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Putting your money where the poll is

By Jeff

The Democratic ticket of Barack Obama and V.P. Hillary Clinton will win the presidential nomination by defeating Republican challengers John McCain and V.P. Tim Pawlenty by capturing 293 electoral votes to 245. Specific enough for you?

Every pundit and polling company is predicting the coming election, but would they really bet on it? Would Rasmussen and Zogby et al care to make a wager that their polls paint an accurate picture of the current electorate? Probably not.

Enter: Intrade. Intrade (based in Ireland) is a predictive market that lets users tap into the “Wisdom of Crowds," which essentially says that while individual perceptions and opinions of the future diverge, if you average those projections, the prediction is typically very accurate. This is one of the main premises behind the efficient market hypothesis. Intrade lets users trade on the outcome of a litany of events like levels of CO2, gas prices, if Eliot Spitzer will be indicted, tax rates in 2011 and the number of Google searches in 2008. However, they are most noted for markets involving political events.

(continued) In 2004, Intrade’s market correctly predicted the outcome of every state in the presidential election, and right now it is predicting a large Democratic win this November; both presidential and congressional. Democrats currently hold 233 seats in the House and 49 seats in the Senate. Intrade’s highest likelihood predicts Democrats to hold between 251-260 in the House and between 51-55 seats in the senate. Additionally, Intrade’s contracts have a 65 percent likelihood that the Democrats win all three branches of government this November.

Merely picking “who will win”, Intrade gives Obama a 58 percent chance of winning and McCain a 38 percent chance. However, they also predict each state, which results in the projected Democratic 293-245 win against the Republicans. This is far more optimistic than either electoral-vote.com, which has McCain beating Obama pretty handily or 538.com, which puts them at a virtual tie. Why? Because Electoral-vote and 538 are driven by polls, while Intrade is driven by money. The lesson, as always: Greed, for lack of a better word, is good. Greed is right.

And yes, Intrade’s contracts also predict a Hillary Clinton vice-presidential nod (17.5 percent chance), which I can’t fathom. I’d put my money on Jim Webb (15 percent). Both of whom are well ahead of John Edwards (7 percent). The Republicans contracts have Pawlenty (17.7 percent) ahead of Romney (15 percent), Huckabee (12.5 percent) and Condi Rice (6.5 percent).

Tags: polling , vice presidential candidates , betting , vice presidents

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