Prediction market analyst Lance Fortnow in an e-mail to me:
Right now the electoral college markets are tracking the polls pretty closely. I think we’-ll see some divergence when we get close to the election since the polls can’-t keep up. In past elections the markets were much better than the polls within a few days before the election (though not on election day itself which has too many rumors).
Other thoughts:
– There is a long-shot bias —-states which are above 85% (for one candidate or the other) reflect a probability closer to 100%.
– The state markets are strongly correlated. There is a small but non-trivial chance that many states will be way off this year. And then people will be reluctant to trust the electoral college markets in the future.
So, I have (at least) one answer to my series of provocative questions: Electoral college prediction markets are more useful than the state polls towards the very end of the presidential campaign (but not on Election Day). Interesting. Thanks.
PS: The discussion about this post goes on in the comment area of another post.
[…] UPDATE: Follow up here. […]
Most of this is rubbish IMO. In stead of asking people who they will vote for, we should have another group and ask them who they think will win the presidency. The subjects could even attach a percentage.
Let’s call the former study “regular polls” and the latter “prediction polls”.
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A divergence between the two will prove my theory that regular polls have no predictive power – they don’t reflect future events/circumstances etc. Unless… the sum of future events/circumstances have a net neutral effect in the public eye. Non-significant effects here are quite common, that’s why we have to listen to all this rubbish about polls being predictive. They are not, but unfortunately people’s prejudices are easily satisfied.
The real issue is not how well Obama or McCain might do in the closely divided battleground states, but that we shouldn’t have battleground states and spectator states in the first place. Every vote in every state should be politically relevant in a presidential election. And, every vote should be equal. We should have a national popular vote for President in which the White House goes to the candidate who gets the most popular votes in all 50 states.
The National Popular Vote bill would guarantee the Presidency to the candidate who receives the most popular votes in all 50 states (and DC). The bill would take effect only when enacted, in identical form, by states possessing a majority of the electoral vote — that is, enough electoral votes to elect a President (270 of 538). When the bill comes into effect, all the electoral votes from those states would be awarded to the presidential candidate who receives the most popular votes in all 50 states (and DC).
Because of state-by-state enacted rules for winner-take-all awarding of their electoral votes, recent candidates with limited funds have concentrated their attention on a handful of closely divided “battleground” states. In 2004 two-thirds of the visits and money were focused in just six states; 88% on 9 states, and 99% of the money went to just 16 states. Two-thirds of the states and people have been merely spectators to the presidential election.
Another shortcoming of the current system is that a candidate can win the Presidency without winning the most popular votes nationwide.
The National Popular Vote bill has passed 21 state legislative chambers, including one house in Arkansas, Colorado, Maine, North Carolina, and Washington, and both houses in California, Hawaii, Illinois, New Jersey, Maryland, Massachusetts, Rhode Island, and Vermont. The bill has been enacted by Hawaii, Illinois, New Jersey, and Maryland. These four states possess 50 electoral votes — 19% of the 270 necessary to bring the law into effect.
See http://www.NationalPopularVote.com
I favor a national popular vote.
Yes, and there are many factors to consider when pointing out the superior role of prediction markets (in general). The problem with a lot of researchers is – their mind is already made up, and it is their job to defend their case. Fair enough, but publicize your results to someone else because I’m not interested.
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So let’s consider another aspect, which I would like to call the “stubbornness of smart money”. Smart money in this context being superior knowledge, insights etc. No insiders.
Smart money rules, we are not simply aggregating information and averaging it through the market place. Smart money will move the price because smart money is not afraid to move the price. The average trader or “followers” are. You could have a gambling addict moving the price because he doesn’t give a rat’s ass about value, but this will be a temporary effect. We still have to explain why smart money is so stubborn, but since people prefer to ignore me anyway, why should I even bother. Hell, the last thing I want to do is to provide evidence to this community. 😀
What’s the deal with Hillary on Intrade?
http://joshbarro.blogspot.com/…..trade.html
Somewhat related post:
http://www.scsuscholars.com/20…..trade.html
polls vs. prediction markets