Nelson Comments On Political Market Accuracy

In addition to offering traders the chance to make or lose money on the race for the White House -- or a host of other races or "proposition bets" being offered -- there is a growing body of evidence suggesting that the political futures markets offer a more accurate picture of political races than polls. The markets work the same way that the pari-mutuel system works at the racetrack, where the crowd is better at picking winning horses than any individual handicapper, said FORREST NELSON, co-director of the Iowa Electronic Markets at the University of Iowa. "It's the wisdom-of-the-crowd argument," said Nelson, an economics professor at the university's Henry B. Tippie College of Business, which has been running a political futures market since 1988. "No one person understands very much and the nature of their information is very different. (The markets) fail when there is no information out there or the traders don't have access to the information. But if the information is out there and just spread around, the markets have a good chance of getting it right."