InTrades prediction markets on secretive events are just an Irish scam. – [ANALYSIS]

Paul Hewitt:

How do we know the Intrade price was not accurate? Well, the raid wasn’t just executed on a whim. It had been planned for quite some time. Therefore, the true likelihood must have been much higher than the four or five percent chance the market was telling us.

Many people knew of the plans, albeit they were very high ranking, sworn-to-secrecy types. Since the market did not reflect the potential success of the planned raid, either the market was inefficient or the market, in an aggregate sense, did not possess enough information to make a reasonably informed prediction. In this case, I have to believe the market participants (every last one of them) knew next to nothing about the outcome being predicted.

The Intrade market prediction was nothing more than an aggregation of guesses. This is very different from an accurate prediction (based on calibration) that turns out to be wrong.

Markets such as these have no use, whatsoever, in decision-making. The useful information was that gathered by the SEALs and other secret services, and that was the information provided to the real decision-maker, The President. I would argue that these types of markets have no place as betting markets either. There is no way to test the calibration, so we don’t know whether they are “fair” markets (unlike the accurate calibration of horse races and casino games).

In other words, stop wasting our time operating and analyzing these markets. They are never going to be useful.

InTrade on the elimination of Osama Bin Laden – [ANALYSIS]

Mike Giberson:

How do we know, now, that Intrade&#8217-s market price was not an accurate estimate of the probability bin Laden was killed or captured by September 2011? Is an prior estimate of 50 percent likelihood that a tossed coin will come up heads wrong if the coin comes up as &#8220-100 percent&#8221- heads (and not half-heads and half-tails)?

I&#8217-m not buying Chris&#8217-s implied definition of success and failure.

However, one might ask Robin Hanson about what the Intrade market&#8217-s performance implies about the usefulness of his Policy Analysis Market idea.

Note that I was contrasting the InTrade-Bin-Laden failure with the high expectations set by Robin Hanson, Justin Wolfers and James Surowiecki.

Also, other than statisticians, most people don&#8217-t have a probabilistic approach of InTrade&#8217-s predictions. That&#8217-s the big misunderstanding, which is one part of the big fail of the prediction markets.

InTrade was not able to predict the elimination of Osama Bin Laden. – [PREDICTION POST-MORTEM]

I already blogged about the big fail of the prediction markets. Here&#8217-s more from the NYT, Eddy Elfenbein, and Barry Ritholtz.

Why you should never trust John Battelles opinion on tech – [PREDICTION POST-MORTEM]

John Battelle pumped up &#8220-Color&#8221- at inception, and now we have confirmation that it is a lemon.

John Battelle badmouthed the iPad at inception, and now we know that it is revolutionizing computing.

2009 New Jersey Gubernatorial Race: Was Nate Silvers prediction more accurate than InTrades?

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Nate Silver&#8217-s prediction (November 2, 2009): &#8220-I&#8217-d make Christie about the 4:3 favorite.&#8221-

[ UPDATE: Nate Silver’s prediction post-mortem on the 2009 US elections.]

You can see that days before Elections 2009, InTrade was too heavy on Corzine:




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Nobel Prize for Economics 2009 – Prediction Accuracy

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The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2009 to Elinor Ostrom &#8220-for her analysis of economic governance, especially the commons&#8221- and Oliver E. Williamson &#8220-for his analysis of economic governance, especially the boundaries of the firm&#8221-.

Both the bookmakers and the prection markets are utterly useless in trying to divine who will get the Nobel prize of economics.

Below is the 2009 prediction post-mortem:

1. Bookmakers

Ladbrokes&#8217-s probabilities (odds) for the 2009 Nobel prize in economics:

Eugene Fama 2/1
Paul Romer 4/1
Ernst Fehr 6/1
Kenneth R. French 6/1
William Nordhaus 6/1
Robert Barro 7/1
Matthew J Rabin 8/1
Jean Tirole 9/1
Martin Weitzman 9/1
Chris Pissarides 10/1
Dale T Mortensen 10/1
Xavier Sala-i-Martin 10/1
Avinash Dixit 14/1
Jagdish N. Bhagwati 14/1
Robert Schiller [sic] 14/1
William Baumol 16/1
Martin S. Feldstein 20/1
Christopher Sims 25/1
Lars P. Hansen 25/1
Nancy Stokey 25/1
Peter A Diamond 25/1
Thomas J. Sargent 25/1
Dale Jorgenson 33/1
Paul Milgrom 33/1
Oliver Hart 40/1
Bengt R Holmstrom 50/1
Elhanan Helpman 50/1
Ellinor Ostrom 50/1
Gene M Grossman 50/1
Karl-Goran Maler 50/1
Oliver Williamson 50/1
Robert B Wilson 50/1

2. Betting Pools

Here is the betting in the Nobel pool at Harvard:

Robert Barro -10%
John Taylor &#8211- 8%
Paul Milgrom &#8211- 8%
Jean Tirole &#8211- 6%
Oliver Williamson &#8211- 6%
Martin Weitzman &#8211- 6%
Eugene Fama &#8211- 5%
Richard Thaler &#8211- 5%
Lars Hansen &#8211- 4%
Paul Romer &#8211- 4%

3. Prediction Markets



Previously: Nobel Prize for Economics 2009 Predictions

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