Intrade vs. MSM: Sotomayor Nomination

by on July 14, 2009 at 7:05 am in Books, Current Affairs, Economics, Political Science | Permalink

What tells you more about the Sotomayor nomination, all of the chatter and debate in the MSM over her "controversial" remarks or the single number from intrade: bids at 98,5, i.e. an estimated probability of confirmation of 98.5% (as of July 14, 11:12 pm EST)?

Loyal-reader Jim Ward writes: 

Do reporters and news Agencies even know to check the betting markets? Or do they just ignore it, because “X sure to happen, nothing to see” is not a story?
Or they don’t want to seem biased, and have to provide 2 sides to every story…Why not just throw Intrade odds into every story as an addendum?

I'm actually amazed at how far prediciton markets have come.  In Entrepreneurial Economics I wrote:

…perhaps one day, instead of quoting an expert, the
New York Times editorial section will refer to the latest quote on "health
care plan A" available in the business pages.

At the time, I didn't think that day would be just a few years in the future. Admittedly, we are not quite there yet but during the last election it was common for media outlets to refer to the prediction markets.  I think this trend will continue.  Can futarchy be far behind?

Andrew July 14, 2009 at 7:12 am

Both tell you this country is in trouble.

Tomasz Wegrzanowski July 14, 2009 at 7:47 am

If it ever happens, I bet ($0.90:$1.00) that media will attach clueless “expertly” commentaries to movement of prediction markets, just as it tries to expertly explain mostly random noise of daily changes in stock prices now.

Dan July 14, 2009 at 9:15 am

I agree that hopefully soon, publications will include wagering data as a prediction method. But I don’t think that a 98.5% certainty of Judge Sotomayor’s confirmation (or even a 99.9% one) should preclude end-to-end coverage of the confirmation hearings. Magnitude matters, yeah?

I’m pretty sure somewhere in the U.S., there is a similarly near-certain event occurring, which would yield a 98.5% probability of success given enough volume to be meaningful. Something like “Assistant Principal of East Meadow Middle School to Be Promoted to Principal” being the bet.

And I’m also pretty sure that there is a “formality” in the way, and the local newspaper is covering it: “Board of Education Holding Open Forum Tonight To Discuss Promotion of Junior High School Assistant Principal Smith to Principal.” But the New York Times, WaPo, etc., aren’t touching that story.

But the topic makes coverage necessary to the publisher’s constituency. 99.9% sure that Billy will take a bath before bed? Not important. 99.9% sure that the stop light at 42nd and 5th will work? Same. The former is boring altogether; the latter is only interesting when it fails.

But in the context of Sotomayor and the assistant principal, that 1.5% (or even 0.1%) matters because of the sheer magnitude of the event. If Sotomayor is *not* confirmed, and the Times, Post, etc. did *not* cover the hearings because hey, she was a virtual lock!, then they lose out, and so do we. Same with the principal, to that audience.

Bob Murphy July 14, 2009 at 9:35 am

Tyler wrote:

I think this trend will continue. Can futarchy be far behind?

Why are we listening to all this chatter and debate from a GMU professor and his readers? Shouldn’t you just tell us the Intrade odds of futarchy as of your writing this post?

John Thacker July 14, 2009 at 10:06 am

Yeah, while I have grave concerns about her decisions in Maloney v. Cuomo (2nd Amendment not incporated), Didden v. Village of Port Chester (even obviously pretextual eminent domain okay), and Ricci v. DeStefano, and the way in which in all three she failed to even address the arguments of the other side, I’m fairly certain she’ll be confirmed.

Even if the Republican Senators were all rabid partisans and voted against her like Senator Obama voted against Roberts and Alito, she’d still be confirmed.

Barrett July 14, 2009 at 10:42 am

Even if the outcome is certain there can be important information to glean from the confirmation hearings and the surrounding hubbub, so it’d be wrong to ignore them. That said, as a member of the MSM myself, I would have no problem placing InTrade probabilities in all stories that could reasonably be benefited by such data.

Millian July 14, 2009 at 10:52 am

Here is a series of possibilities.
1. The hearings are relevant to the future success of the Democratic Party or the Republican Party among various demographics: probably Latinos and possibly women and the legal profession.
2. Journalists feel obliged to report on something, anything, about an important event in the U.S. political process.
3. The hearings themselves are informative about the future behaviour of Judge Sotomayor in rulings.
4. Reporting only the prediction markets quote would be negligent if important information which materially changes the probability of Judge Sotomayor’s nomination is ignored.
5. Low volume on the prediction markets implies an unreliable result in this case.
6. The prediction markets aren’t informative about the probability beyond common sense, i.e. there are sixty Democrats and enough moderate Republicans.

Silas Barta July 14, 2009 at 11:27 am

Don’t focus on the “yes/no confirmation” bet. More interesting is the confirmation margin. There are bets on how many votes she get, and I see the best opportunity in betting against her getting 70+ votes to confirm. Yesterday, another anonymous gambler and I were one-upping each other on ask prices. I offered at 90, then someone else at 89.9, then someone else at 89, then someone at 89.9 then me at 89.8, while people were offering to buy at 85.

While I’m pretty sure she’ll be confirmed, I can’t see many Republicans going along, and there’s a chance conservative Senate Democrats may vote no. Remember, since the confirmation is so secure, that allows Senators to cast symbolic votes.

JSIS July 14, 2009 at 12:49 pm

Which MSM are you reading. Mine has the quote of some senator, unless you have a complete breakdown you will be confirmed. NYT makes it clear, it will be a formality.
I think msm knows it will be a breeze through, but deliberatly plays up controversy for all the usual reasons.

Bruce July 14, 2009 at 1:59 pm

The whole idea of betting markets is that they are independent. By making them self-referential you end up with skewed analysis and a cascade/bubble of self-reinforcing news and analysis.

Yes, they become worthless if you check them and anchor on them before coming up with your assessment.

liberalarts July 14, 2009 at 3:04 pm

To tell the truth, if the MSM relied too much on Intrade, it would be bad journalism due to the ridiculously thin trading volumes. Even if you believe the market price to be off, the opportunity cost of entering the market would cancel out the small profit that you might be able to make, given that the thin markets will give you market power to quickly push the price to your expected value of the outcome.

mulp July 15, 2009 at 12:33 am

If the traders in prediction markets weren’t reading MSM, how would they determine the prices/odds/wager they use in the prediction market?

A Ouija board?

As noted previously, this is all about the posturing and positioning. I believe Sessions stated yesterday “unless you have a melt down, you will be confirmed.” He then proceeded to politely skewer and misrepresent her statements, in the sort of political hockey checking of an irrelevant opponent merely to send the message he is the enforcer and he’s gunning for Obama’s next player.

I wonder is Alex watches a game when the odds are totally against one team? If so, why? Worse, wouldn’t watching the sports highlight of the game where the winner was a virtual lock, and the highlight in introduced by “and in going down to defeat, the quarterback threw these three interceptions, and after the game said this ‘I had a bad night and they took every advantage’”

mkamdar July 19, 2009 at 12:17 pm

The Economist was one of the earliest publications that started using tradesports quite regularly.

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