by Mitch Kokai
Senior Political Analyst, John Locke Foundation
I was so dumb last week.
I wrote my column Tuesday — before election results were in. I assumed Hillary Clinton would be president-elect. …
… I was wrong because I trusted the bettors.
That’s usually not dumb. The best predictor of things has been betting markets. They are more accurate because they reflect the wisdom of crowds. Crowds can be an ignorant mob, but crowds do have wisdom. Know the TV show “Who Wants To Be A Millionaire”?
When contestants are stumped, they may ask the audience for help or an expert. The experts are often brilliant specialists. The audience — well, they are the kind of people who wait in line in the rain to watch a game show. Still, the audience gets the answer right 91 percent of the time, the experts succeed just 65 percent of the time.
With betting markets, the crowd is made up of people willing to put their money where their mouths are. That makes them extra careful. …
… Even last week, when bettors were wrong, the betting odds still adjusted faster than pundits on TV did. The bettors saw what was happening and quickly hedged their bets, while many in the media — mostly Clinton supporters — still clung to their failed expectations.
My failure won’t make me abandon prediction markets and go back to trusting pundits or opinion polls — or internet commenters who had fun trashing me:
“Dewey beats Truman … oh wait.”
“I can’t laugh enough at this article.”
“I liked Stossel … but he is as clueless as the liberal media.”
I sure was! But I will still trust prediction markets over everything else.
There is wisdom in crowds, especially crowds that put their own money on the line.