Larvatus Prodeo

MB writes: I’ve always been of the view that the “wisdom of the crowd” hypothesis doesn’t work very well in the case of prediction markets for elections – because the number of insiders who have relevant information not available to anyone else is miniscule. One instance I followed closely was the Queensland state election – where the odds for the number of seats Labor would win very closely paralleled what the polls and the pundits were saying. I actually did have a bit of inside info, and I made about 1500 bucks, which I couldn’t have done if there’d been tons of people with access to such info. Possum’s piece in Crikey today, I think goes some way to confirming my view that the markets are basically parasitic on the polls because in the absence of any, punters went with “received wisdom”, which got the result spectacularly wrong.

Possum writes: If you were to look at the betting markets for the NT election last week, you’d be forgiven for thinking that the ALP had a greater chance of being abducted by the latest outbreak of NT UFO’s than they had of being beaten by the CLP. Yet, with no major pollster running pre-election surveys in the Territory, should we be at all surprised that the markets got it so wrong in terms of the chance of Labor retaining government?

As much as political polling is scorned as reducing important political issues down to little more than horse race commentary, it fulfills one fundamentally important role — it stops people talking sh-t.

From politicians to columnists, from reporters to your average Joe – political polling encourages all but the learned types at The Australian to keep it in their pants.

Continue reading ‘Guest post by Possum Comitatus: Betting markets in the absence of the polls’