The idea behind prediction markets is the “wisdom of the crowds’ ‘ – that if you get enough people to make a prediction about the outcome of a certain question, the aggregate of their wisdom will get you close to the truth. This is simple on it’s face, but complicated when you take into account all of the different factors that go into a multi-faceted decision like making 2022 midterm election predictions.
Still, election betting sites like PredictIt, “the stock market for politics,” gives users a platform to make real money off of their wisdom – the more informed and accurate their predictions, the more accurate the markets and the more money they can make.
So how can you make the most out of the markets during the 2022 midterm and 2024 presidential elections on political betting sites? The best way to improve your accuracy is by reducing bias and noise, and increasing the information you take in. Common biases in political betting include confirmation bias – seeking out information that confirms your pre-existing beliefs – and coverage bias, where the media influences our opinion of political topics to the extent to which they are covered. To be most effective on political betting sites like PredictIt, you need to be able to filter out the noise and seek out information.
New research shows that the best way to improve overall predictive accuracy is by aggregating the forecasts from the best forecasters in a group. In other words, wisdom of the forecasting elite. Philip Tetlock of the University of Pennsylvania, author of Expert Political Judgement, found that the people who can predict the future best have a reasonable level of intelligence, search for information, change their minds when the evidence changes and think of possibilities rather than certainties. The best advice for people who want to become better forecasters is to be more open-minded and try to be aware of and strip out cognitive biases.
The financial incentive on political betting sites helps to increase interest in the topic, and by doing so increase the liquidity and volume. That can transform prediction markets from the theoretical world of usefulness and the practical world of small-time gambling into serious markets that deliver useful information.
Interest in political betting sites has increased over the last several years when research was released suggesting that prediction markets generate more accurate forecasts than traditional polls and the forecasts produced are less biased and more informed.
With so many federal and state elections happening in the 2022 midterm elections, there will be plenty of opportunities on political betting sites to make a few bucks (or more!) if you remember to recognize and ignore your biases to the best extent possible and to make sure you’re well informed.