alex tabarrok is amazing post This morning on Marginal Revolution, he explained why he believes in prediction markets and why he believes in them. It is very difficult to argue with people who make predictions and then invest their own money in their predictions.
Like Alex, I track these markets closely, which is why I was telling a friend that I expected Donald Trump to win the presidential election and the Republicans to take control of the Senate.
I also had my own prediction machine that said Trump would win. Granted, that was after voting had closed in the Eastern time zone, but that was only a short time later.
If you’ve been following the election, you’ll know that one of the big issues was which way Pennsylvania would go. If Donald Trump wins Pennsylvania, he will likely win the national election as well. Everyone knew the vote would be close, but it was also said that it could take hours to actually count Pennsylvania’s votes.
However, New Jersey borders Pennsylvania. I thought, why not use New Jersey as a leading indicator for Pennsylvania’s vote? While watching the results live, I told my wife that if Donald Trump wins New Jersey’s popular vote by at least 4 points more than he did against Biden in 2020, he will win Pennsylvania. Ta. why? Because Trump lost Pennsylvania in 2020. Only 1.2 percentage points. So if he gets at least four points in New Jersey, he’ll likely get at least a one-point difference in Pennsylvania compared to his share in 2020. We found early on that Trump’s approval rating in New Jersey was about 5 percentage points higher than he was in 2020. He ended up Pennsylvania State is down by two points.
I’m not saying my method was better than the market’s predictions. My method was clearly worse because I didn’t get the results until much later. But it was much better than sitting there in the early evening PST or late night EDT wondering who would win like millions of Americans.
Note: By the way, I won $40 from a Facebook friend and $10 from a neighbor by betting that Trump would win. I made this bet a few days before the election, and it was the prediction markets that gave me confidence. these These are the people I followed.