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Posts Tagged ‘prediction markets’

Predicting the End of the Government Shutdown

Flip Pidot, co-founder and CEO of the American Civics Exchange, writes to let us know that the exchange has recently added cash prizes to their political prediction markets and is currently running two parallel government shutdown prediction markets, allowing for an interesting experiment:

At American Civics Exchange, we’ve just begun to implement cash prizes in our political prediction market (a sort of interim maneuver on our way to regulated exchange-traded futures).

For the government shutdown, we’re running two parallel markets – one in which traders buy and sell different shutdown end dates (with play money), yielding an implied odds curve and consensus prediction (below), and another in which traders simply log their best guess as to exact date and time of resolution (with no visibility into others’ guesses), with the closest prediction winning the real-money pot.

Try Your Hand at Economic Forecasting

Think you can do a better job at predicting the economic future than all those economists and pundits?  Here’s your chance to prove it:

Members of the public are being encouraged to take on the Bank of England by betting on the U.K.’s future inflation and unemployment rates.

Free-market think tank the Adam Smith Institute on Wednesday launched two betting markets in an attempt to use the “wisdom of crowds” to beat the Bank of England’s official forecasters. Punters can place bets on what the rate of both U.K. inflation and unemployment will be on June 1, 2015.

Sam Bowman, the research director of the Adam Smith Institute, believes the new markets will “out-predict” official Bank of England predictions.  “If these markets catch on, the government should consider outsourcing all of its forecasts to prediction markets instead of expert forecasters,” he said.

InTrade, Prediction Market to the Stars, Gets Banned From the U.S.

InTrade, the Dublin-based prediction market (i.e., betting platform) that we’ve written about regularly over the years (including a Q&A with its founder, John Delaney, who has since died), is under legal scrutiny from U.S. regulators and will therefore stop taking bets from U.S. customers. Here is InTrade’s statement, and here is the CFTC’s press release on the shutdown. What will U.S. regulators do next, outlaw online poker?

The Politics of Political Prediction Markets

For years, I have argued that the best way to track what really matters through election season is to follow the political prediction markets. The one difficulty is that these markets aren’t really available to the general public.  Sure, the University of Iowa runs a market, but because it’s for research purposes, the maximum bet is set at only $500. And while I track InTrade closely, they’re based in Ireland, and are frowned upon by American regulators. Likewise, Betfair won’t deal with American customers.  But all that may be about to change.

Predicting the Nobel Prize

Next Monday, the Nobel Prize Committee will announce the recipient(s) of the 2011 Nobel Prize in Economic Sciences. If you think you know who’s going to score this year’s prize, head on over to Harvard’s Nobel Pool, “the world’s most accurate prediction market.”
Each entry will cost you $1; all entries and bets must be received by 11:59 PM on Sunday, October 9th. If you’re looking for inspiration, past predictions can be found here. And if you haven’t already, listen to our Freakonomics Radio podcast, “The Folly of Predictions,” to find out where we stand on the whole notion of predictions.
So Freakonomics readers, who are you betting on?

Prediction Markets on the Debt Ceiling, U.S. Credit Downgrade

Over at Intrade, there are two “hot” markets involving the odds that Congress will raise the U.S. debt ceiling.
– Congress to approve increase in U.S. debt ceiling before midnight on July 31, 2011: 40% (It was 65% a month ago)
– Congress to approve increase in U.S. debt ceiling before midnight Aug. 31, 2011: 75% (It was 85% a month ago)
And at Irish bookmaker, here is the line on a Moody’s downgrade:
Will Moody’s downgrade the U.S.?
-Yes: 9/2
-No: 1/8

Newt's Not the News: Prediction Markets Double Rick Perry's Chances for GOP Nomination

OK, so Newt Gingrich’s senior staff have quit. But Newt’s not the news. At least according to the political prediction markets. The real news is that Texas Governor Rick Perry is likely to enter the Republican nomination race. The connection, of course, is that many of the staffers who quit have close ties to Governor Perry.
The figure below tells the story. (Click inside for graph). Since yesterday’s announcement, you can see the markets have re-evaluated Perry’s chances of winning the nomination from around 5%, up to 11%. There’s a tip here for newsgatherers: Focus on the details, and you’ll notice that the Perry’s prediction market rally began just after 11am. But the story broke three hours later, just before 3pm.

A Prediction Market Trading Pit for the Digital Age: A Guest Post From David Pennock

David Pennock is one of the smartest guys I know. As a scientist at Yahoo! Research, he’s on the bleeding edge of computer scientists working at the interface with economics. His latest project, called Predictalot, is an amazing new prediction market which allows people to trade on the millions of possible outcomes of the Sweet Sixteen. It’s a brilliant example of just why economists are going to have to get cozy with computer scientists. And David has generously agreed to provide a guest post describing what he’s up to. (And if you want more, he writes the always-interesting Oddhead Blog).

Middle East Despot Watch

I’ve been watching developments in the Middle East and Northern Africa closely. It can be hard to keep track of it all. Fortunately, the prediction markets at InTrade provide a useful barometer.

Witches to Be Held Accountable for Bad Predictions; Why Only Them?

In Romania, life has gotten even harder for practicing witches, as spelled out in a recent A.P. article: “A month after Romanian authorities began taxing them for their trade, the country’s soothsayers and fortune tellers are cursing a new bill that threatens fines or even prison if their predictions don’t come true.”

