What to make of prediction markets this election season?

That is the topic of my latest Bloomberg column.  Mostly I am pro-prediction market, but my last two paragraphs contain the cautionary note:

Prediction markets have another potential flaw: They focus attention on clearly demarcated events that are easy to bet on, such as who will win an election or whether Rudy Giuliani will face federal charges. Sometimes these are important matters. Other times they are not.

There are more meaningful trends that are more difficult to measure, such whether Americans are feeling more lonely. These things certainly have an impact on politics, but they are not easy to bet on. Political prediction markets are undeniably useful and very often enlightening, but maybe they should come with a warning: Feel free to check the odds as often as you like, but do not let your obsession blind you to the larger issues at stake.

There is much more in the earlier parts of the piece.

Comments

What are the odds of an impeached president winning re-election? After all, do not let your obsession blind you to the larger issues at stake.

If such a man runs in 2020, the odds are 100%.

The only question right now is "How many different people named Trump will become President?"

A Gallup poll released Wednesday showed that 52 percent of Americans endorse impeaching and removing Trump from office.

But hey, if you drop enough voters and close enough polling places, you might make it up on volume.

Bonus links:

Our Republic Is Under Attack From the President

A letter to Kurdish soldiers from a US military wife

Too bad nobody warned you that things could get bad.

The unemployment rate is 3.8%.

The election will turn on two things, the economy and who the Dem candidate is. Recession and Biden, Trump probably loses. No recession and Warren, Trump probably wins.

Same as it ever was.

To people with no moral or ethical standards, sure.

So now the voting public has no moral or ethical standards.

You said "same as it ever was."

It is only that if you have no moral or ethical standards.

Or if you are so committed to your "both sides" prior, that you can't let go, no matter what.

Like Trump sends the G7 to Doral, and you say "this just proves Biden would do the same thing!"

I think it is possible that Rudy Giuliani will face federal charges. The federal court of Southern NY is headed by an corrupt prosecutor who is intent on getting Trump. But I don't think they will bring it to trial because it doesn't look like Rudy Giuliani did anything wrong or illegal. So far it is just political name calling.

Well, you can believe the Federal Election Commissioner, or you can just assume she is biased because she is critical.

FEC chair tweets reminder that accepting foreign help in an election is illegal after Trump urges China to investigate Joe Biden

The question is whether the election will swing on this stuff. I say no, because most voters are not paying attention yet and a narrative, rightly or wrongly, has formed about Democrats planning impeachment since November 2016. The percentage of voters like you who spend hours a day arguing on economics blogs is basically a null set. More importantly Trump will have an opponent in the general.

And there is some large group of American voters who would rather endure another four years of The Trump Show than have their family’s health insurance taken away, pay an additional 15-20% of their income to the IRS, and pay for the healthcare, housing and food stamps of illegal immigrants.

Was that a troll? As the Trump administration tries to kill the preexisting conditions rule, you worry about Democrats taking away insurance?

Gotta be.

Trump's smoke-and-mirrors 2020 health care strategy.

And a president can't raise taxes by executive order. If you're going to be scared, you have to be scared the Senate would go along with a big increase.

😨

Trump asked China to investigate Biden's crimes because the crimes were committed in China. Nobody is above the law and the administration has a responsibility to expose Americans using government authority in a criminal way.

'nd the administration has a responsibility to expose Americans using government authority in a criminal way'

Thankfully, loyal American in the Trump Administration like Mulvaney are ensuring that the illegal actions of an American using government authority in a criminal way as part of a quid pro quo are being exposed.

After all, no one is above the law, including our president. It will be fascinating to finally read read the verbatim transcript of Trump's Ukrainian call, to allow Americans to see for themselves what disturbed so many members of Trump's administration, including that famous hard leftist John Bolton.

Are you a troll?

There has been no action at all regarding pre-existing conditions whatsoever. Even your own link does not support that accusation.

Warren has promised to cancel insurance for 180 million Americans.

