November 15, 2006
Did the "wisdom of crowds" fail this election?(Posted by francois to: Strategy | technology enablement )
According to Reason, the wisdom-of-crowds-based prediction markets failed for the Senate race this last election. Most prediction markets were putting the likelihood that the Republicans would keep a majority in the Senate at 75-80%.
Does it really mean a failure of the system? If the probability that most people in the "crowd" would predict that the democrats would win 6 out of 7 tight races in order to win a majority in the senate is less than 50%, then the wisdom of crowds would only reinforce that - at least that is what the Condorcet jury theorem says. Besides, predicting that there is a 20% chance that the dems would win those races and thus take control of the Senate is not a negligible chance. In fact, it probably is somewhat higher than the straight probability that pollsters would have come up with.
What do you think?
Posted by francois at November 15, 2006 10:33 AM | Bookmark This
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