A collection of (relatively) recent yellow bricks on the road to widespread use of prediction markets:
- Wired Magazine features an article on political prediction markets infused with a mostly healthy if occasionally misguided skepticism. I was struck most by the nonchalant subtext that prediction markets have gone mainstream: “As you’ve no doubt heard…”
- Two nice articles at MSNBC and Business Week describe the context and opportunity presented by the CFTC’s mayday asking for guidance on regulating prediction markets in the US.
- In May, twenty-two economists, including two with Nobel Prize credentials (expect that number to grow), published a position paper in Science calling on the US government to legalize and regulate socially valuable prediction markets.
- The International Institute of Forecasters has set up a new Special Interest Group on Prediction Markets as part of its Forecasting Principles portal. The prediction market content is maintained by Andreas Graefe and contains a number of valuable resources including publications, press, events, links, and a nice news feed. (Some oddhead-centric items: coverage of Dimitrov and Sami’s EC’08 paper in ScienceDaily, slides and abstracts from the 3rd Workshop on Prediction Markets, and a preview of a session on prediction markets at INFORMS.) Andreas is also involved in Pollyvote, an election forecasting aggregator that uses IEM prices as one of its four components and, according to the site, “provided near-perfect predictions for the 2004 election”.
Plus a Murphy’s Law Alert:
Mr. Murphy may be hard at work orchestrating one of his signature ironies. Picture this: Prediction market proponents (including me) aren’t careful and get what they wish for: The CFTC takes prediction markets under its regulatory purview. Then, efforts to legalize Internet gambling in the US succeed, opening up an enormous and fabulously lucrative business that the “socially good” prediction market operators are legislated out of, mired instead in a separate regulatory goop of their own making.