Salon.com has an article on the Iowa Electronic Market's
(http://www.biz.uiowa.edu/iem/) apparent failure to correctly predict
the popular vote winner in the recent election. The IEM gave Bush a 70%
chance of victory the morning of the elction, but as we know Gore came
out slightly ahead.
Iowan economists gambled that they could predict the presidential
election. They lost.
Salon is a liberal magazine and so any institution which is based
on markets is automatically suspect in their view. The article
rehashes a number of the old critiques of idea futures, in a somewhat
contradictory way. Bush supporters will bet on Bush, and they're richer
than Gore supporters. But no, Bush supporters will bet on Gore, because
they want to hedge against a possible Democratic victory. Not a very
The truth is that a single success or failure in any predictive system
is not very meaningful, and you have to look at the long term record to
judge its value.
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