot will happen that we just can’t forecast. As such, prices near 50 are simply a recognition (and quantification) of the uncertainty we face two years prior to a poll.

[*] I can’t count —the start of the primaries is less than one year away.