What do you think of InTrade and other such "prediction markets" short/long term?

Sites like InTrade allow people to use real money to purchase “shares” of futures in predicting political, economic, and other (non-sports) events, sort of like a stock market for political punditry. (Except, again, you use real money.)

What do you think of such sites as a predictor of future events? There are two different ways to think of their predictions:

  • Long term: as an indicator of best conventional wisdom of what will happen. Is such a concept worthwhile?

  • Short term: via trends and individual buys and sells - for example, around 8:30 tonight, someone a LOT of money against Barack Obama winning the Presidency; that has led some people to think that this person has inside info about an upcoming event or announcement - such as one McCain’s said he’s going to make this morning. Is such a move an accurate indicator of immediate future events, since there’s real money involved?

I don’t think so. It just means someone thinks Intrade has some credibilty that people might base their own decision on (I want to vote for the winner, I don’t want to waste my vote), and that someone has a lot of money they feel is worth trying to game the system in order to move public opinion. I don’t think it will work, but i can see someone arriving at that conclusion out of desperation.

I’ve asked myself the same question as well for a while and I have come to this conclusion. Intrade certainly doesn’t seem to reflect any kind of insider information that one can’t glean over the internet. For example, after drudge released the story about the Obama / Bayh tickets, the Bayh for VP contract shot through the roof. We all know of course this was wrong. So basically it’s just a good barometer of public opinion about the current state of the race, and not necessarily indicitave of future performance.
Also, Re: the Obama sell above.

Nate Silver from fivethirtyeight.com thinks that a lot of intrade trading activity is suspicious. It’s a very small market and would seem ripe for attempting to influence, but the difficult side is that prices are affected by politics.

http://www.fivethirtyeight.com/2008/09/intrade-betting-is-suspcious.html

http://www.cqpolitics.com/wmspage.cfm?parm1=5&docID=news-000002976265
A McCain supporter was trying to manipulate the market.