We have witnessed a backlash against the prediction markets just after the Hew Hampshire fiasco. Some bloggers and journalists picked on the prediction markets (InTrade, that is), even though both the polls and the pundits were awfully wrong too. [*] Here are the persons who participated in the pro-PM side of the debate:- Robin Hanson at Overcoming Bias (the best pro-PM piece so far, although his phrasing is a bit too long and a bit too complicated for the average citizen)-
– Justin Wolfers in the Wall Street Journal (who did not convince Felix Salmon, who in tun did not convince me 
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– Chris Masse at Midas Oracle (see Tim Harford’-s new post to discover how irrational Chris Masse really is )-
– Jason Ruspini in a comment here-
– Caveat Bettor on Caveat Bettor–
– and John Tierney in the New York Times (a special case I’-ll blog about soon).
[UPDATE: Jonathan Kennedy.]
[UPDATE: Mike Giberson.]
[UPDATE: Eric Zitzewitz.]
[UPDATE: Cass Sunstein.]
[UPDATE: Steve Roman,]
[UPDATE: Nigel Eccles.]
[UPDATE: The Everyday Economist.]
[UPDATE: Adam Siegel of Inkling Markets.]
[UPDATE: George Tziralis.]
[UPDATE: Leighton Vaughan-Williams.]
[UPDATE: Emile Servan-Schreiber of NewsFutures.]
[UPDATE: “Thrutch“.]
[UPDATE: Panos Ipeirotis.]
[UPDATE: Sean Park.]
[UPDATE: Lance Fortnow.]
[UPDATE: Jed Christiansen.]
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[*] For why the polls were wrong, see: The New York Times, Zogby, Rasmussen, Gallup…- [Thanks to Emile Servan-Schreiber of NewsFutures for one link.]
The problem remains this; we have heard why the polls got it wrong, but we have not heard why the prediction markets did.
Read the post New Hampshire analysis from Zogby ….Clinton was showing up strong in the latter stages etc…… why did the collective wisdom of the crowd not pick this up?
The reason that people are quick to put the boot into prediction markets over this episode is simple. Those that sing the praises of said markets are only seen and heard when things are going their way; or, indeed, when they can put spin on things to make it seem that they are going their way (re: inflated claims in the past regarding the predictiveness of Iowa; failing to highlight that traditional bookmakers and spread betting companies were more predictive when it came to the 2004 US election etc…).
From the outside, the debate seems partisan; subjective; one-sided …those that raises matters of concern or dare to question the methodology are ignored in the hope that they will go away.
In the end of the day, it leaves the impression that many of those that stick up for the prediction markets, are merely bag carriers for the prediction market companies, laden down with too much baggage.
P.S = You cannot have it both ways, on the one hand lambasting the polls and on the other hiding under their collective skirt when things go wrong.
“Those that sing the praises of said markets”
Names and URLs, please.
“those that raises matters of concern or dare to question the methodology”
Names and URLs, please.
“many of those that stick up for the prediction markets, are merely bag carriers for the prediction market companies”
Names and URLs, please.
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“You cannot have it both ways, on the one hand lambasting the polls and on the other hiding under their collective skirt when things go wrong.”
Your argument would be accepted if you had responded to one of the questions I asked you and that you ignored: Does Niall O’Connor know of a more accurate forecasting tool than the polls or the prediction markets?
http://www.midasoracle.org/200…..air-trial/
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And I wrote that the prediction markets should be understood as an information aggregation tool of convenience. Thus, I cannot be accused of making “mystical” claims [see Krugman] about the performance of the prediction markets.
http://www.midasoracle.org/200…..ndicators/
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And I voted against the claim that the prediction markets will replace the polls.
http://www.midasoracle.org/200…..ement-sir/
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And I am the only blogger who dares kicking the asses of the exchanges, when they fool the traders, or else.
http://www.midasoracle.org/issues/nkm-scandal/
The “PMIA” is probably right to stay out of this, unless it can somehow disguise itself as something other than an “industry association.” Otherwise, their arguments would justifiably be seen as dishonest, tainted and self-interested.
It’s quite possible to belong to a corporation or an industry association and to sound pertinent at the same time. Robert Scobble was the official MicroSoft blogger for some time, and he was accepted in the Blogosphere because he sounded fair. He sometimes criticized MicroSoft, and at other times, he defended them.
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The key is whether the readers think you’re telling the truth and whether you’re disclosing your affiliation(s).
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Corporations and lobbies should participate in the discussion. Why would we exclude them, since they are the center of the prediction market industry? They should be careful to sound honest, though. TradeSports-InTrade has a history of not being completely ethical with its traders.
No-one got it right because the polls were flawed, and the media fed off the polls. Because of the legal situation and difficulty of funding an Intrade account, the markets were unable to capture any independent information. The “wisdom of the crowds” was hamstrung and could not assert itself. Of course there are cases where legal, easily accessible markets will be wrong because traders don’t have (sufficiently independent) information but we need to control for one issue at a time.
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No further PM defense is required in this case. We should dissect what went wrong with the polls along with the pollsters. Some things are inherently unpredictable, and while this outcome may have been difficult to predict, there do seem to be flaws in polling methodology that lie at the kernel of this surprise.
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As far as the PMIA goes, they could respond by way of focusing on the legality issue. I don’t currently have any material financial interest in prediction markets, and even if you remain skeptical of their superior predictive power, you can still be a strong supporter of their legality.