Justin Wolfers pumped up the shitty, play-money prediction exchange run by InTrade/WSJ.

Shit here.

The fake-money exchange is pitiful, and to have a professor pumps up that shit is pitiful too.

UPDTE: That was the 2008 election. Fortunately, this crappy exchange is dead. Here&#8217-s Freakonomics on the 2010 election.

Mystification, demystification, value assessment, and prediction markets

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Justin Wolfers:

Prediction markets can yield valuable insight into the dynamics of political campaigns, a conclusion we&#8217-ve drawn from years of intensive study and research. We&#8217-ve even proselytized about the value of these markets, extolling their ability to yield sharper insights than pundits or polls. […]

If this statement were true,

  1. Justin Wolfers&#8217- columns at the WSJ would have been linked to by the blogging political experts. They never were.
  2. The blogging political experts would have adopted the prediction market tool (over than just quoting the InTrade prices out of curiosity). They never did.

Both the mystification of the prediction markets (mudding the primary indicators into commentary- suggesting that the traders&#8217- anticipations are always sound) and their demystification (listing the primary indicators) don&#8217-t do the trick: Economic science should be able to tell us whether the prediction markets on 2008 US elections are of high social utility, and whether other kinds of prediction markets are of higher social utility. I am not satisfied by what I have been reading, as of today. The prediction markets are rather a tool of curiosity, as of today, not much a tool of forecasting. The prediction markets are not used as a tool by the experts &#8212-by &#8220-the experts&#8221-, I mean all the experts but the prediction market experts (who are expert in nothing else than pumping up the prediction markets): the political experts, the financial experts, the management experts, the oil production experts, the credit experts, the health care system experts, the automobile market experts, the wine market experts, the web technology business experts, the web advertising experts, the medical drug experts, the foreign affairs experts, the military experts, the aviation industry experts, the condom industry experts, the restaurant industry experts, etc.


Robin Hanson:

[I]nfo value [] is the added accuracy the markets provide relative to other mechanisms, times the value of accuracy in improved decisions, minus the cost of maintaining the markets, relative to the cost of other mechanisms. A highly accurate market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.

PREVIOUSLY: See Robin Hanson&#8217-s take on Google&#8217-s enterprise prediction markets.

Now that Joe Biden is the Democratic vice president nominee, what to think of Justin Wolfers August 1st column for the WSJ?

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The good point is that he dealt well with the fact that the VP prediction markets fed on primary indicators that are less reliable than the ones used for the political elections.

The bad point is that, at the time he wrote up his column, Virginia governor Tim Kaine was the favorite of the InTrade VP prediction markets. The others were, in decreasing order, Evan Bayth, Kathleen Sebelius, and then&#8230- Joe Biden. So, the critic reading his column today could say that the prediction markets are oversold to a gullible public and that a prediction market bubble ready to pop up is forming under our very nose.

– Now, we know that Barack Obama made his decision while vacationing in Hawaii (less than 2 weeks ago). That&#8217-s only from that date that the VP prediction markets started generating probabilistic predictions worth quoting. The trick is that Justin Wolfers (and the other prediction market analysts) didn&#8217-t know that, on August 1st. (PDF file)

– I don&#8217-t regret my decision not to publish about the VP prediction markets. I&#8217-d look like an idiot today.

A Mystery Wrapped In A Riddle Inside An Enigma – CFTC Edition

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How could that &#8220-exemption&#8221- guy have climbed to the top of Memeorandum even though there are no blogs listed that have discussed that WSJ piece?

Previous blog posts by Chris F. Masse:

  • In a blow to the French, BetFair choose Bastille Day to premiere the revised version of the bet-matching logic of their prediction markets. — IMPROVEMENT MEANS BETTER LIQUIDITY FOR THEIR EVENT DERIVATIVE TRADERS.
  • InTrade Spotting — Monday Morning Edition
  • Forecasting Principles should index BusinessWeek.
  • Caveat Bettor…
  • Yet another prediction market newbie who should be meeting with Robin Hanson one on one to get a little injection about conditional prediction markets and how they could be useful for BOTH private decision makers AND public policy makers.
  • We are now awaiting the CFTC’s decision on “event markets” (prediction markets)…
  • Why Midas Oracle will have to drop InTrade

BAD KARMA FOR PREDICTION MARKET JOURNALISM: Almost nodoby has linked to Justin Wolfers articles at the Wall Street Journal.

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Considering that he is the #2 researcher in our field, that he issued bold statements on the use of market-generated predictions by journalists (&#8221-2020&#8243-), that the WSJ is the premier business publication, then that&#8217-s bad omen for prediction market journalism &#8212-well, at least, for the version that he has put out. The feedback of the Blogosphere is clear: WE COULDN&#8217-T CARE LESS.


How to read the Wall Street Journal stories on prediction markets… FOR FREE

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Very simple. The WSJ is free if you come from big news content aggregators (like Digg or Google News). If you can manage to have your browser produce artificially a Digg or Google News referral, then you&#8217-re permitted to enter the WSJ paid content for free.

  1. Download RefSpoof, which is an add-on for Mozilla FireFox-
  2. Type &#8220-digg.com&#8221- in the RefSpoof entry box-
  3. In the &#8220-R&#8221- drop menu, on the right, check &#8220-static&#8221-.
  4. Go to the Wall Street Journal, and click on a story. (You&#8217-ll hit the pay wall.)
  5. Click on &#8220-spoof&#8221-, which is located at the left of the RefSpoon entry box. (That will create the false referral.)
  6. You&#8217-ll see that the Wall Street Journal story reloads and that the pay wall has disappeared, freeing the content.

The guy who published that trick says it&#8217-s all ethical to him. (Hummm&#8230-)

NEXT WEEK, we&#8217-ll show you how to speculate on BetFair-TradeFair and InTrade-TradeSports event derivative markets&#8230- FOR FREE. :-D Just kidding. :-D