Archive for December, 2007

Editors Note: This is the first post from TheTodd, a long-time friend of mine who has 2 degrees from the U of I. Todd is an authority on many things, and I have always enjoyed his unique perspective. I hope you will join me in welcoming TheTodd to the agora.

~by TheTodd

Compared to most of you, I know very little about politics. I don’t read much news about any of the US presidential candidates, and I don’t have my finger on the pulse of the American people. Despite my lack of knowledge, by occasionally looking at a few numbers and graphs, I have a good idea about how likely each candidate is to win and which candidates are gaining and losing ground.

How is this possible? It’s quite simple, really. People bet on the election, and I follow the odds they’re betting at and how those odds change with time.

There is a well known theory in finance called the Efficient Markets Hypothesis. Wikipedia defines it thusly: “The efficient market hypothesis (EMH) asserts that financial markets are ‘informationally efficient’, or that prices on traded assets, e.g., stocks, bonds, or property, already reflect all known information and therefore are unbiased in the sense that they reflect the collective beliefs of all investors about future prospects.” I know, I know. This market isn’t totally efficient. Please read on.

In a past life, I spent a great deal of time observing the markets for betting on sports. Those markets were not totally efficient, but they were usually quite close, and – with a few exceptions – as the size of the market grew, the market became more efficient. If you’re one of the 5 people interested in the Southwest Wyoming Christian State vs. Northwest Baptist Montana basketball game, you might be able to get an edge with careful analysis. After your $100 bet on that game, the odds would significantly change.

However, if you’re betting on a well-studied NFL game, then you can safely assume that the odds you’re betting at are very close to the true odds, because if the odds were inaccurate, some people with a lot of money and excellent analysis skills will throw money at the game until the odds move enough to eliminate any edge. The best professional gamblers tend to focus on these larger markets because they can bet tens or hundreds of thousands of dollars in them. Their time is wasted trying to find a way to make a few bucks on the SW Wyoming game.

I believe that even bigger markets (like the stock and currency markets) are even more efficient, but again, I don’t think they’re completely efficient. What’s the point of all of this efficiency talk? Well, the betting market for the 2008 presidential election is large enough that I consider it to be “reasonably efficient”. By that, I mean that when I look at the odds, I feel like I’m looking at numbers that are probably just a few percentage points away from the current
true odds in most cases.

Here is the market’s current estimation of the odds to win each nomination:

Republican:
Giuliani 30%
Romney 25%
McCain 18%
Huckabee 14%
Paul 8%
Thompson 4%
Other < 1%

Democratic:
Clinton 62%
Obama 30%
Edwards 5%
Gore 2%
Other < 1%

Some trends:

McCain: Started the year as the clear GOP favorite (above 50%) but steadily dropped until falling below 20% in May. May saw a small resurgence (up to close to 30%), but a steady drop through the second half of May and all of June put him at around 5%, where he remained until a small gain in November and a very sharp gain over the last 4 days. Huckabee: Started the year at around 4%, and spent April-July below 2%. August-early October was spent at around 3%. In mid-October, everything started going right. By the start of November, he was around 7%. By the start of December, he was past 12%. He got close to 20% earlier this month, but he’s fallen back a bit in the last few days.

Paul: Below 1% until June. June and July were spent at 3%. In August, he rose past 5%. October pushed him past 7%. He hit a peak of 9% in early November, dropped sharply (to around 5%) by early December, but he’s back at 8% now.

Thompson: Started the year at around 4%. Gradually rose to around 20% by mid-April. Dropped back to around 15% in late April and May before another steady rise to close to 30% in July. Since July, it’s been a slow, steady fall, though.

Clinton: Started the year at around 47%. Bounced around in between 42-53% until beginning a steady rise in July. This rise peaked at close to 75% in October, but she’s dropped since then.

Obama: Started the year at around 22%. Remained there until a sudden rise to around 30% in March. Remained there until another rise (to close to 40%) in July. Late July-mid October was a steady fall down to around 12%, but he’s been back on the rise since early November.

Edwards: Started the year at about 16%. Hit 18% shortly thereafter, but steadily fell until hitting 5% in July. Rose back to around 7% in August and September but fell back to 4% in October, which is about where he’s remained since.

Gore: Started the year around 8%. Fluctuated rapidly between 6% and 12% until May, where he remained steady at 10% for about a month and a half. In mid-June, he fell until hitting 5% in early August. He then started to rise again, hitting a peak of about 12% in early October before sharply falling in mid-October to below 5%.

Last month in here we were talking about worlds in which the United States never came into being and what the situations would be there. I found it very interesting this afternoon when I stopped by Barnes & Noble and saw this new book by Harry Turtledove.

The premise of Opening Atlantis, the first of a new trilogy, is that the entire East Coast of North America, from the beaches of the Atlantic to the Western side of the Appalachians (and including the islands of the Caribbean Sea) were formed a thousand or so miles further East to make a small sub-continent in the mid-Atlantic.

I figured that this would be a fine Christmas present for Prescott or anyone else with interest in both history and speculative fiction.

On a side note, I wanted to let everyone know that I’m doing fine; my retirement parties were last weekend (and Augur managed to get to the brunch on Sunday afternoon.) I’ve been writing one of the exclusive stories for the book the last couple of days and am quite pleased that I can do a couple thousand words per day. It’s hard work while I’m banging on the keys, but I love the results.

I hope that the exams for those contributors that are in law school went well and that Billy Joe wasn’t injured when he put his car in the ditch over the weekend. (We got some serious snow on Saturday night.) I’m looking forward to talking to all of you soon. Merry Christmas, Joyous Yule and a very Happy New Year to everyone at Urbanagora.

Tom

This video is wonderful. Do take a look.

Here’s a rather nice piece to serve as a counterpoint to the John Derbyshire piece that was posted by Tom a few weeks ago.

A brief excerpt:
“Nearly all the evidence suggesting a genetic basis for the I.Q. differential is indirect. There is, for example, the evidence that brain size is correlated with intelligence, and that blacks have smaller brains than whites. But the brain size difference between men and women is substantially greater than that between blacks and whites, yet men and women score the same, on average, on I.Q. tests. Likewise, a group of people in a community in Ecuador have a genetic anomaly that produces extremely small head sizes — and hence brain sizes. Yet their intelligence is as high as that of their unaffected relatives.”

The Author, Richard E. Nisbett is no small potato, so take the article as something written by a well respected academic.