KansasCity.com (page two):

[…] To advocates such as business professor Justin Wolfers, people can better plan their lives, their purchases and their businesses by knowing how much investors are willing to wager that, for example, mortgage rates drop.

“It’s an empirical question, not a theoretical one: Does the market do better than polls or pundits in predicting outcomes? The short answer is yes,” said [Justin] Wolfers, of the University of Pennsylvania’s Wharton School. […]

Previous blog posts by Chris F. Masse:

• IIF’s SIG on Prediction Markets
• Science
• Why did prediction markets do well in the pre-polling era, professor Strumpf?
• Mozilla FireFox users, do you have trouble downloading academic papers (as PDF files) from SSRN?
• “Impact Matrix. Used to collect and gauge the likelihood and business impact of various events in the very long term.”
• Ends and Means of Prediction Markets — Tom W. Bell Edition
• How to run enterprise prediction markets… legally

[…] [About the Iraq war] – “There is no question that America is living a nightmare with no end in sight,” retired Lt. Gen. Ricardo Sanchez told a convention of military journalists on Friday. […]

But why didn&#8217-t he come forward before, then?

[…] Asked why he did not speak out about his concerns, Sanchez said general officers take an oath to carry out the orders of the president while in uniform. “The last thing that America wants, the last thing that you want, is for currently serving general officers to stand up against our political leadership,” he said. However, general officers do have the option of stepping down if they disagree with the country&#8217-s leaders. Sanchez said he felt he could not resign and go public with his reservations while he was in Iraq, because he feared that move could further jeopardize troops serving there. “I think once you are retired, you have a responsibility to the nation, to your oath, to the country, to state your opinion,” he said.

Associated Press:

We can&#8217-t rely on retirees to tell us the truth. We need an anonymous information aggregation mechanism that gives an incentive to people who come forward with advanced information: the prediction markets.

Jed Christiansen has more on the 2007 Consensus Point conference on prediction markets&#8230-

Robin Hanson

Robin gave a quick addendum to his earlier talk, where he focused on the cost-value space of a prediction market. He described an evolution from betting markets, which have negative cost (aka profit) though little value to an organisation, to future prediction markets. Fully evolved prediction markets will certainly have a cost to operate, but the output could have tremendous value to a company.

Intro to Prediction Markets – (PPT file) – by Robin Hanson – 2007-09-24

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Which way does Robin Hanson blow? When he was not involved, he had negative comments on internal prediction markets. Now that he is more involved (keynoting at a vendor conference), he has positive comments. Could it be that The Professor is biased?

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#1. Justin Wolfers on the 2007 Consensus Point conference

Robin Hanson tells me that he is now (back to) bullish on prediction markets – he saw real evidence of real firms implementing prediction markets and taking them seriously.

#2. Jed Christiansen on the 2007 Consensus Point conference

Robin [Hanson] gave a fairly standard introduction to prediction markets lecture that some may have seen at other events or downloaded from his website. It was a good overview of the topic.

The question and answer period was the most interesting part with Robin. He was asked about manipulation, and provided some fairly convincing answers that manipulation shouldn’t be a worry (at least with the correct incentives.) Robin described the situation in terms of sheep and wolves. Sheep aren’t that knowledgeable- they are trading for any number of reasons, and are the “noise” in the marketplace. Wolves take advantage of that, and consequently they look for markets with lots of sheep. With better information, the wolves will easily have plenty to “eat.” The net result is that those noisy markets are accurate markets.

Another concept he talked about was creating a “fudge” account. Let’s say you want to weight one set of traders more than another, or simply want to “move” the forecast in one direction or another- create a “fudge” account to conduct those transactions. If after the account has been running for a while and it’s positive, you’ll know you’ve done a good job fudging. But if the fudge account is negative, you don’t know more than the market so just stop fudging and leave the market to itself. It’s a great idea, and fairly easy to implement.

UPDATE: Jed has more&#8230-

Robin Hanson

Robin gave a quick addendum to his earlier talk, where he focused on the cost-value space of a prediction market. He described an evolution from betting markets, which have negative cost (aka profit) though little value to an organisation, to future prediction markets. Fully evolved prediction markets will certainly have a cost to operate, but the output could have tremendous value to a company.

Dixit James Surowiecki at the 2007 Consensus Point on (internal) prediction markets. Reported by Jenny Ambrozek.