Wedding-Driven Markets

The engagement of Prince William and Kate Middleton has thrilled tabloid newspapers around the world, but the effects may be more far-reaching than you realize.

Caricaturing Economists

I was at the Legg Mason Thought Leader Forum last week, talking about my research over recent years on prediction markets. It was good fun, but the real novelty was that as I was speaking – literally, in real time – there was a cartoonist next to the stage, cartooning my talk on a five-foot-wide poster. I’ve never seen this before, but it was a real hit.

If You Can Bet on the Rain, Watch out for Rainmakers

A few days ago, the Chicago Mercantile Exchange began selling futures contracts on rain. As this Marketplace report points out, the Merc – best known for selling agricultural commodities and futures – “already sells futures for temperature, frost, snow – even hurricanes.”

Is It Time to Name This Recession?

As evidenced by this chart from the betting site Intrade, the probability of Slumdog Millionaire winning the Oscar for Best Picture has risen over the past two months right along with the probability that 2009 will be a year of recession (i.e., two negative quarters of G.D.P.): This correlation isn’t meaningful in any way. Lots of things rise (or fall) . . .

What’s the Best Way to Predict American Idol?

I had a sobering moment a couple of years ago when I noticed that MSNBC’s recommendation engine predicted that I would enjoy stories about American Idol. It’s a guilty pleasure, but AI is one of the more normal things that I do with my 11-year-old daughter, Anna. So my household is quite happy that (fellow Kansas City area native) David . . .

Prediction Markets in Science

In a short piece in the latest Science journal, about the Promise of Prediction Markets, we provide a short review of the literature on prediction markets — how and why they work, and the accumulated empirical evidence. But our key point is public policy: Unfortunately, however, current federal and state laws limiting gambling create significant barriers to the establishment of . . .

Progress on Prediction Markets

One of the real barriers to widespread adoption of prediction markets by U.S. corporations has been a murky legal environment. Are prediction markets legitimate business tools, an alternative set of securities markets requiring SEC regulation, illegal betting markets, allowable games of skill, or something else altogether? Fortunately, the Commodity Futures Trading Commission is stepping up to the plate, and I’m . . .

Introducing the Freakonomics Prediction Center

We’ve blogged fairly regularly about prediction markets, so the next step would seem pretty logical: make our own. Enter the folks at Predictify (see the latest news here), who have been kind enough to create the official Freakonomics Prediction Center. It can be found in the right-hand column of our home page. We’ll post questions and you’ll supply the predictions. . . .

Freakonomics in the Times Magazine: Bottom-Line Philanthropy

In their March 9, 2008, column in the Times Magazine, Dubner and Levitt ask: why can’t a charity be run more like a business? They look at two philanthropies that have adopted unorthodox business models. Smile Train, which performs free cleft-repair surgery for poor children around the world, started training local doctors rather than flying in U.S. surgeons; this has . . .

Watching the Democratic Races

The political aficionados in Freakonomics Nation are probably doing the same thing that I’m doing right now — continually reloading the major news pages, in the hopes of finding some useful information. There won’t be any hard data for a few hours yet, and even then, it looks like there may be a long night of vote-counting ahead of us. . . .

Prediction Markets at Google: A Guest Post

In my last post, I promised to say a bit more about prediction markets at Google. Google has been running internal prediction markets for a couple of years, and Eric Zitzewitz and I were fortunate enough to team up with Google whiz Bo Cowgill to analyze these markets. Ask any economist about the “theory of the firm” (what firms do . . .

Is Too Much Attention Paid to Small InTrade Contracts?

Harvard economist Greg Mankiw recently posted this chart depicting an InTrade contract on the probability of a U.S. recession in 2008, with the following commentary: In online betting, the probability of recession is now about two-thirds, compared to about one-half a few weeks ago. Evidence pointing toward a recession is certainly present, as Larry Summers and others have noted. Still, . . .

What A Night! Interpreting the New Hampshire Primary

A few observations about last night’s surprise result in the New Hampshire primary. Let me draw on the thoughts outlined in my column for the Wall Street Journal. First, red faces all around for the political prognosticators: Judging by the pre-vote polls and prediction markets, the Democratic primary in New Hampshire created one of the most surprising upsets in U.S. . . .

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 . . .

The FREAK-est Links

Are prediction markets efficient? Robert Frank back on his feet after a heart attack. (Earlier) Hackers use “flirt” program to fool would-be online daters. (HT: Marginal Revolution) Malawian innovator builds windmills to provide local electricity.

The FREAK-est Links

Are men inherently better at math & science than women? (HT: Odd Numbers) Strange food tattoo fails to save owner’s restaurant. Working the night shift linked to cancer. (Earlier) New prediction market focuses on software products. (Earlier)

The FREAK-est Links

Care to create a better algorithm? The results from Netflix’s $1 million challenge. The next wave in fantasy sports sites. “The Best New Gadget You’ll Never Hear Of.” (Earlier) New prediction market ranks predictors against each other. (Earlier)

The FREAK-est Links

Can a future of Internet gridlock be avoided? Corporate prediction markets conference kicks off in Kansas City, Mo. A breakdown of Halloween spending. Expert debunks myths about current U.S. wages and productivity.