Who are you going to believe?
Case 1: According to the latest polls, “Gov. Walker Holds Slim Lead in Wisconsin, But with only one day to go the recall election appears far from decided…. Two new polls, released Sunday, have the governor out in front by a handful of percentage points, although in both surveys his lead is within the margin of error.”
Case 2: According to the “prediction market,” InTrade: Wisconsin Gov. Scott Walker to win the 5 June 2012 recall election 93.2% CHANCE.
I’ll have much more to say about prediction markets later this summer as we head into the general election, but suffice it to say that these markets tend to be more accurate than pollsters at predicting elections. From a Journal of Economic Perspectives piece by Justin Wolfers:
In the political domain, Berg, Forsythe, Nelson and Reitz (2001) summarize the evidence from the Iowa Electronic Markets, documenting that the market has both yielded very accurate predictions and also outperformed large scale polling organizations… (and) the accuracy of the market prediction improves as information is revealed and absorbed as the election draws closer.
That is taken a bit out of context and is comparing national polls to certain political markets, but if it was my money, I’d bet on the market. That is, right now the polls are running between a coin toss (50-50) and a slight advantage for Walker, perhaps 3:2. In contrast, the prediction market has Walker at about a 15:1 favorite at this point. So, to put this in perspective, suppose someone is tossing a coin and you believe it to be a fair coin. You can lay a $9 on heads to win $10 or $1 on tails to win $10. Which side would you bet?
In calling this one early, it would seem the credibility of prediction markets on Briggs 2nd is now riding in the balance.
Today it is election day, so economists around the country —