During Father’s Day this year, my father, brothers, and I went to the horse races at the Belmont Race Track. With an interest in economics, this was going to be a fun opportunity to observe and play in a prediction market (legally). You have several different places for information on the odds of each horse winning. But these fall in to two categories: There are those predictions of the experts, which can be found in any newspaper. And then there are those predictions of the masses, plebians, or “the free market” if you will. These are the odds the track uses to determine your winnings. Not because the track is run by radical free market types, but because its the only way to ensure that the house doesn’t lose any money.
So I tried a little Keynesian experiment:
Equipment: Horse track, odds predicted by experts, horses, odds offered by the teller/free market/proletariat masses, beer.
Method: Whenever the odds offered by the teller are mispriced favorably according to the experts, place a bet on that horse.
Possible sources of error: luck, organized crime.
Anyway, you might like to independently verify these results.