Nelson Explains IEM
October 7, 2003 | North Gate NewsPollsters, talk-radio pundits, and party strategists aren't the only ones who have weighed in heavily during this unusually high-profile election. Bookies are also giving their two cents, gambling that their predictions will ultimately earn them a few more cents. However, betting on non-sporting events in the United States is illegal, and legitimate Las Vegas sports books don't publish odds for election races. So when media outlets refer to Las Vegas odds makers in their election coverage, invariably they're referring exclusively to America's Line, which is essentially a column that's syndicated to 125 newspapers. FORREST NELSON, a professor of economics at the University of Iowa, said his school's 15-year-old research project, the Iowa Electronic Markets (IEM), which allows people to bet money on election results, avoids the self-interest found in traditional odds making. Participants--including anyone who signs up on the IEM web site--set the odds in the IEM. Nelson said IEM traders "operate a futures market in which a 'contract' may pay $1.00 or $0.00 depending on the election outcome." IEM traders buy and sell these contracts, and their prices "represent the consensus beliefs of traders regarding the probabilities of the election outcomes," said Nelson.