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Informed voting via prediction markets

January 7th, 2008

My friend Richard sent me this interesting link and email in response to my post yesterday:

[Intrade.com is] moving beyond prediction markets that try to determine who will win
the election, towards markets that predict the effect of someone
winning the election. In other words, markets that attempt to predict
the price of oil, interest rates, # troops in Iraq, etc. conditional
on the person or party that wins the election.

The design of these markets is theoretically interesting as are
questions as to whether you can get enough liquidity in these more
complex markets to get good results.

But beyond that, there is the potential, mentioned in the blog post,
of using these markets to help people decide how to vote. On one
hand, this seems ridiculous – and maybe even open to abuse or
manipulation. On the other, it’s eminently reasonable. I really want
to vote for the candidate that will be the best president and have the
best outcomes for the country. To the extent that I feel that the
markets are better predictors of these things than I am alone (or in
conjunction with the spouting of pundits or even deliberation),
shouldn’t I base my vote on them?

In my opinion, the most important questions facing voters are: what is the consequence of your voting decision? How will the world be different if one candidate wins rather than the other? Using prediction markets to understand these consequences seems entirely reasonable to me.

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