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.
http://www.salon.com/tech/feature/2000/11/16/election_prediction/index.html
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
clear critique.
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.
Hal
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