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.

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Similar blog posts:

• My open challenge to AskMarkets co-founder George Tziralis
• Political prediction markets should “move beyond mere horse-race forecasts to demonstrate larger social value”.
• 2008 US presidential elections
• Nate Silver “killed” InTrade.
• Is InTrade being manipulated? Why does InTrade give a discounted probability for Barack Obama as US president?

Tags: accuracy, Daily Kos, Emile Servan-Schreiber, fivethirtyeight.com, Nate Silver, polls, prediction markets, social utility, state polls, utility