- Daniel Gross – Today: A real little PM fanboy. (See towards the end.) – Yesterday: Overly critical.

- As for the Republican hack who, during the 2004 and 2006 US elections, was a living publicity for InTrade-TradeSports… nada.

http://en.wikipedia.org/wiki/Justin_Wolfers

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Robin Hanson, Tyler Cowen, Steve Levitt, and even Don Luskin and Robert Scoble, have their own Wikipedia entry. Why not Wolfers???… I realized that when I updated my “acknowledgments” page:

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Acknowledgments

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- Friedrich August Von Hayek (an economist who introduced, among other things, the concept of the market as an information aggregation tool in The Use of Knowledge in Society, and the 1974 co-winner of the Nobel Prize in economics);

- Professor Vernon Smith (an experimental economics pioneer, and, as such, the 2002 co-winner of the Nobel Prize in economics);

- Professor Robin Hanson (one of the contemporary co-inventors of the prediction markets);

- Doctor James Surowiecki (author of The Wisdom Of Crowds);

- Professors Justin Wolfers and Eric Zitzewitz (meta analysts of the prediction markets);

- Professor Steve Levitt (co-author of Freakonomics);

- Professor Tyler Cowen (co-author of Marginal Revolution and author of Discover Your Inner Economist);

- Donald Luskin (author of The Conspiracy To Keep You Poor And Stupid);

- The GNU, Linux, WordPress, World Wide Web Consortium, Mozilla, Opera, Yahoo!, Google, Wikipedia, Creative Commons and Free Software Foundation people (among others) for freeing our information-based society.

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More Thanks

• The Midas Oracle Blog Authors
• Credits

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In my post, I said that I “respect” him “as a Wall Street professional and as a libertarian blogger.”

How more “agreeable” should I have been???…

On top of that, his name is listed here.

As for responding to him, I will do once he links back to that piece of mine —and not to an empty Blogger page.

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Not a single word on the concept of probabilistic prediction:

The financial incentive to get it right, and the ability to draw on bettors from around the world — anyone who might have any information on whatever proposition is being bet on — is what gives these markets their uncanny predictive power.

Mixing prediction markets (a reality) with decision markets (a utopia):

Economics professor Robin Hanson, who has studied prediction markets extensively, told me he envisions a “futarchy” — government by futures contracts traded in a prediction market.

Claiming that these information aggregation mechanisms (the prediction markets) will supplant the advanced indicators which they feed on:

Today prediction markets are threatening to replace political polling — they’re certainly doing a better job. Tomorrow, who knows? Prediction markets might replace politics itself.

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My readers will prefer the Midas Oracle explainer on prediction markets.

1. George Tziralis
2. Robin Hanson
3. Jonathan Kennedy
4. and I’ll give the 4th spot to a combo, mixing takes from John Tierney, Adam Siegel (surprisingly pertinent –I bet he is on a fish diet, post Christmas ), and Steve Roman.
5. UPDATE: “Thrutch“, 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‘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’ll publish it here.

…asks Slate’s Daniel Gross —via Mister Usability (Alex Kirtland), who needs to go and get his own gravatar.

So, I’ve been watching the action in one of the political futures markets this evening, Intrade. And the action in this prediction market has reinforced my opinion that these are less futures markets than immediate-past markets. The price movement tends to respond to conventional wisdom and polling data; it doesn’t lead them.

Throughout the day and into the early evening, while polls were still open, Democratic investors, mimicking the post-Iowa c.w. and polls, believed Obama was highly likely to be the Democratic nominee. The Obama contract was trading in the lows 70s, meaning investors believed he had a 70 percent chance of being the nominee, while Hillary Clinton contracts were in the 20s. [...] At 6 p.m., this market had written Hillary Clinton’s entire presidential campaign off. At 9:30 p.m., it was calling a dead heat. What caused investors to change their minds so drastically in the space of a couple of hours? A few data points that went against the day’s prevailing conventional wisdom and polls. [...]

See also Niall O’Connor’s assessment:

I am looking forward to the post New Hampshire Caucus, when all you prediction market advocates crawl out from under your stones. For the record at one point the market on Intrade and Betfair was suggesting that Obama had a 95% probability of winning the caucas; whilst Intrade had him at 77% to win the nomination.A case perhaps of both the foolery of crowds and, the market biting back.

New Hampshire will go down as the Black Wednesday of prediction markets and unless there is now objective transparent debate (as opposed to the usual biased sabre rattling) – prediction markets will be dead in the water.

My answer to Dan Gross’ legitimate question and to Niall O’Connor’s snarky comment:

1. Prediction markets are forecasting tools of convenience that feed on advanced indicators. When those advanced indicators are wrong, the prediction markets are wrong.
2. If you prefer the polls or the pundits, your call —but polls and pundits were also wrong, this time, right? Required reading for mister Niall O’Connor: “New Hampshire’s Polling Fiasco” + “Analysis: pundits eat crow“.
3. The ultimate forecasting tool would be a way to reverse our psychological arrow of time —so as to remember the future instead of the past. Only science-fiction writers and some imbécile ( ) believe in that.
4. The prediction market approach is to stick with the markets, on the long term. Take their successes. Take their failures. Unlike Donald Luskin and Markos Moulitsas, Chris Masse will not turn against the prediction markets when they fail punctually. What counts is the long series.
5. My first point should be included in the prediction markets approach definition, in my view, but others (like economist Michael Giberson) might have different opinions.
6. With respect to my first point, I bet that the prediction markets will never replace the polls as the forecasting tool of choice for political analysts —on that particular point (but not on a myriad of others), I break away from Justin Wolfers’ irrational exuberance and I side with Emile Servan-Schreiber of NewsFutures (my preferred play-money prediction exchange). Prediction market reporting will have a function, indeed (as suggests Justin Wolfers), but not the dominant function.
7. Going forward, prediction market journalism should emphasize relative accuracy (as opposed to absolute accuracy) —that is, comparing prediction markets with polls and pundits, which is what Robin Hanson has said from day one. Our good friend Niall O’Connor has difficulty to compute that, apparently. He should eat more fish.

