The Smart Money

NYT reported Do not be fooled by the talking heads in Rome. The journalists handicapping the papal election may sound as confident as ever, authoritatively quoting anonymous cardinals and exclusive sources deep in Opus Dei. But our profession is in trouble. A specter is haunting the punditocracy - the specter of Intrade.

That's an online futures market, based in Dublin and used by more than 50,000 speculators worldwide who put their money where our mouths are. They're expected to spend at least $1 million on futures contracts tied to the election of the pope. And if recent history is any guide, their collective wisdom could be a lot more valuable than ours.

If you listened to journalists during last year's presidential campaign, you heard about a tight race with oscillating polls and shifting momentum. The weekend before the election, we painstakingly analyzed the battleground states and bravely proclaimed them too close to call.

But if you watched the Intrade market throughout the campaign, you saw the traders serenely betting on a Bush victory. Most remarkably, the weekend before the election, the traders correctly called the winner in every one of the 50 states.

Of course, it's much easier to call Ohio than a conclave of cardinals who have never been polled and would be excommunicated for joining an MSNBC focus group. But given the news media's track record, any system more scientific than scrutinizing the entrails of a sacrificial chicken could be an improvement.

Steve Bainbridge blogged The most interesting column I've seen in the NY Times for a while praised the power of prediction markets. Why do prediction markets work? For the same reason that any other efficient market works: they attract smart money that can make a viable return off fleecing the sheep and, especially, because they may attract those with inside information. PS: One more thing I learned from Tierney's column; it turns out there is "a 1591 papal bull forbidding Catholics from betting on a conclave." What a bummer good thing.

Dale Franks blogged The New York Daily News has an interactive flash presentation to help handicap the selection of the next pope, as well as an in-depth profile of Dionigi Cardinal Tettamanzi, Archbishop of Milan, who is currently considered to be the front-runner for the papacy.

Meanwhile at Tradesports, the futures market contract prices look like this:

• Tettamanzi: 20.0
• Arinze: 14.0
• Rodriguez-Maradiaga: 9.1
• Ratzinger: 8.0
• Hummes: 7.1

To compare those numbers with Intrade we have

• Tettamanzi: 19.1
• Arinze: 14.0
• Rodriguez-Maradiaga: 11.0
• Ratzinger: 8.0
• Hummes: 7.1
• Field (anyone else): 19.9

Betfair lists the odds at

• Tettamanzi: 4.8/$25
• Arinze: 6.4/$29
• Hummes: 9/$19
• Rodriguez-Maradiaga: 9.8/$75
• Maradiaga 9.8/$75
• Ratzinger: 12.5/$3

Pinnacle Sports lists the odds at

• Tettamanzi: +384
• Arinze: +541
• Rodriguez-Maradiaga: +748
• Ratzinger: +508
• Hummes: +711

Tom Maguire: blogged This site (Tradesports) has the current betting (look under the tab for "Current Events"). They have a perma-link feature, and I would welcome assistance with that.

I did not see a perma-link, but the trade number is 226549

James Joyner blogged I agree with Tierney that watching Intrade is at least as likely to give insights as listening to talking heads on television. Of course, reading Rob Tagorda's background summaries on the papabile wouldn't hurt, either.