Prediction Markets in New Orleans: A Guest Post

Here’s the second installment from our newest guest poster, Justin Wolfers. His first post can be found here.

This weekend is the annual gabfest of the American Economic Association, running in New Orleans from Thursday through Sunday. It’s an econ-stravaganza, with dozens of parallel sessions running on just about every topic (the full program is here). For the past few years, Eric Zitzewitz and I have organized sessions around prediction markets (a recurrent theme on this blog). This year, we have assembled what I think may be the best panel to date:

1. Forrest Nelson, George Neumann, and Phil Polgreen will be presenting results from the Iowa Influenza Prediction Market. This is one of the most important public policy prediction markets so far, and it comes from the right folks — Nelson and Neumann are founders of the Iowa Electronic Markets, and Polgreen is one of the smartest epidemiologists you will ever meet. Their idea is fabulous – that doctors are the first to see signs of a flu outbreak — and their insight is terrific — that markets can help aggregate this disparate information. I’ve seen some of the early work from these guys, and it is very convincing, and a real step forward for epidemiology.

2. Paul Tetlock is an exciting young finance guy who was recently lured away from U.T. Austin by the Columbia Business School, and his paper, “Does Liquidity Affect Securities Market Efficiency?” arrives at the startling conclusion that more liquid markets on TradeSports.com are actually more likely to be inefficient, showing evidence of pricing anomalies such as the favorite-longshot bias.

3. Freakonomics will be represented with a paper from Steve Levitt, co-written with Ricard Gil, analyzing the TradeSports markets on the 2002 Soccer World Cup. In a previous posting, Levitt admitted that he was a bit slow bringing this paper to market, but I am particularly fond of it for a somewhat unrelated reason. I remember very clearly having lunch with Levitt in late 2002 when he was visiting Stanford, and he mentioned a fledgling Web site called TradeSports.com. I went back to my office, looked up this site, and within a few months, I had started writing furiously about prediction markets. I will be the discussant for this paper, so please feel free to leave suggestions for my discussion in the comments.

4. Finally, I’m really excited for a paper by Bo Cowgill, Zitzewitz, and myself that we will be debuting at this conference called “Using Prediction Markets to Track Information Flows: Evidence from Google.” I can’t say too much about the paper (yet), but I hope to describe it in a future post. Let me say that Zitzewitz and I are working with Cowgill, the Google whiz who set up an amazing set of prediction markets within Google. We use these prediction markets to track very precisely how information flows within the Googleplex and beyond. The three of us are optimistic that this may be one of the most far-reaching assessments yet of what can be learned from corporate prediction markets.

Meanwhile, Chris Masse gives his own prediction: “Good times will roll.”

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  1. Johnny E says:

    So what do all the economists in New Orleans say about the effect of a destroyed city on our economy? Can a free-market approach rebuild it in a reasonable amount of time or does the government need to take a more active role like providing direction? ie. where will it be safe to build?

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  2. Johnny E says:

    So what do all the economists in New Orleans say about the effect of a destroyed city on our economy? Can a free-market approach rebuild it in a reasonable amount of time or does the government need to take a more active role like providing direction? ie. where will it be safe to build?

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  3. CraigCunninghm says:

    Hopefully, Steve can sneak out for some poker while he’s there as well..

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  4. CraigCunninghm says:

    Hopefully, Steve can sneak out for some poker while he’s there as well..

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  5. Anthony Trepanier says:

    Prediction markets are a very good idea, but they do not seem to be catching on anywhere outside of economics blogs. Predictify.com doesn’t seem to be catching on very well.

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  6. Anthony Trepanier says:

    Prediction markets are a very good idea, but they do not seem to be catching on anywhere outside of economics blogs. Predictify.com doesn’t seem to be catching on very well.

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  7. Mike Giberson says:

    Hey, that was my “good times will roll” prediction posted on Chris Masse’s Midas Oracle group blog.

    Wish I was there helping the prediction come true.

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  8. Mike Giberson says:

    Hey, that was my “good times will roll” prediction posted on Chris Masse’s Midas Oracle group blog.

    Wish I was there helping the prediction come true.

    Thumb up 0 Thumb down 0