Betting on the Future

by Lou on July 11, 2008

The past year has seen a spate of stories in The Financial Times, CNN, and Bloomberg, among other publications, about how prediction markets offer a more accurate view of the future than either experts and or opinion polls.

A Dublin-based trading platform called Intrade allows users to bet on whether a future event will occur. This works through the buying and selling of contracts that include things as diverse as whether California’s same-sex marriage ban will pass and whether the average global temperature in 2008 will be among the five warmest years on record.
Trading volumes have grown steadily, according to John Delaney, Intrade’s chief executive (pictured left), who says that the media’s growing interest in prediction markets as a workable alternative to experts or opinion polls is well founded.
Academic research supports Delaney too, and studies at George Mason University and the University of Pennsylvania found that prediction markets were correct 54 percent more than opinion polls.

Delaney believes that prediction markets are the best aggregators of opinion because the financial incentive eliminates competing sentiments that might otherwise cloud a person’s judgment. In other words, when you have to put your money where your mouth is, you tend to take a more accurate view of things—a view unclouded by how you’d like things to be.

Intrade’s 82,000 members are drawn from 162 different countries, and are typically college educated, between 25 and 35, and male. However, he added that the number of female traders and also as a proportion of the entire membership base is rising.
So … is gambling good for you? We can’t answer that, but gambling on the future now seems like the best way to predict it.

{ 3 comments }

gtycoon July 11, 2008 at 3:43 am

I might be one of those that even though I am Putting up my money, I sometimes put it on how “I’d like it to be”. Especially when it comes to putting money on favorite teams that make it to the NFL Super Bowl, NBA Championships, etc.

Logan July 12, 2008 at 6:27 pm

I think it is kind of fun, but also kind of crazy that you can bet on absolutely everything these days!

Big Edge Poker July 14, 2008 at 5:58 pm

A great blog entry. thought I might add…folks were betting on whether or not Doyle Brunson would live to 95 in the 2+2 forums. Apparently Doyle reads the forums and he came in and said he would take the over. Not a bad bet, I suppose he’s off the hook if he loses.

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