Wednesday, November 5, 2008

Prediction Markets correct skew of false equality

Last night's election of Barack Obama was indeed a defining moment for America. First-time voters wept alongside moderate supporters. The great crescendo of Change, mounting so long, finally struck home, sweeping the GOP from the White House and the Senate as well. But looking back, this victory was hardly a surprise. Intrade’s investors called it long ago. And we can use this crowd wisdom to vet more than upcoming elections.

The election’s eventual outcome was clear to many. The Economist boldly went to press this week with a cover bearing Barack Obama’s photo (alone), beneath the headline '"It’s time". The polls have long shown Obama with a widening lead (though nail-biters admittedly agonized over a potential 'Bradley effect' that would snatch the apparent vote away from the minority candidate.) Most telling of all, a great sage predicted in this very space that Obama at 63 was "just free money."

A month ago, the Intrade prediction markets may not have shown 100% for Obama, but they did reflect a clear skew, enough to bolster the many pronouncements now proven correct. Anyone forced to call the election a month ago using only Intrade markets would have done so correctly. How else can we use this tool?

We can begin by attacking the myth of the two-sided story in the major media.

There are certain issues for which the truth is not a matter of opinion, and if a counterpoint is to be presented, it is rightly cast as a fringe or minority view. History will reveal, for instance, that opponents of global warming – those who believe human activity could not possibly impact our climate on a large scale – are simply wrong, their pseudoscience overwhelmed by the steady accumulation of reliable, falsifiable data. Why, then, has climate change so long been presented as a ‘debate’? When scientists overwhelmingly support a single hypothesis, and the issue in question is a scientific one, we are likely best to defer to their collective expertise. (Put differently, if we are willing to weigh seriously the scientific whims of the masses, why bother training scientists at all?) Yet the media tiptoes around such results, deeply pressured to present a balancing view – regardless who they must tap to voice it.

By carefully affording equal space to opposing views in this way, journalists create false dichotomies. By seeking to avoid bias, we unwittingly introduce it.

It happens quite often. For a time, evolution could hardly be mentioned without a respectful nod to those who believe it hogwash and have made it their mission to replace it with religious teaching in schools. The implication? That there are two sides; that all are not convinced; that experts are split down the middle and it’s up to you to decide.

Such pandering empowers the audience, who find themselves suddenly elevated from mere consumers of news to the swing voters in major issues of the day. But this is of course misleading. Dig a little and you will find there is, really, no debate. It’s not up to you.

Evolution is fact. Climate change is real. And when the media stretches to present opposing views in the name of balance, the result is sometimes to present as uncertain and up for grabs something that in no way actually is.

That said, this quest for balance comes from a good place – presenting both sides often yields the most fair and nuanced approach. I don’t think major media reform is in order. Systemic change toward one-sided reporting would not be a good thing. (Fox News, anyone?)

But Intrade can help. A prediction market can restore the weight of mass opinion, the wisdom of crowds. It can remind us that in a false dichotomy, opposing views do not enjoy equal support.

In this sense, Intrade is not just a means to stake claims on the future, and it is more than a valuable predictor of election returns.

It offers a valuable lens through which to consume news. If you’re lucky enough to find a market that tracks a false dichotomy, Intrade can be a great clarifier.