THE BLOG

Meet the Best Forecaster Around: Intrade

01/04/2008 11:03 am ET | Updated May 25, 2011

Know about prediction-market Intrade? If not, you should. Why? Because it's the best forecaster around--business, economic, political, and other.

Yesterday, for example, Intrade predicted Obama and Huckabee would win in Iowa before any votes were cast (and long before the networks started screaming "irresponsible!" at each other for daring to venture the same conclusion).

How does Intrade work? The same way the stock-market works. It shows the consensus of multiple bets made by individual participants. As those who have studied wisdom-of-the-crowd experiments know, collective estimates are usually better than the estimates of most individuals (and sometimes all individuals).

This seems inconceivable to most smart people, who point out that the stock market and other prediction markets are often wrong. But the point is not that prediction markets are always right--they aren't. It's that their current estimate is the best available estimate at any given time, because it incorporates the knowledge, information, and relative skill of dozens of participants.

So what's Intrade predicting now?

-That the US will go into recession in 2008
-That the XMSR/SIRI merger will close by June
-That Hillary will win the democratic nomination (surprising)
-That McCain will win the republican nomination