I’ve said it’s the great thing about prediction markets: either you can accept their implied probabilities as correct, or you can show that your disagreement is not just prattle by trying to make money off their “errors.” A friend of mine, “J.,” has been sulking around complaining that the rest of the world does not appear to apprehend what an especially bad matchup McCain versus Clinton is for the Democrats. Tonight he’s decided to take action, and he is attempting to allocate the entirety of his long-dormant intrade.com account on betting for the by-implication-underpriced Republican candidate to win in 2008.*
“J.” hopes he’s wrong. Indeed, he made money in 2004 on a dual bet that Bush would win the general election but Kerry would win Wisconsin. This did nothing to abate his desolation after Election Day. And, yet, he bets ‘em and he sees ‘em.
* Technical note: “J.” only disagrees with the market evalution of Clinton’s chances in a Clinton-vs.-McCain general election, and he could make more specific bets to get at this more directly, but is betting the straight Republican victory contract because he doesn’t want to spend a lot of time trying to arrange the bet and the Republican victory market has higher volume and so should be easier for his bet to clear.