Want Predictions? Bet on Markets, Not Polls

Opinion polls have a spotty track record when it comes to predicting political events, Paul Parsons writes in the Telegraph. He recommends a clearer crystal ball: futures markets, such as the University of Iowa’s Electronic Market. Functionally the same as a financial market, IEM allows individuals to bet between 1 cent and $1 on the likelihood of political events.

Winning contracts are 74% more likely to predict the outcome than polls. Economists say the markets are accurate because the determination of a price by independent traders synthesizes all known information on the event, free from “herd effects” and wishful thinking. So what does Iowa think about the presidential contest? An Obama win trades at $0.62, while a McCain victory is $0.37 cents. (More prediction markets stories.)