The Iowa Caucuses are tonight (!) and several online "marketplaces" provide interesting glimpses into the possible outcomes. We think that these online markets are exciting examples of (a) how online tools can collect information rapidly from diverse and dispersed audiences in a way that no other media can (cost effectively) and (b) how online tools can be used to set up a marketplace for predicting outcomes, providing data which are more valuable than straw polling.

Predictive Markets like the Iowa Electronic Markets and Intrade have proven in the past to be pretty good predictors of electoral outcomes, often better than traditional polling. The thinking is that these markets predict better than polling because speculators are wagering their own money (even if small amounts) on what they expect will happen, which may not be what they personally would like to see as the outcome. (See Wikipedia overview of IEM and Intrade/Tradesports.)

These markets tap into the Wisdom of Crowds phenomenon which James Surowiecki has written about and which argues that a diverse collection of independently-acting people are often better than experts at making (some) decisions and predicting outcomes. Add to the wisdom of crowds the power of (online) markets to get at peoples' predications (not preferences) and you get some pretty relevant results.

Anyway - here's what two key predictive markets show as of today, the day of the Iowa caucuses:

The Iowa Electronic Markets show the following average bids for the "winner take all" national Nominee market, which will be determined by the outcome of the political conventions in the summer of 2008. This is not a direct prediction of the outcomes of the Iowa caucuses, but is relevant info to consider:

Market Quotes: DConv08: 2008 Democratic Convention Market, average bids:
CLINTON: 59.4
OBAMA: 28.9
EDWARDS: 9.9
OTHERS 1.8

The trend chart for the Dems shows increases since October for Edwards (a little) and Obama (more so), though with Clinton maintaining a substantial margin. It'll be interesting to see how the bids change after the caucuses tonight.




And for the Republican field:

Market Quotes: RConv08: 2008 Republican Convention Market, average bids:
MCCAIN: 26.8
ROMNEY: 26.8
GIULIANI: 22.8
HUCKABEE: 12.7
OTHER: 6.8
THOMPSON: 3.1

With the trend chart showing... a messy and close race between Giuliani, Romney and McCain - though with McCain gaining most strongly since December.



InTrade has markets in both the 2008 overall election and the primaries. The "Presidential Nominee" market for Dems shows ("last" numbers) Clinton at 64, versus Obama 31, and Edwards 6. Not too far off the IEM numbers.

More timely for today -- the InTrade Iowa market, however, shows Obama at 70, Clinton 24, and Edwards 17. Not even close.

The Republican "Nominee" market shows a close race with McCain at 28, and Romney and Giuliani at about 24.

The Iowa market for Reps shows Huckabee at 60, Romney at 42, and McCain at 1 (though interestingly, the New Hampshire primary market shows McCain as winning there.)

I'll track how these numbers look after tonight and how they change.


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