Ladies and Gentlemen,

 

My name is Nathan Labenz; I'm a recent college graduate and a strong Ron Paul supporter from Michigan, and I want to share some information that could be very relevant for the Ron Paul campaign.  Prediction markets, which are demonstrably reliable mechanisms for aggregating public opinion, currently indicate that Ron Paul has a 6.6-6.7% chance of winning the nomination (essentially neck and neck with McCain for fourth place) and a 3.4-3.5% chance of winning the general election.  These figures are far more encouraging than national polls and, quite notably, indicate that Ron Paul would have a better chance of winning the general election than any other potential Republican nominee.

 

I imagine that you may be unfamiliar with prediction markets, so I'll provide a brief introduction:

 

Prediction markets, also known as event markets or event futures markets, allow individuals to buy and sell contracts that behave very much like traditional stock options.  Generally, a contract will be tied to an event (such as "Ron Paul wins the GOP nomination") and will pay a fixed value (often $10) if the event actually occurs.  Otherwise, it pays nothing.  To date, more than 60,000 $10 contracts (and make no mistake -- this is real money) have been traded on exactly this proposition on the site www.intrade.com alone.  At present, the market price is roughly $0.66-0.67.  This can be taken as the market's expectation value for the contract, which implies what I stated above: Ron Paul has roughly a 6.6-6.7% chance of winning.

 

Why should we believe in prediction markets?  The answer is one that any defender of the free market will intuitively understand: the opportunity to trade securely on the likelihood of future events provides people with a strong incentive to conduct good research and to act in accord with their true beliefs.  As a result, they capture information that ordinary sources cannot, such as a candidate's momentum, the value of funds raised but not spent, and the dedication of supporters.  There is a financial opportunity for anyone who can recognize a mispriced contract, and as such these contracts tend to be quite well-calibrated.  Some companies are using internal prediction markets as a replacement for traditional economic and sales forecasting techniques, and indeed the markets have repeatedly outperformed experts in both the business and political spheres.  Happily for our cause, Ron Paul's chances have improved dramatically since the summer, when he was virtually unknown.

 

I have included two links (at bottom, with descriptions) and attached a paper from the National Bureau of Economic Research that discusses prediction markets for your reference.  I am not a political strategist, but it seems to me that this information could be used (1) as evidence in letters to the editor or other media activities to combat the notion that Ron Paul has no chance to win the nomination (surely one of the campaign's main objectives) and (2) to encourage and motivate supporters who might be discouraged by the monotonous coverage offered by the major media outlets.

 

If you would like any more information on prediction markets or assistance in drafting letters or other documents, I'll be happy to offer my support.  Thank for your work on this campaign and attention to my note.

 

All the best,

Nathan Labenz

 

http://www.intrade.com/jsp/intrade/contractSearch/index.jsp?query=ron+paul  -- This is the Ron Paul page from a major prediction market.  Take note of his historical graph -- it's quite telling.

 

http://www.overcomingbias.com/2007/10/intrade-nominee.html#comments -- A well-known rationalists' discussion blog that begins with an interesting insight: Ron Paul is the only candidate with a greater than 50% chance to win the general election if he is in fact nominated.