Prediction Markets: Its Not Just the Republicans that Think Palin was a Bad Choice!

It seems there are now a lot of Republicans attacking McCain’s selection of Palin as a running mate after the election loss.  This is a bit of a change of heart since, on the day of the election, 71% of Republicans surveyed said McCain had made the right choice of running mate.  But I guess 29% of Republicans is still a lot of potential naysayers.

I have a great interest in the powers of prediction markets.  This was triggered by reading a book by James Surowiecki called “The Wisdom of Crowds“, which (amoung other things) convinced me that prediction markets are a very powerful way to predict likely outcomes.

So when Daniel Pink, another author I enjoy, presented the Iowa Prediction Market’s 90% chance of a Obama victory on the eve of the election, I had look at the chart that he provided:

What really struck me was the precipitous drop in the Republican’s chances that appears to start at the very end of August.  I did a quick Google search to try and figure out what could possibly have triggered this steep decline, that you can see at the far right of the graph above.

It didn’t take me long to put 2 & 2 together… McCain oficially announced Palin as his running mate on August 29th, 2008, which aligns exactly with the cliff-like drop in the GOP’s chances in the prediction market data.  McCain, considered a very leftward leaning Republican, was probably advised to pick Palin – a Bush-esque ignoramus – to appeal to the Republican ‘base’ and also increase the chances of attracting women (disaffected by the Dem’s choice of Obama over Hilary Clinton) to the republican ticket.

It sounds like a pretty sound strategy, but the prediction market data clearly shows that this one decision triggered a massive drop in the GOP’s chance of victory, and was certainly the single biggest factor in the Republican loss.

If you believe prediction markets…