2008 08 18 Telegraph: Parsons: Predicting the future - with the power of betting (1)...

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In 1945, Austrian economist Friedrich Hayek applied Galton's finding more widely. He argued that price is an effective way to aggregate public opinion on all sorts of issues - from the value of commodities to who will be leading the country. Betting on elections became a popular pastime in the early 20th century. But it's not the only field where speculative markets are proving remarkably accurate. Companies such as Google, Microsoft and Hewlett-Packard use internal betting markets to guide their business decisions: HP's consistently out-predicts official forecasts of the company's sales. Betting is now used to predict the future of climate change, movie box-office takings and even US military action. In 2006, the Hollywood Stock Exchange - a market based on the box-office success of movies - correctly predicted 32 of 39 major Oscar nominations, and seven of the eight top winners. Meanwhile, the futures market for the price of orange juice has earned a reputation as a more reliable predictor of the weather in Florida, where 98 per cent of the US orange crop is grown, than the National Weather Service. And when the US Navy was unable to pinpoint the wreck of USS Scorpion - a nuclear submarine that sank in the Atlantic following an accident in 1968 - it asked salvage experts to bet on the location. The wreck was later found within 200 metres of their consensus view.