"History is a wonderful thing, if only it was true"
-Tolstoy

Wednesday, January 02, 2008

Justin Wolfers "gets it"

Skip following the "polls" follow the markets

In "markets" the participants "bet" real money on expected outcomes, what they expect, not what they "want".

One might "want" McCain to win, but expect Hillary to win.

While in polls, people answer what they "want" to happen, even who they will vote for, but not what they expect to happen.
Also, in polls, people sometimes lie.

Best Bet for Next President: Prediction Markets - WSJ.com: "As the 2008 presidential race heats up, voters are overwhelmed by a flood of new data: Who is ahead in the polls? Who is winning the 'money race'? How are the dynamics of the race likely to respond as the candidates tack left and right, advertising strategies change, and we learn whose Web site is drawing more eyeballs?

Political prediction markets provide us -- the consumers of this information -- with a way to cut through this clutter.

A prediction market is a bit like the stock market, except that you are buying shares whose value depends on the success of a political candidate, rather than the profits earned by a corporation. And just as stock prices are a useful barometer of the health of a company, so too the price of a prediction contract is a barometer of the health of a political campaign."

Read the whole thing, and check the sidebars.

No comments: