Too soon to make that judgement

Via Econlog, Paul Krugman in response to Hillary Clinton's win in New Hampshire:

But to be more specific, the prediction markets — which you see, again and again, touted as having some mystical power to aggregate information, know no more than the conventional wisdom.

As various people have pointed out, prediction markets give probabilities, not certainties, and sometimes longshots do win.

However, I think there's another factor involved that often gets overlooked in many economic analyses: maturity of markets. In general, the greater the number of participants, the better these markets work. Most prediction markets are relatively new.

Sports betting is another type of prediction market, one that has been around for a long time, even before Al Gore invented the internet. There are lots of participants.  Nobody I know consistently comes out ahead in betting on sports.

What's the difference between sports betting and election betting? A lot of people I know bet on the Orange Bowl, whereas I only know one person who bet on the NH primary, even though the former was a 'niche' game and the latter was a national event. Sports betting markets are mature; election prediction markets aren't yet.

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