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Justin Wolfers:

“In a few years, we may regard the second half of the 20th century as the aberration in which the press used polls rather than markets to track political races,” Justin Wolfers, a business professor at the University of Pennsylvania’s Wharton School, wrote in an e-mail message. “And in the 21st century, we may return to the habits of the early 20th century, reporting on political races through the lens of prediction markets rather than polls.”

Emile Servan-Scheiber:

1) The traders themselves are the first to look at the polls to inform their trades. So the polls are here to stay.

2) Our recent experience in Western Europe seems to indicate that the superior accuracy of markets over polls when predicting elections may be a U.S. artifact that isn’t so easily reproducible elsewhere. I’ve discussed this with Forrest Nelson of IEM [Iowa Electronic Markets], and apparently, ever since the Truman-Dewey polling debacle of 1948, U.S. pollsters have adopted a policy of reporting mostly raw numbers rather than projections based on sophisticated secret formulas, so they can’t be accused of manipulating opinion. However, raw numbers are notoriously unreliable when based on small samples, and Western European pollsters never report them, preferring instead to publish projections based on historically-informed statistical formulas. What we’ve observed in France and Holland is that it it’s very hard to beat the accuracy of such projections.

[I don't make mine Emile Servan-Schreiber's second point, but that's a minor.]

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InTrade’s expired prediction markets:

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New Hampshire

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The Democrats

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The Hillary Clinton event derivative was expired to 100.

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The Republicans

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The John McCain event derivative was expired to 100.

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Iowa

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The Democrats.

The Barack Obama event derivative was expired to 100.

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The Republicans

The Mike Huckabee event derivative was expired to 100.

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Source: InTrade

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[A more complete prediction market reporting should have included expired contracts from NewsFutures and BetFair. Sorry for that. Note that InTrade-TradeSports is the only exchange to offer a "closed contacts" section.]

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NEXT: Prediction Markets 101 + Who did best in explaining the prediction markets to the lynching crowd? + After the New Hampshire fiasco, 16 people came to defend the prediction markets, so far. + The prediction markets deserve a fair trial. + Prediction Markets = the greatest time-saving invention of this century

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- Friedrich August von Hayek (an economist who introduced, among other things, the concept of the market as an information aggregation tool in The Use of Knowledge in Society, and the 1974 co-winner of the Nobel Prize in economics);

- Professor Vernon Smith (an experimental economics pioneer, and, as such, the 2002 co-winner of the Nobel Prize in economics);

- Professor Robin Hanson (one of the contemporary co-inventors of the prediction markets);

- Doctor James Surowiecki (author of The Wisdom Of Crowds);

- Professor Steve Levitt (co-author of Freakonomics);

- Professor Tyler Cowen (co-author of Marginal Revolution and author of Discover Your Inner Economist);

- Donald Luskin (author of The Conspiracy To Keep You Poor And Stupid); [*]

- The W3C, Mozilla, Yahoo!, Google, Wikipedia, WordPress and Linux people (among others) for freeing our information-based society.

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[*] Don Luskin helped me with finding a good blog name, “Midas Oracle”.

The two-sentence excerpt run by NBC News (Brian Williams – Thursday, May 17, 2007):

They attack us because we’ve been over there. We’ve been bombing Iraq for 10 years.

And then Alan Greenspan’s spouse cut Ron Paul abruptly to give air time to Rudy Giuliani, who caricatured Ron Paul’s views and crashed him like he was aiding and abetting a Mid-East terrorist or something.

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What Ron Paul really said:

They attack us because we’ve been over there. We’ve been bombing Iraq for 10 years. We’ve been in the Middle East [for years]. I think (Ronald) Reagan was right. We don’t understand the irrationality of Middle Eastern politics. Right now, we’re building an embassy in Iraq that is bigger than the Vatican. We’re building 14 permanent bases. What would we say here if China was doing this in our country or in the Gulf of Mexico? We would be objecting.

Ron Paul:

I believe very sincerely that the CIA is correct when they teach and talk about blowback. When we went into Iran in 1953 and installed the shah, yes, there was blowback. A reaction to that was the taking of our hostages and that persists. And if we ignore that, we ignore that at our own risk. If we think that we can do what we want around the world and not incite hatred, then we have a problem. They don’t come here to attack us because we’re rich and we’re free. They come and they attack us because we’re over there. I mean, what would we think if we were – if other foreign countries were doing that to us?

I am happy to see that both Donald Luskin (“in all seriousness”) and Pat Buchanan (who views him as a “serious” contender) like Ron Paul’s ideas. See the “Ron Paul 2008″ site for their reaction.

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- Ron Paul on CNN responding to Rudy Giuliani

- Ron Paul on Blowback