Let’-s not confuse media visibility with utility. Aside from the depressed Obama-to-win prices on one exchange, prediction market and polling aggregation results for the 2008 election were essentially the same using squared errors. Despite his insane schematics, Emile Servan-Schreiber has a good point about capturing the interest of the public, something that nerdy academic and libertarian-types aren’-t necessarily good at. An Obama-backing baseball statistician out of Daily Kos nailed that part this year, a year where people were especially skeptical of markets, not to mention unregulated “-offshore”- ones. Likewise, if you put down the lens of considering markets as commission generators, you’-ll see the value of contracts tied to social and cultural outcomes. Of one the biggest assets of prediction exchanges is media goodwill, which should be fostered by distilling information on subjects like global development and art prices.
Other things to keep in mind:
- This year happened to have a lot of favorite-longshot States, which turned-out to be favorable to 538’-s error relative to markets.
- Prediction markets register information in real time. Since the difference in error is small, this is important.
- Markets are more flexible, and useful in situations where you don’-t have a rich data set and obvious statistical analyses. Elections are just one type of question. Even if you have data, it might be less expensive to set up a new contract than to undertake the analysis.
- And of course, prediction markets have functions aside from forecasting, and provide incentives for uncovering new information.
” prediction market and polling aggregation results for the 2008 election were essentially the same using squared errors”
Since 2004, the “media goodwill” was based on the fact that InTrade claimed to have nailed all the 50 states, and that the prediction markets have a predictive power superior to the one of the polls.
Your post don’t answer my questions:
What was the social utility of the political election prediction markets during the 2008 campaign?
In other words, why should the media have informed people about the InTrade probabilities at a time Nate Silver did a near-perfect job forecasting the 2008 US elections?
What’s the added value of the political election prediction markets over the poll aggregators?
Can you cite one prediction market (other than the “who’s gonna become president?” prediction market) that has a high social utility?
The “media goodwill” has always been “about the [accurate] predictions”.
A lot has been made of relative accuracy and it’s clear now that raw polls are not fair “comps” for election markets, but Intrade/IEM have a longer track record than the aggregators. Clearly proven accuracy isn’t necessarily the most important source of media goodwill in the short run. The markets are also faster in registering news.
While many markets have provided valuable information, I agree that more compelling success stories are needed, i.e. situations where prediction markets are outliers with respect to conventional wisdom on important questions, or aggregate information that is completely scattered. We have seen this to a degree, but it is hard to point to a situation where these markets have, for example, saved lives. Ideally you want to find a situation where one authority/province listens to the markets and makes a policy change, while a similar authority/province doesn’t, and see what happens. Of course there is a good chance that they already basically know what the markets would tell them and aren’t taking action for other reasons.
“Clearly proven accuracy [was] the most important source of media goodwill”. InTrade claimed to have nailed the 50 states in 2004. Hence, the good publicity they have received.
I have in mind one situation where the experts and the prediction markets were delivering a message that the mass media took some time (2 weeks) to compute and deliver.
[…] Chris F. Masse November 16th, 2008 From Jason Ruspini, here. […]
Many people have told me that I’m from a different planet. Actually, that isn’t true. I have a lot more understanding of human behavior than the average person. It is they who can’t see beyond what lies in front of them, and some can’t even see that. It is they who live in a world of their own that doesn’t even come close to reality.
Boom & Bust.
After a sustained multi-year rally most people have gained confidence in the stock market. Banks sell their clients risky products because people have an appetite for risk – nothing can go wrong. As we know (should know by now), this is very poor advice from our experts who are advising us. “Your” experts, Chris.
After a market crash people usually have lost their faith, and banks sell their clients savings products. There is not a lot of appetite for risk this time. Again, clients are being given very poor investment advice when all they care about is making money, selling as many products as possible.
This has to end. People, ordinary folks, are losing money because they’re given advice by people with vested interests, whom they trust.
How to achieve this ? Well, that should be the really, really easy part for anyone involved in prediction markets. But I’m not going to tell you.
As for the high social utility of PM’s, come on… how many people have lost most of their savings / pension money because they were “misinformed” ? How about giving it a shot and try and close the ever increasing gap between rich and poor, just a little bit, simply by telling people the truth for a change? (Last time I checked, prediction markets were still pretty damn accurate). That good enough for you, Chris ? All you need to do now is figure out what markets to offer, and sell it to the public. That last bit will be the tough part, especially when you have no faith in your own product, or when you are unaware of its capabilities, or maybe even ignorant and naive.
I heard Dell was downgraded today.
They are 2 days late. We can’t sell it at $9 now.
You own any, Chris ? Selling ?
Seriously… these are probably the same people who upgraded the stock when it was trading at $35.
People with vision like that deserve more than just $25,000,000,000 of your (taxpayer) money.
I think it was only $26-27 when it was initiated at outperform
I noticed Jason. Another way of explaining it would be to say it took them three years after the previous crash to gain enough confidence and finally show some commitment.
Or, as Einstein would say (if you allow my personal interpretation, this time) “He who joyfully marches to music rank and file, has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would surely suffice. This disgrace to civilization should be done away with at once.”