Why Vote When You Can Bet? - Slate's guide to all the political markets

[EV_Ares]

The idea behind political prediction markets is simple. Lots of people wager on the outcome of political campaigns: Who's going to be the Democratic presidential nominee? Will the Republicans take back the House? And when the votes are counted, the winning bettors collect. The thrill of prediction markets for political junkies is that they harness "the wisdom of crowds." A single person's bet on an election outcome isn't very good, but thousands of bets, with real stakes, are more likely to predict the correct result than even the best pundit. The Iowa Electronic Markets, the big daddy of the political prediction markets, is consistently better at forecasting winners than pre-election polls. (Read a 2003 Slate "Explainer" about prediction markets here.)

If a single prediction market is wiser than the pundits and the polls, imagine how wise all the prediction markets are together. That's the idea behind Slate's "Political Futures," which offers a comprehensive guide to all the big political prediction markets. From now until Election Day 2008, we'll publish regular updates of the key data from Iowa Electronic Markets, Intrade.com, Newsfutures.com, and Casualobserver.net. (Casualobserver has not yet launched its 2008 political prediction market, but we will add it as soon as it goes up.) In these early days of the campaign, we are tracking four markets: 1) Democratic nominee for president, 2) Republican nominee for president, 3) presidential victor, and 4) party control of the presidency. We'll add Senate and House races as they heat up next year.

How do you read the Political Futures charts? Let's consider the market for Democratic presidential nominee. At the time of this writing, Intrade shows a price of "29.2" that Barack Obama wins the Democratic nomination and "45.1" that Hillary Clinton wins the nomination. What this means is that bettors are willing to pay:

$29.20 for a contract that will pay off $100 if Obama wins the nomination, and $0 if anyone else does; and
$45.10 for a contract that will pay off $100 if Clinton wins the nomination and $0 if anyone else does.
A month ago, by contrast, the same Obama contract would have cost $19. This suggests that Intrade participants have gotten more confident that Obama will capture the nomination.

One more thing you should know. In two of the markets we are covering, Iowa Electronic Markets and Intrade, participants bet real money. At Newsfutures and Casualobserver, they wager with play money.

Link: http://specials.slate.com/futures/2008/

1. http://specials.slate.com/futures/2008/democratic-presidential-nominee/
2. http://specials.slate.com/futures/2008/republican-presidential-nominee/
3. http://specials.slate.com/futures/2008/presidential/
4. http://specials.slate.com/futures/2008/control-of-presidency/