The morning after the folks in Scotland decided not to break away from Mother England, I read this article in The Upshot at the New York Times. The author noted that while most opinion polls about the Scotish vote correctly predicted the proposal would fail, they were volatile while prediction markets were more stable and suggested a resounding no vote, which is what happened. The author includes this comment:
My own research with Microsoft’s David Rothschild suggests that pollsters could do a better job if they learned from prediction markets. Instead of focusing on whom people say they plan to vote for, ask them instead to focus on who they think will win. Typically, asking people who they think will win yields better forecasts, possibly because it leads them to also reflect on the opinions of those around them, and perhaps also because it may yield more honest answers.
I decided to poke around and see if there were any prediction markets focused on U.S. politics. Intrade used to provide a predictive market for political races but sadly, they’re no longer around. I found a two that seemed active. I’m sure there are others out there and if you know of any, please let me know.
IPredict is a New Zealand based prediction market focused on politics. You can place bids on which Party will control the two Houses of Congress. As I type, they predict a 98.3% chance the GOP will hold the House and a 62.3% chance the GOP will take control of the Senate.
Another prediction market I found was run by the University of Iowa. The ask price as I type for the “GOP Gain” position in the House is .955, or a 95.5% chance the GOP picks up seats. The last actual price for this position was .88. The ask price for the “Democrat Lose” position in the US Senate is .835 or an 83.5% chance the GOP gains enough Senate seats to gain the majority. The most recent price for this position was .793.
Here is a graph of the “Democrat Lose” the Senate Market from the University of Iowa. As you can see, the purchasers in this market seem to be increasingly of the opinion the GOP will indeed win a majority in the Senate. The participants in this market seem more sure of this than most pollsters and those at websites which use polling to offer a percentage chance of a certain outcome.
What do you folks think about this? Do prediction markets have a better read on what will happen on November 4th? Should pollsters ask people for what they think will happen and not just how they plan to vote?