Speaking of falling markets, McCain’s odds are now 29.5%


If you haven’t read The Wisdom of Crowds by James Surowiecki, all you need to know is that groups of people can be pretty accurate in their guesses. Ask a room of 100 people how many marbles are in a jar and every individual will miss, but average all the collective estimates and you’ll be right on the money.

One huge impartial group is guessing McCain’s odds of winning the presidency are now less than 30%.

The Iowa Electronic Markets is a prediction market experiment in which thousands of real people bet small sums of money on the outcomes of things such as the U.S. presidential election — and for years has achieved remarkable success. The idea is similar to betting on a horse race; the demand of people picking winners sets a price for the two horses, and those “odds” come extremely close to the actual outcome … since the group intelligence of all betters ends up predicting the real odds.

The IEM expresses odds in cents on the dollar, similar to percentage. After the bailout debacle yesterday, McCain’s odds in the “winner takes all” betting pool fell 17% from a recent high of 47 cents on Sept. 12 to 29.5 cents at midnight last night — or a 29.5% predicted chance of winning the election vs. Obama’s 70.3%. It’s noteworthy that these bets are not political opinions; they are the wisdom of people trying to make a profit by predicting the real outcome, which makes the guesses extremely accurate. Also note that this is not a guess on what percent of the voters will go for each candidate (which is much closer), but a “winner takes all” prediction on who, Obama or McCain, will win the entire election.

Crazy times. A lot could happen. Play this forward and you know that both Obama’s and McCain’s camps, who watch this type of thing, will be preparing bold chess moves to try to secure/dislodge the momentum. But bookmark IEM if you want to keep an eye on what the free market thinks about the U.S. political process.

3 thoughts on “Speaking of falling markets, McCain’s odds are now 29.5%

  1. You say that the “betting pool fell 17% from a recent high of 47 cents”, although what you meant was that it lost 17 of its’ 47 points. In stock markets terms, the asset lost more than one-third of its’ value. Is this asset about to be recognized as a “Geffen good”?

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