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Predicting the Political Future

Predicting the Political FutureWhile political futures markets paint a point-in-time picture of people's political expectations, The Fletcher School's Daniel Drezner says that they may not be the best way to predict election winners.

Medford/Somerville, Mass. [01.28.08] Primary season is heating up, and Hillary Clinton and John McCain appear to be the Democratic and Republican frontrunners-in more than just traditional political polls. The two candidates are favored to win their parties' presidential nominations in political prediction markets as well.

People shouldn't put all their stock in the latter, however, The Fletcher School's Daniel Drezner recently said in a commentary for American Public Media's "Marketplace.""While political futures markets are gaining popularity, they may not be the best way to predict the outcome of an election," he said.

"Participants in these markets trade in the likelihood of a particular candidate winning the nomination," the associate professor of international politics told the radio program. "The market price for each candidate essentially represents that person's probability of winning the nomination."

Right now, the Irish prediction market platform, Intrade, shows Clinton as having a 62 percent chance of winning the Democratic presidential nomination, while McCain has a 55 percent shot at the becoming the Republican nominee. Drezner described websites like as "the trendy oracle in recent election cycles among pundits in the know."

But do prediction markets really live up to their name when it comes to politics? Drezner says no.

"Prediction markets have gotten past elections wrong," he said on "Marketplace.""On Election Day in 2004, the Iowa Electronic Market priced John Kerry as the likely winner. On Election Day in 2006, Intrade put an 85 percent probability on the Republicans holding the Senate."

But there's still hope for these types of markets, Drezner pointed out.

"As prediction markets become more mainstream, they will expand in size and scope, and their informational efficiency might improve," he said in the commentary. "And to be clear, political prediction markets are far from useless. Think of them as representing the purest, most distilled snapshot of the conventional wisdom's expectations of the upcoming election."
Still, Drezner explained on the program, political science research shows that "in the past a sophisticated analysis of polling could outperform the market."

But this year's election will be a tough one for anyone to call, according to the Fletcher professor.

"The problem, even for savvy and sophisticated public radio listeners, is that in such a wide-open election year, with polls fluctuating wildly from day to day, there is not a lot of sophisticated analysis to go around," Drezner told "Marketplace.""Writing about Hollywood, screenwriter William Goldman famously said, ‘nobody knows anything.' Remember that line when looking for your next political oracle."


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