Story Explains Iowa Electronic Markets

The longest-running online market for political prognostication is up and running -- and there are already a couple of front-runners. For now, it's Obama and Giuliani. The idea behind the Iowa Electronic Markets is relatively simple, if unorthodox: You trade contracts in the various candidates or parties as if they were offerings on a commodities market, at prices ranging from zero to $1. After the election, each contract pays off $1 if you predicted the correct outcome -- and nothing for the losers. "We like to say this is not rocket science, it's just a case of putting your money where your mouth is," said GEORGE NEUMANN, an economics professor at the University of Iowa and one of the market's inventors.