The probabilistic and statistical method won’t be used when one reports about the expiry of one prediction market. People want to know how that prediction market fared. You have to report it in a binary way (right/wrong, correct/false, failure/success). Then, in a second leg, you can report “the historic average of similar markets”.

1. I am a fan of Panos Ipeirotis’s scientific approach on prediction markets. It is all right.
2. However, I (obviously) won’t use the statistical and probabilistic approach when reporting about the expiry of one (or two) prediction market(s) in particular.

Let me explain why.

1. Panos Ipeirotis is a professor whose job is to instruct young people about the scientific approach. Fine.
2. On Midas Oracle, I abide also by the marketing approach. That is, I try to understand how people view things. Sensing how people can understand or mis-understand prediction markets is what I try (hard) to do. Turn out when I talk about prediction markets to people, the first question they ask me is, “How did prediction markets fare with Barack Obama (or George W. Bush)?“.

My observations:

1. People don’t want to be fed with statistical series about multiple historical prediction markets.
2. People want to know whether one prediction market did or did not forecast the outcome of an event —in terms of yes/no, right/wrong, correct/false.
3. People treat a probabilistic prediction just like any binary prediction.

Now, let’s take a look at how Nate Silver did communicate with the public on The Oscars 2009:

1. Nate Silver gave a set of probabilistic predictions.
2. However, when he blogged his failure, he acknowledged it in the binary mode (yes/no, right/wrong, correct/false) —”four hits and two misses“.

That’s how I do it, too. When one prediction market expires, I assess its past prediction as if it were binary (and not probabilistic) —in terms of success/failure. Which makes me an idiot in Panos Ipeirotis’ book. – (I can take it.)

Now, my challenge to Panos Ipeirotis, is this:

1. Do blog the next expired prediction market (on any topic).
2. Do apply your scientific approach.
3. I bet that your blogging will be as boring as a fruit cake, because, by essence, you can’t say anything, scientifically, about one expired prediction market —or if you abide by the statistical and probabilistic approach, then you won’t really report on that expired prediction market.

Don’t get me wrong. Midas Oracle should publish scientific assessments about multiple historical prediction markets. But to report about one expired prediction market, and to have a bit of fun, it is necessary to put (temporarily) science on the back burner.

As an addendum, remember that Emile Servan-Schreiber told Robin Hanson that science is not all.

NEXT: The prediction markets chalk another one up, as Susan Boyle is sent packing.