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New Hampshire – The Democrats

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The Hillary Clinton event derivative was expired to 100.

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New Hampshire – The Republicans

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The John McCain event derivative was expired to 100.

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PDF file.

I don’t think there is any question that the usefulness of prediction markets has been exaggerated. We don’t hear much from James Surowiecki anymore. So a few of those polled probably indicated that he doesn’t exaggerate the usefulness (at least not anymore). Justin Wolfers isn’t as well known as Robin Hanson in the prediction market arena. This probably accounts for the large size of the “Don’t Know” vote. This leaves the “Yes” category, which would be made up of Robin Hansonites, who believe the slightest possible improvement in predictive accuracy over other methods justifies a significant investment in prediction markets.

If the question had been asked in a prediction market instead of in a poll, such answers would have led us to believe that the market knows little about the subject, if anything at all. Of course it would have been difficult, if not impossible, to create a prediction market in which the “outcome” is an opinion!

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UPDATE: Here’s an example (among many) of the grave problems with prediction markets, which are unreported by the media.

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PDF document.

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In a new study, Daniel Reeves, Duncan Watts, Dave Pennock and I compare the performance of prediction markets to conventional means of forecasting, namely polls and statistical models. Examining thousands of sporting and movie events, we find that the relative advantage of prediction markets is remarkably small. [...]

Given that sports and entertainment markets are among the most mature and successful, our results challenge the view that prediction markets are substantively superior to alternative forecasting mechanisms. Nevertheless, it is certainly possible that there are forecasting applications where either the relative advantage of markets is larger, or that such differences in performance are consequential. Thus, while prediction markets may yet prove to be useful, it would seem the enthusiasm for their predictive prowess has outpaced the evidence.

Prediction Without Markets — by Sharad Goel, Daniel M. Reeves, Duncan J. Watts, David M. Pennock

http://www.cam.cornell.edu/~sharad/papers/pred-wo-markets.pdf

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Robin Hanson’s comment:

Whoever said that every prediction market would always be more accurate than any other mechanism? [*] I’d say they are more-accurate more often than they are less-accurate, compared to mechanisms with similar resources. And your plots at the bottom look like they are testing calibration, not accuracy.

Read Daniel Reeves’s answer to Robin Hanson.

[*] Google, doc.

I probably wouldn’t use an alternative. –> 65%

It is a lie. They would use BetFair USA instead —or another service. Come on.

And Chris Masse of Midas Oracle is not a “symbiotic detractor”, John. Blame yourself for the occasional slamming in the world’s #1 prediction market blog. I am a fair guy. All the slams published here are deserved. Take it graciously —as the other ones do.

Markets vs. Polls as Predictors: An Historical Assessment of US Presidential Elections – (PDF file) – by Robert S. Erikson and Christopher Wlezien