Betting on the Flu

The wisdom of markets, which has worked so well for the health care industry in general, is now being applied to influenza. Via MedPageToday, we learn that researchers are asking traders to bet on when outbreaks occur — and they’re pretty accurate:

All the “traders” were given 100 flu dollars at the start and were asked to buy and sell “stock” according to how much influenza activity they thought would occur in a given future week. The goal was to try to predict the level of an outbreak ultimately recorded by the CDC, which is reported by a five-stage color code.
If they saw hints of flu in their patients, for example, they might want to sell any shares they owned that predicted a low-level week in the near future and buy stocks that predicted many cases.
With 52 traders actively participating on the website, market predictions were able to hit the right color for the state of Iowa 80% of the time, two to three weeks ahead of the actual cases. That means they were three to four weeks ahead of the CDC’s announcement of the actual data, which comes out the week following the outbreak week in question.
“Ninety-percent of the time, the market was able to get within one color four weeks ahead of the event,” said Forrest D. Nelson, Ph.D., an economist at the university who has developed prediction markets and is a member of the research team.

This is an interesting development. Predicting when and where outbreaks occur can eliminate waste and get vaccines allocated efficiently. In fact, we wouldn’t be surprised if traders putting money on the flu started investing in vaccine suppliers as well. It’s just good business.
More from the University of Iowa…