Prediction Markets and the Palin Pick

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4 Responses

  1. Dave says:

    Perhaps it says nothing at all. My sense is that prediction markets do well at establishing probabilities for future events subject to either market or competitive forces (such as elections, sporting events, or other markets), and do not so good on what is ultimately a single person’s decision, and, as in the McCain VP pick, a decision where the decisionmaker is trying to surprise everyone with his maverick pick so as to take advantage of the news cycle.

    I wouldn’t read to much into this one. You might as well ask the prediction markets to determine which number between 1 and 10 I am thinking of right now.

  2. A.J. Sutter says:

    “There is good money to be made trading against the ignorant, CNN-driven masses:” but not the WSJ-driven masses. Palin’s name appeared in a WSJ list of contenders several weeks ago. From that point, choosing her seemed like an obvious “move to block”, to use a Hollywood Squares metaphor that seems to fit our electoral process all too well.

  3. Ocean says:

    I must agree with Dave. Since prediction markets aggregate publicly available information, they’re useful for foreseeing winners of elections, or other events involving many different people. But to determine what one person (or at best a small group of people behind closed doors) is deciding would probably require insider information. And, apart from being illegal, that isn’t what prediction markets are based on.

  4. Miriam Cherry says:

    Dave is 100% right on this one. People said the same thing when prediction markets failed on Harriet Miers. When it’s up to an individual, the markets don’t really work.

    Prediction markets are good when based on knowledge or perhaps what a crowd will do, all based on publicly available information. They are not mind-reading devices, and only McCain (or McCain & staff) was privy to that info.