The Prediction Markets Stumble

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

Katherine Mangu-Ward | November 13, 2006

(Page 2 of 6)

/o:p> /p> p class="MsoNormal">Thorough all this chaos, I calmly cited online election prediction markets. Standing zen-like above the fray in that chaotic week, I'd casually drop a mention that " InTrade has the likelihood of Republicans holding the Senate at 70 percent." I delivered tiny, smug lectures on the superior ability of markets to aggregate information, name-checking Hayek. I sat aloof, murmuring the old TradeSports motto to myself "Put your money where your mind is." o:p> /o:p> /p> p class="MsoNormal">This strategy has served me well in the past: In 2004, InTrade traders correctly called all 50 states the weekend before the election. The Iowa Electronic Market , a highfaultin', academic futures market in the same vein, has frequently boasted a lower margin of error than polls since its creation in 1988.