“How the 2004 U.S. political prediction markets outsmarted a Wall Street pundit, an esteemed economics professor and the commentariat as a whole!”
Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
9 thoughts on “Chris Masse’s Postmortem Analysis of Prediction Markets and the 2004 Elections”
I thought that the electronic markets quotes just indicated the likelihood of victory (e.g. a Bush contract at 0.66 indicates he will win over Kerry), not that he would take 66% of the vote…
Indeed. Where did I give you this impression?
Chris. F. Masse
The futures markets were so much less volatile than the polls, it was suggested strongly that they were reflecting the underlying trends more accurately and not just whipsawing around due to ephemeral stimuli. There is nothing like having a few bucks on the table to focus the mind. The interesting question is why the MSM ignores these extremely accurate predictors? Easy. First, they didn’t like the answer they were giving: Kerry is going to lose. That is the ideological reason, shooting the messenger. Second: They don’t have lots of movement so there is little drama to turn into bogus news stories about who is up and who is down. Yet another reason the MSM is becoming irrelevant. They are a source of DISinformation about who is likely to win, their punditry and “analysis” is all horsesh*t, far less accurate than a bunch of anonymous people betting and trying to make money. As more and more people figure this out, the MSM’s relevance will erode further. I think these kinds of services will penetrate the popular consciousness eventually, maybe in time for the 2008 election.
Conventional media often work closely with pollsters. Media organizations conduct or commission polls themselves or report on poll results that were paid for by competing media organizations. So the MSM companies may be either prediction-market competitors, or they may benefit by disseminating poll results produced by others (as compared to prediction-market data, which are inherently public and need little dissemination).
Took Jonathan’s advice and read the whole commentary article on predictions etc. regarding the outcome of the U.S. Elections, and would wish to comment on the commentary, as it were!
• I have no problem with people either commenting or betting on the outcome of an election, after all, all that is being risked is money, so what the hell? When a BusinessWeekOnline columnist gives his views on whether Bush or Kerry would benefit certain areas of the economy, he is using his inside and expert knowledge of the various sectors of the Stock Market scene to give guidance to people who are prepared to lay down ‘big bucks’; that is his right under your Constitution! Or when James Surowiecki pontificates on ‘crowds’ and whether their behaviour under certain conditions can be predicted, he is once more using his knowledge of behaviour patterns to advise others on the possibilities of predictive behaviour patterns, again; fair enough, if people believe Mr. James Surowiecki, all they are truly risking is their money!
• Again, with Chris Masse’s rather snipy section on the prediction successes of Professor Thomas Rietz, and his various pronunciations regarding the probable electoral successes of the two candidates, all that is being discussed is the merits of the good professor’s statements, and how successful he was in his calling of the election!
• Where I do definitely depart from the path of ‘betting on everything’ was after reading the section “The Prediction Markets Chalk Another One Up” devoted to the betting market on the outcome of the trial of Michael Jackson. Now here was a man, brought before a jury on serious criminal charges, where if found guilty he may have served up to twenty-five years in jail, on charges which would disgust most people of what may be termed ‘normal’ behaviour patterns and morals! The fact that the man is a ‘Celebrity’ and has been known in the past to behave as a ‘kook’ (as I believe the term applies) is irrelevant, the man was in court on a long list of charges regarding abuse of children! So what do you bunch do? You start up a betting pool on whether he is found guilty, and if he is guilty, how long does he get to serve in prison? What sort of of people actually place MONEY on the outcome of a morals trial where the victim was a child? Are there no limits to your sacred “Freedom of Expression” rules? I have worked with Americans, have known and corresponded with many more, and I have to admit that this betting market, for me at least, is the most cynical, disgraceful, debased, disparaging, negative and unpleasant item I have had knowledge of in a very long time!
Mike, I acknowledge that you find betting on the outcome of a trial to be distasteful, but do you think that anyone is actually harmed by the act of betting (assuming that the betting doesn’t influence the outcome of the trial)?
What the event-driven futures exchanges (a.k.a. prediction exchanges) in the U.K. or Ireland would not do is to float a bet that would involve the death of someone or that would incit the speculators into having an impact in this event.
Every golden rule has its exception:
– Bin Landen and Zarqawi.
– Some pyjama bloggers could make up a conspiration theory elaborating on the possiblity for some US special forces to know in advance of the capture/killing of one of these bastards, and place a speculative bet on InTrade/TradeSports.
– Follow my link below, click on “current events” and see that, if you postulate liquidity, you could multiply by up to three or five your initial investment. Not bad, but not extraordinary either.
Chris. F. Masse
Quote “but do you think that anyone is actually harmed by the act of betting”
Jonathan, when I read the words in your reply, I just did not believe my eyes. Here I am reading the words of a well-educated man, and I am nearly bereft of thought, never mind speech. The same attitude as is portrayed by those words allows the viewing of pornographic pictures of gross activity with young children, on the grounds that “it doesn’t really harm them”, which is the defence of the paeadophiles who prey on, and molest these children. The very fact that anyone is actually attempting to make money out of the twisted stories which emerged from the trial is enough to tell me that the moral processes have passed the writers by completely! This was a trial about the sexual molestation of a minor child; and you, and the many who participated in that disgusting betting syndicate, or whatever the correct betting term is for a pile of electronic dung, should reflect on the simple truth by asking yourself if you would have the same sentiments if the child in question had been yours?
On preparing to post the above, I also read the comment of Chris Masse, who postulates that a quick bet on a possible death after an insider tip could provide multiple earnings which he states are “ Not bad, but not extraordinary either.” Either he is literally playing the fool, in which case I don’t think much of his sense of humour, or he is serious, and I would advise that he undergoes a swift course of E.C.T., which might bring him back to a tenuous reality!
I asked who is harmed by betting on the outcome of a trial. You responded by 1) trying to browbeat me for asking a question that you don’t like and 2) suggesting moral equivalence between defenders of betting markets and child molesters. Nice. And — what a surprise — you ignored my question. I take it that you oppose fire insurance as well: betting on misfortune and all that (and what if it were your house that burned?).
BTW, Chris Masse can respond to you himself if he wants, but I note that you misinterpreted his comments too. Suggest you look up the terms “moral hazard” and “thought experiment” in the dictionary.
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