The Wisdom Of Unpaid Crowds

The practice of using speculative markets to predict events has been applied with surprising success to football scores in Europe, the severity of the flu season in Iowa and many other real-world scenarios. Now they're catching on in Asia, too. Japan's market has 500 traders predicting the Lower House election, slated for late this year or next. The Indian-run has run 39 markets on global politics, economics and cricket, with 32 correct predictions. The Center for Prediction Markets, the biggest in the Chinese language, will try to call Taiwan's presidential election on March 22.

The Taiwan market is being closely watched because players will use points, not real money, testing whether a market's accuracy is undercut by the absence of a profit motive to get predictions right. (Taiwan's antigambling laws preclude using real money.) Although funny-money markets have worked in the past, their reliability is still in doubt, experts say. So far, the Center for Prediction Markets points to a victory by the China-friendly candidate Ma Ying-jeou. Time will tell if it's got the right guy.