UPDATE: Justin Wolfers on the 2007 Consensus Point conference + Jed Christiansen on the 2007 Consensus Point conference

Jenny Ambrozek:

A thread among the presenters [of the 2007 Consensus Point conference] was how prediction markets expand people connections in organizations. Through market participation employees from disparate parts of organizations discover unknown people with similar interests and unexpected talents. Market activity becomes a thread in employee conversations. Previously unrecognized expertise emerges through successful trading and listing on leader boards.

It makes people talk more together. Good. Now, are those internal prediction markets accurate and do they have useful predictive power?

UPDATE: Justin Wolfers on the 2007 Consensus Point conference + Jed Christiansen on the 2007 Consensus Point conference

All the reference material posted by Inkling in its marketplace area is awesome. High quality. Very interesting read. In the section highlighted below, Adam Siegel explains how important is the relationship between the blogs and the prediction markets. Which is what I said from day one. It&#8217-s time that the world recognizes me as the most forward thinker in the field of prediction markets.

The explainer below on trader incentives is awesome, by the way. Go reading it, folks.

Now that I know how to embed a YouTube video , here are some videos I linked to in the past. They are all about InTrade, but, in the future, we will show YouTube videos from other exchanges and vendors. (E-mail me if you know of other YouTube videos on prediction markets.)

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John Delaney of InTrade (CNBC Larry Kudlaw – August 2007):

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John Delaney of InTrade (Fox News – Feb 2007):

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Justin Wolfers on InTrade (Bloomberg – Feb 2007):

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If somebody can post the other Justin Wolfers video on YouTube (providing your criminality lawyer is OK for that), e-mail me and I will update this blog post.

– Beating Wall Street Economists – Bloomberg TV – AVI file – 30 Mega “Bs” – [Economic Derivatives versus surveys of economists] – 2007-03-08

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Also, if somebody can post the Yahoo! Confab on YouTube (providing that it is legal to do that), e-mail me too. (David Pennock would like it to be hosted on Yahoo! Video, instead, I suppose. Or is it already hosted by Yahoo! Video?? Just asking. I&#8217-m not an expert in those things.)

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Also, if you have recorded conference segments, tell me, we could embed them too, if all people agree.

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If you think it&#8217-s legally wrong to republish these YouTube videos, e-mail me to explain me IP rights management. I&#8217-m a bit a newbie.

And he could be right.

The only way to evaluate accuracy of predictions is with a sufficient group or series of predictions.

I don&#8217-t disagree with that. My previous blog post on the Karl Rove prediction market simply stated that:

1. The NewsFutures prediction on Karl Rove happened to be wrong.
2. The resignation prediction markets are usually wrong.
3. There are different kinds of prediction markets. The resignation prediction markets are of the kind where there are no reliable advanced indicators.

Jed Christiansen and Emile Servan-Schreiber want to deny us the right to say that an individual prediction was inaccurate. I respectfully disagree with that. Other than that, I agree with their general point about using long series and understanding the true nature of probabilities. But, in day-to-day life, we all assess the accuracy of individual predictions. While it&#8217-s not the most important angle, that&#8217-s not something to censor, in my view.

On a related note, Midas Oracle should publish more excerpts of papers that assess long series of prediction markets. We will work on it in the future.

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Karl Rove will resign from the White House.

(You will spot that the prediction market was predicting, lately, that the probability for a Karl Rove resignation was only about 20%.)

Previous blog posts by Chris F. Masse:

• Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
• Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
• How does InTrade deal with insider trading?
• Modern Life
• “The Beacon” is an excellent blog published by The Independent Institute.
• The John Edwards Non-Affair… is making Memeorandum (twice), again.
• Prediction Markets = marketplaces for information trading… and for separating the wheat from the chaff.

James R Miceli for Congress

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Justin Wolfers and Eric Zitzewitz were asking, &#8220-How to attract uninformed traders?&#8221-. (PDF file) Well, here&#8217-s one answer. Make suckers believe that Inkling Markets is like a voting system, where the more supporters show up for a political candidate, the more likely it will be that their candidate will get the nomination/election. (See Mike Giberson&#8217-s excellent blog post, yesterday, for more info.)

REALITY CHECK: The &#8220-votes&#8221- sent to Inkling Markets by the uninformed traders will be overturned over time as the active and informed traders (the &#8220-market makers&#8221-) go trading on this particular prediction market.

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Previous blog posts by Chris F. Masse:

• “Is Clinton’s Pennsylvania Lead Really 20 Points?”
• The Most Surprising Piece Of News I’ve Heard Today
• My first prediction market plugin for WordPress
• Self-Serving Prediction Market Of The Day — Unlawful Internet Gambling Enforcement Act of 2006
• Prediction markets tend to be so illiquid, though, that mere activity looks like volatility.