Most polls have showed that the Democratic nominee will win in November. But there is another kind ofprediction: John McCain is at nearly even odds to win the popular vote, at a 46% likelihood.
This is actually from the latest data of Iowa Electronic Markets, where traders place their money. Perhaps such predictions by large numbers of people betting their own money could have more v
alue than some polls. You know sometimes, polls do suck, and even in politics, market rules.
At least these Web-based prediction markets are showing that how the Web lets people combine their views so that, in the aggregate, they’re more likely to get it right. James Surowiecki, in his book The Wisdom of Crowds, points out the fact that combined guesses from experts and non-experts can result in a nearly perfect answer.
These kinds of collective intelligence also accounts for why Google results, determined by an algorithm reflecting the popularity of Web results matching a search, are so relevant. Likewise, Wikipedia entries edited by many anonymous citizen “editors” can be remarkably accurate.
According to Wall Street Journal, some $165 million in today’s dollars was traded inside Wall Street on the 1916 election. It was twice the amount spent on the election campaign itself. An active market with known information can well reflected in prices. “Betting odds are generally taken as the best indicator of probable results in presidential campaigns,” as the newspaper explained. Numerous firms “make a business of receiving and placing bets, and many of the principal banking houses call these firms up daily to secure information on the betting trend.”
The Iowa Electronic Markets mentioned above claims that its results have been more accurate 75% of the time versus some 1,000 opinion polls since the early 1990s. Similarly, traders from Intrade (another prediction market service based in Dublin, which also powers a political futures market at WSJ.com using play money) has also correctly called the results of 49 states in the 2004 presidential election.
As for now, besides poll results, probably prediction markets can be the second best answer for both candidates and voters to figure out where the election is going. After all, a politician with faith in markets and the populist wisdom of crowds might happen to be the best bet.
Filed under: Campaign 2008, John McCain Tagged: | Intrade, Iowa Electronic Markets, James Surowiecki, John McCain, The Wisdom of Crowds
