For those interested, here is what ComScore predicted. But I can’t access the page.

Prediction markets provide the best objective forecast, and they respond faster to new information than the mass media —but slower than the vertical/local media do (since aggregating information takes a little time). I like that, and if you read Midas Oracle, that means you like it too. But it is overall a small benefit. There is no case for running out there and selling $400-a-seat conferences —hyping that prediction markets can run organizations and governments.

NEXT: Prediction markets have failed at forecasting correctly an important event —*once again*.

1. Vertical media and local media — starting Tuesday, April 21, 2009
2. Mass media, news aggregators, and user-created prediction markets (a la HubDub) — starting Friday, April 24, 2009
   
3. Centrally managed prediction markets (a la InTrade) — starting Monday, April 27, 2009

External Link: Google News Timeline

Previously: Our “velocity” tag

[...] In virtually every case, the prediction market forecast is closer to the official HP forecast than it is to the actual outcome. Perhaps these markets are better at forecasting the forecast than they are at forecasting the outcome! Looking further into the results, while most of the predictions have a smaller error than the HP official forecasts, the differences are, in most cases, quite small. For example, in Event 3, the HP forecast error was 59.549% vs. 53.333% for the prediction market. They’re both really poor forecasts. To the decision-maker, the difference between these forecasts is not material.

There were eight markets that had HP official forecasts. In four of these (50%), the forecast error was greater than 25%. Even though, only three of the prediction market forecast errors were greater than 25%, this can hardly be a ringing endorsement for the accuracy of prediction markets (at least in this study). [...]

To the despair of this man, Paul’s analysis is quite similar to mine (circa February 14, 2009):

The prediction market technology is not a disruptive technology, and the social utility of the prediction markets is marginal. Number one, the aggregated information has value only for the totally uninformed people (a group that comprises those who overly obsess with prediction markets and have a narrow cultural universe). Number two, the added accuracy (if any) is minute, and, anyway, doesn’t fill up the gap between expectations and omniscience (which is how people judge forecasters). In our view, the social utility of the prediction markets lays in efficiency, not in accuracy. In complicated situations, the prediction markets integrate expectations (informed by facts and expertise) much faster than the mass media do. Their accuracy/efficiency is their uniqueness. It is their velocity that we should put to work.

Prediction markets are not a disruptive technology, but merely another means of forecasting.

Go reading Paul’s analysis in full.

I would like to add 2 things to Paul’s conclusion:

1. We have been lied to about the real value of the prediction markets. Part of the “field of prediction markets” (which is a terminology that encompasses more people and organizations than just the prediction market industry) is made up of liars who live by the hype and will die by the hype.
2. Prediction markets have value in specific cases where it could be demonstrated that an information aggregation mechanism is the appropriate method that should be put at work in those cases (and not in others). Neither the Ivory Tower economic canaries nor the self-described prediction market “practitioners” have done this job.

Nate Silver applies the approach to Bobby Jindal.

Note that accuracy is out of the picture (since 2012 is far away) —as I said, the velocity argument is impermeable to inaccuracy and backfires.

Sean Park, take this as my answer.

Note that, by contrast, the efficiency (velocity) argument does not lead to any backfire —because it is impermeable to inaccuracy.

And in other words:

1. The relative accuracy of the prediction markets = epsilon and (quite) controversial.
2. The relative efficiency of the prediction markets versus the mass media (not the vertical media) = big (in complicated situations), undeniable, and impermeable to inaccuracy.

Voila.

Part of the job of the Open Institute Of Prediction Markets will be to help documenting velocity. From there, we will develop some other projects.

That is not true.

Let’s imagine, for the sake of the exercise, that Barack Obama does not pick up Kathleen Sebelius to head HHS. The velocity argument remains valid: Fed by the vertical media (in this case, Yahoo News republishing the Associated Press), the prediction markets integrated expectations (informed by facts and expertise) much faster than the mass media did.

Any argument about the velocity of the prediction markets cannot be contradicted. No way.

In the conclusion of their introduction, Robert Hahn and Paul Tetlock wrote that they want their readers to contemplate the idea that prediction markets could make a “big” difference and “revolutionize public- and private-sector decision-making”. Well, 4 years later, it is clear that those big dreams didn’t pan out. Not a single mass media outlet has praised the public prediction markets for their work on the 2008 US presidential election (I am taking about a post-mortem analysis about Election Day, not the primaries). Not a single one. (Not even Justin Wolfers.) And the number of corporations using enterprise prediction markets is still minute. The thinkers who wrote this book (“Information Markets”) all made the mistake to put the emphasis on accuracy instead of efficiency. That was the foundation flaw. We should reset and reboot the field of prediction markets.

Previously: The truth about prediction markets