Prediction Markets as a Form of Polling

 

by Pa Rock

Citizen Journalist

Most of us understand the concept of polling.  Pollsters (trained questioners) go out into the field and ask lists of randomized people questions about specific items , and the results are then tabulated and publicized as generalized facts.  Vacuum Cleaner A is preferred by 40% more single people in their twenties than Vacuum Cleaner B.  

Sometimes polls can be "predictive" in nature, for instance which team will will a World Series, or which candidate will will an election.  

But there is another form of predicting that comes not from polling but through the actual market itself.  In a predictive market, users (gamblers) buy and sell contracts (place bets) on a particular outcome in a horse race, ballgame, election contest, or whatever.   In that type of betting scenario, the odds fluctuate as more money is placed on particular outcomes.

Let's shift the focus directly to elections.  As election day draws nearer, many news stories will reference polling numbers, results obtained by sending pollsters with lists of questions out into the community to collect opinions directly from lists of randomized voters.  Their collective answers supposedly represent a close approximation of what all voters think about a certain candidate or issue.  Some people worry that polling has the unintended effect of influencing the choices of voters rather than just informing them of how the general population feels.  (If 65% of the people feel that way, perhaps I am wrong and need to change my view on the matter.)

Then there are the predictive markets where people bet on candidates and outcomes.  As more bettors (who are educating themselves about what they are betting on) bet on a certain candidate or outcome, the percentage payouts for those bets go down.

Journalists covering elections thus have two sets of predictive data which they can reference for their election stories:  the actual polling data which shows individual preferences, and the predictive market (betting) data which shows what people actually believe will happen in the election, regardless of their personal preferences.

When you are wondering which way the election winds are blowing, read a few polls, and then don't forget to check in with the bookies!