Iowa Electronic Market Fail – Santorum in the Republican Presidential Primary

I am not very into politics – but I am into markets, crowds, social, computing, etc. So when I heard that last night Rick Santorum surprised folks with some Republican primary wins, I figured that I would go and check the Iowa Electronic Market to see if it was somehow smarter than the other pundits.

Folks like James Surowecki in his book The Wisdom of Crowds (which we use in my SI124 class) like to cite the IEM as a better way to aggregate knowledge than polls. So I ran to the IEM to see the current trade values for the “Winner of the Republican Primary” market. (data) (Graph)

The numbers in the data indicate the current market price to buy a $1.00 payoff if you guess right. A summary of the top-candidates as of right now is:

		Bid	Ask	Last	Low	High	Average
ROMN_NOM	0.804	0.842	0.804	0.780	0.832	0.804
RROF_NOM	0.120	0.135	0.142	0.120	0.159	0.147
PAUL_NOM	0.015	0.022	0.015	0.015	0.015	0.015
GING_NOM	0.040	0.046	0.036	---	---	---
BACH_NOM	0.001	0.002	0.001	0.001	0.001	0.001
PERR_NOM	0.001	0.002	0.001	0.001	0.001	0.001
CAIN_NOM	0.001	0.002	0.001	0.001	0.001	0.001

As of this morning, Romney is trending downwards. The second highest bid is for “Rest of the field”. RROF_NOM is anyone other than the listed folks. Apparently those who set up the market apparently gave Santorum so little chance of winning they did not even include him in the list of options.

Funny and kind of a “fail” in a way. But of course it supports James Surowecki’s concept of the wisdom of the crowds. I would assume a small group of people at the IEM decided who the six best candidates might be (oops).

It is funny and ironic that there is some non-zero chance that the members of the Iowa Electronic Market will in effect be betting that “None of the above” will win. It will be funny if Santorum gains steam and the bidding goes through the roof for “none of the above”.

Again, I must emphasize that I really am not very political at all and this is not a political post nor a political commentary on anyone in the race. It is just a really fun example of the concepts in SI124 at work and a teachable moment for my class. It is fun to teach a class titled, “Network Thinking” (SI124) during an election year. :)