Prediction markets are useful. They give us a way to determine what the market is pricing in about any number of events. With the 2012 campaign starting, it will be one of the easiest ways for a casual observer to avoid the noise and see who people think is actually going to win. Intrade is pricing in a victory for the democrats in 2012 at 60%, and for Republicans at 38%. They are also pricing in a 1.5% chance of another party winning, which considering which party is more likely to fracture may partially explain why the chances for Republicans are so low.
More interesting than the broad probabilities is what you get when you combine the probabilities relating to individual candidates. The three categories of "Republican primary presidential candidate," "Republican party wins the presidency" and "Individual wins the presidency" has an interesting relationship. If every candidate has the same probability of winning the presidency after winning the primary, P(Primary winner)*P(Republican wins) = P(Individual Winner). However, this isn't always the case and the chance that a specific Republican will win can be priced in from the other two contracts..
That table shows the probabilities for different Republican candidates and the implied probability of their chance of winning the election if they win the the primary. The data should be taken with a grain of salt. Ron Paul enthusiasts bidding up his contract are probably responsible for his seemingly high chances of winning a general election. Wider bid/ask spreads and illiquid markets also mean that fast moving markets such as Rick Perry's probably won't yield an accurate market view. Still, it is interesting that Sarah Palin and Michele Bachmann are priced in at levels where they would hurt the Republican's chances to win the presidency while Jon Huntsman and Rick Perry are priced at levels where they give the Republicans a better chance of winning while the rest of the candidates are clustered right around 40%.
The "chance of winning" is something people talk about during the primaries so it is nice to have a market mechanism that provides these numbers. However, if it gets too popular as a measure without the market getting more liquid then the market might end up with numbers as skewed as Ron Paul's.