The Prediction Markets Stumble

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

Katherine Mangu-Ward | November 13, 2006

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But this time around, InTrade and its other electronic market cousins didn't acquit themselves very impressively. Iowa Electronic Markets had Republicans holding the Senate, with an all-Republican Congress trading high for most of the history of this cycle's market, and an all Democratic Congress trading very low— below 20 percent probability for most of the market's history . And while markets devoted to individual races in the Senate tended to be correct, the overall prediction markets for the balance of power in the upper house miscalled the race. These outcomes were still better than a heck of a lot of pundits , but not good enough to justify my serene pre-election confidence. o:p> /o:p> /p>