Daily Archives: January 11, 2008

Columbia Journalism Review not much convinced by Wall Street Journals Justin Wolfers

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No GravatarTo say the least.

[&#8230-] Unfortunately, by the eve of the New Hampshire primary, Wolfers was back in the Journal, writing this time that the newspaper’s own prediction market, WSJ Political Marketplace, run by Intrade, was showing that New Hampshire might be the “death knell” for Clinton and a couple other candidates. After a bet like that, in Vegas they’d say, &#8220-craps.&#8221- 

Humm&#8230- I don&#8217-t like this CJR piece, but it shows that many in the non-business press are skeptical of prediction markets.

Read the previous blog posts by Chris F. Masse:

  • I get a kick each morning out of spying on the rich, famous, and powerful people updating their LinkedIn profile and connections. (Go to “InBox”, and click on “Network Updates”.)
  • ??? BetFair bet-matching logic ???
  • Eliot Spitzer has simply demonstrated once again that those who rise to the top of organizations are very often the most demented, conflicted individuals in any group.
  • Business Risks & Prediction Markets
  • Brand-new BetFair bet-matching logic proves to be very controversial with some event derivative traders.
  • Jimmy Wales accused of editing Wikipedia for donations.
  • What the prediction market experts said on Predictify

Who did best in explaining the prediction markets to the lynching crowd?

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After the New Hampshire fiasco, 16 18 people came to defend the prediction markets, so far. So far, the best takes are from:

  1. George Tziralis
  2. Robin Hanson
  3. Jonathan Kennedy
  4. and I&#8217-ll give the 4th spot to a combo, mixing takes from John Tierney, Adam Siegel (surprisingly pertinent &#8211-I bet he is on a fish diet, post Christmas :-D ), and Steve Roman.
  5. UPDATE: &#8220-Thrutch&#8220-, Emile Servan-Schreiber and Panos Ipeirotis.

AWOLs (so far): PMIA, AEI-Brookings, InTrade, TradeSports, BetFair, TradeFair, NewsFutures, Emile Servan-Schreiber, Jed Christiansen, Koleman Strumpf, Bo Cowgill, Richard Borghesi, Chris Hibbert, David Perry, Ken Kittlitz, Paul Tetlock, David Pennock, Mike Linksvayer, Brent Stinsky, David Yu, Mark Davis, David Jack, James Surowiecki, Tyler Cowen, Greg Mankiw, Donald Luskin, John Delaney [*], etc.

[*] Steve Bass tells us that John Delaney&#8217-s pre-NH CNBC appearance was awesome. I was up that day, waiting for that CNBC segment, but failed to spot it. If somebody sends me the YouTube link, I&#8217-ll publish it here.

GIGO and prophets, tears and markets

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Prediction markets failed to accurately predict the unexpected effect a few tears had on the New Hampshire primaries- and some analysts rushed to blame the tool and undermine its reliability and applicability. Let me restate some fundamentals and my view, in a snapshot:

  • Markets are not prophets, prophets do not exist.
  • A mechanism&#8217-s forecastability should not be judged against a virtual fool-proof prophet- we&#8217-d better compare it with other existing or widely-used mechanisms and -to my partial and context-bound knowledge- markets outperform all those.
  • Markets are the only tool that intrinsically suggests their probability of failure. If Obama&#8217-s stock is traded at 70 cents, this suggests that there is a 30% probability of Obama losing- I&#8217-d say markets are by character modest and no fanfare has any place in describing their suggestions.
  • Markets are primarily an aggregation/meta mechanism- as such, garbage-in-garbage-out effects are expected to happen, so we&#8217-d need to keep focus on minimizing garbage rather than blaming the market/compiler.
  • Maturity of the mechanism and its use, as long as trading volume (in real-money intrade for example), have not yet reached a fully efficient level (more on this to come soon), but these result in significant profit opportunities, so I expect things to just keep getting better.

cross-posted from my blog