The Prediction Markets Stumble

The "wisdom of crowds" crapped out in Election 2006.

Katherine Mangu-Ward | November 13, 2006

div class="Section1">It's not often one finds oneself in a position to eat crow on behalf of more than 50,000 people—but here I am. My beloved election prediction markets have failed me this cycle, and so I'm here to apologize for the inaccuracy of the predictions I stole from those markets, and for the failings of the tens of thousands of traders who were supposed to illuminate the truth for us all. o:p> /o:p>  o:p> /o:p> p class="MsoNormal">Usually, when people—especially pollsters—predict election outcomes wrong, they say something like "No one could have guessed that the turnout would be so high in the southwestern part of the state" and leave it at that. They don't get fired, and they only occasionally even concede that they might have something to apologize for. And maybe they don't. After all, they're in the business of entertaining and informing, but perfect accuracy isn't required. o:p> /o:p> /p> p class="MsoNormal">For a brief, shining moment last week, politics junkies had lots of facts at their disposal, and it made them giddy. Judging by the frequency with which polling data was released, Americans spent the entire first week of November answering pollsters questions about their voting habits, opinion on the issues, and preferences for the more handsome candidate. Oceans of data poured forth from every television, every political blog, every newspaper. With all that information, talking heads swelled. Already confident in their predictive abilities, the presence of such a profusion of information sent election season seers into a frenzy of confident explication and prediction. Conversations about politics inevitably degenerated into poll swapping—"Zogby says Allen is ahead." "Yes, but CNN's poll favors Webb." And when things got really desperate (either on air or over drinks) surprising fervent discussion of margins of error would flame into existence. o:p>