And she might not need congress at all, since she plans to pack the court to somewhere between 11 and 19 judges.

"Even your own link does not support ..." Well, he's getting better. Most of the time his links directly contradict his claims.

You are putting an awful lot of words in my mouth in addition to making wild accusations of my character.

I am simply stating what is. Not your opinion of what ought.

It’s just so darn cute the way you pretend that voting for Democrats is moral or ethical. This made my day so far.

No recession and Biden? Recession and Warren?

Biden probably wins, but much less certain. Does the progressive wing of the party show up to vote, does he only receive nomination in a brokered Dem Convention without a majority, does the Hunter Biden story drag him down, does the Trump campaign blast wall to wall ads of photos of Biden sniffing teenage girls and how much Hunter and Bidens brother have earned abroad...

Warren in a recession, very hard to tell. Trump’s selling point to the people is the economy, which is what most voters pay attention to. Black Democrats have circled the wagons around Biden and might not show up for Warren. They’re also much less liberal than Warren is and she will have to answer whether she agrees with Beto about stripping black churches’ tax exempt status...

Keep in mind Warren’s support among black Dems is low enough to lose the south and trigger a brokered convention. That alone regardless of outcome would fracture the party to some extent and depress turnout.

Should be a wild ride.

record democratic voter turnout in 2020 will roll trump and the senate. vote blue no matter who...

Was her husband one of the majority of US soldiers/veterans that know the Afghan and Iraq wars were not worth it?

I've been dissapointed in prediction markets for elections. They simply follow the polls. If someone has an example of prediction markets that showed something different from polls and was correct. I'd love to see it

I listen to Yoda. Imagine if Yoda were six feet tall and he smoked weed.

we predict even a googlyeyedyoda (unlike the newyorktimes.com) wouldn't make the dumb prediction that medicare for all can be done without raising taxes!
https://www.nytimes.com/interactive/2019/10/17/opinion/medicare-for-all-funding-military.html?action=click&module=Opinion&pgtype=Homepage

I'm confused by your statement. If you see a poll showing two candidates with 50-50 shares and run the election a few thousand times, then each candidate might win about 50% of the time each. However, if the poll shows 75-25 and you could run the election a few thousand times, the guy with more support might win just about every time. The prediction market should behave the same way so long as what you are betting on is the outcome.

I predict at 4:30PM this afternoon the identity of the hear-ay whistle-blower will be made public.

What are the tax implications of betting market gains/losses?

Gambling winnings are taxable income. Gambling losses can be offset against gambling winnings, but not against ordinary income.

For anyone who has read The Great Sort, you'll know instantly that polarization is here to stay, and it will get worse. I don't know about next year, but I prognosticate on what is forthcoming in a decade or longer from now.

Tinderbox.

What might the personality biases of early adopters of event betting be?

Are most prediction markets in the U.S. limited to "play money" since in most places online gambling is illegal? If that's the case, then aren't they less likely to be accurate (as compared to prediction markets where participants use real money - gambling)? Also, hasn't manipulation been a problem with prediction markets? In the case of U.S. elections, there's two levels of manipulation: manipulation of the election and manipulation of the predictions market.

Agreed.
If a prediction was important then big money already bet in the derivatives market.

Has anyone ever done a comprehensive analysis of option "greeks" for prediction markets? I would imagine there would be some use in understanding the greeks for comparable duration prediction contracts.

Is "prediction market" in fact an accurate synonym for "extrapolation market"?

"Prediction market" does conjure association with palm reading, crystal ball gazing, Ouija boards, cartomancy, even astrology.

"Statistics markets"? --more accurate?

I am puzzled by the controversy about election prediction markets. After all, we have been running just such a market from the beginning of our electroal system - we call it the market for major political donations. Each donation is both a statement of political preference, but also a bet on the outcome. Small donations are a different matter because small donors are not in a position to reap direct benefits from the victory of their preferred candidate. Large donors, on the other hand, most definitely enjoy such benefits and their donations are a clear expression of their expectations.

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