Can prediction markets refresh political polling?

Martin Boon, ICM’s head of social and government research, has been beta-testing this approach, which is based on the theory of the “wisdom of crowds” and prediction markets, since the last general election in 2010. At the time, he added questions to the end of the traditional voting intention poll that ICM produces for the Guardian, asking people what they thought the results of the election would be.

The results of this early Wisdom Index were not published, but were instead privately analysed to see how reliable the approach would turn out to be. “What we noticed was a real predictive power coming through, one which was suddenly opening up new information to us that could prove interesting to voters and politicians alike,” said Boon. “It’s certainly an alternative way of looking at election results and political sentiments.”

After years of behind-the-scenes trials, the first Wisdom Index results were published this week in the Sunday Telegraph. Political editor Patrick Hennessy wrote that if the crowd’s predictions came to pass it would be enough to hand Labour Party leader Ed Miliband a House of Commons majority of around 90 seats.

That’s a headline-grabbing stat, but Boon says: “When you compare our last survey for the Guardian a few weeks ago to the Wisdom Index results this week, the differences aren’t huge by any means” – it gives Labour an eight point lead compared to five points previously.”

In its favour, Boon says, the average error rate of a Wisdom Index survey is significantly lower than one using traditional polling methodology. And in addition, “It will allow us to learn what people think about issues based on their judgements compared to how they usually claim they will behave in a typical poll. This form of tracker survey will show how the two often complement each other.”

Boon thinks the Wisdom Index insights may also help influence future trends in the commercial sphere, where firms such as Consensus Point are building models that ask research participants to wager points against the new product ideas they think are most likely to succeed. “There is real scope here, with these futurity trends that voters provide in the Wisdom Index, to shape the way that responses are made,” Boon said. “We’re already talking with commercial clients to help their businesses predict future values from what Wisdom respondents provide.”

Yet in politics, Boon says, polls are still the key tool and are unlikely to be replaced in the near future. “The Wisdom Index is a great new contribution, offering hard facts based on judgements, not opinions,” Boon said. “That’s what makes it particularly exciting and it will hopefully provide new talking points to add to the polling figures.”