Justin Wolfers, writing (lucky them) in the Wall Street Journal before the New Hampshire primary observed:

Last week Barack Obama was a clear underdog in the race for the Democratic nomination, and his victory in Iowa propelled him from a one-in-three chance of winning, to one-in-two. Even this rapid movement underestimated his post-Iowa momentum, and his strong showing in subsequent polls has led his chances to be further revised upward to two-in-three.

On the back of this, the wonderful-but-overexuberant Chris Masse wrote:

TRANSLATION: Hillary Clinton is finished. Done with.

This is the same Chris who, based on prediction markets, wrote in November that:

The next US president is Hillary Clinton. Period.

In more sober moments, I know that Chris would agree that prediction markets are not omniscient. Here is another prediction market fan, Robin Hanson, in an article I wrote almost five years ago:

“You have to compare these markets to the alternative. People point to market overvaluation during the bubble but the press and the analysts did not do a better job than the market of calling stock prices. You might point to individuals who did better than the market; but without hindsight, which advice would you follow?”

Quite. The polls were wrong too. You can read the whole thing here, although we’ve come a long way since then.

January 10th, 2008 in Grown up economics | Permalink