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Barack Obama re-election prediction market:

- The Economist on how the US stock markets (not the “prediction markets”) can predict political elections. A bad piece, in my view.

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Justin Wolfers interview:

[...] Wolfers predicted that cable news shows would turn to prediction-market experts for analysis in 2008. “My forecast is that they’ll either have someone in the studio whose job it is to track the markets, or the James Carvilles of the world will learn how to interpret the markets, and they’ll integrate that into their commentaries,” he said. [...]

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Justin Wolfers interview:

“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.”

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Justin Wolfers interview:

Wolfers predicts that “within a few years and a couple of election cycles, we will be back to tracking political markets through the lens of prediction markets instead of polls. In fact, in the last few election cycles, we have seen political commentators talking more and more about the race in light of prediction markets.”

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Justin Wolfers interview:

Justin Wolfers interview:

“My long-term prediction is that newspapers in 2020 will look like newspapers in 1920.”

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I think that the media will be citing:

1. the polls
2. the experts
3. the prediction markets —from InTrade, TradeSports, BetFair, TradeFair, NewsFutures, HubDub, etc.

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In some particular cases, it makes high sense to use the prediction markets more than the polls. We’re in such a period. The national polls about Barack Obama and Hillary Clinton are irrelevant, right now. (They’re tied.) The experts who can count in terms of delegates and super-delegates tell us that Hillary Clinton is both baked and toasted. The political prediction markets are reflecting that, and are crowning Barack Obama as the future Democratic presidential nominee.

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What do you, folks, think?

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APPENDIX:

Paul Rhode and Koleman Strumpf. PDF file

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The prediction market charts below were taken a bit before the close of the Australian polling stations, last Saturday.

BetFair (on Australia’s Labor Party, which ended winning):

BetFair had a complete set of Australian political election prediction markets:

InTrade-TradeSports: