My adventures on Intrade

by John Quiggin on November 5, 2011

For those who don’t follow the economics and politics literature obsessively, Intrade is a market in bets on various kinds of predictions, set up to follow the conventions of a share market. As I’ve discussed quite a few times in the past, the efficient financial markets hypothesis in its strong forms, implies that markets like this should give a better (more precisely, at least as good a) prediction of things like election outcomes than could be obtained from studying polls, pundit predictions and so on. I’ve been sceptical of this, on the basis of casual empiricism and some concerns about whether the empirical tests I’ve seen are biased in favor of the claim being tested.

One thing I haven’t done until now is to enter the actual market to see how it works. I finally signed up, and discovered a few items of interest. First, thanks (I assume) to US laws against online gambling, it’s quite difficult for Americans to participate in the market, which is, at least for legal purposes, based in Ireland. You can’t use a US credit or debit card, and my attempts at a wire transfer from my US bank account failed. Australia has no such restrictions.

Second, and relatedly, the market is quite thin. If the managers of Presidential campaigns cared what Intrade said, they could shift the markets a long way for a very modest outlay. For example, shares in Ron Paul, with a $10.00 payoff if we wins the Repub nomination, are currently trading at 0.27, implying a 2.7 per cent chance. But a Paul fan who wanted to raise his estimated chances could push them up to 0.40 for an outlay of $1000 (there are about 3000 shares for sale at prices between 0.27 and 0.40).

Third, there’s no margin trading, which means in particular, that you need a lot of collateral to go short on a long-odds candidate (at least if I have worked out the system right). Selling short costs $10 a share, less the current price, so if I wanted to sell short $100 worth of Paul shares at the current price (that is about 400 shares), I’d have to put up nearly $4000. I had an elegant Dutch book worked out, betting against Paul and Huntsman (zero chance, in my view) to finance a bet against my preferred dark horse whose odds were equal to the sum of the first two. But that didn’t it work, so I had to just put down my money.  Over the fold, my trackside tip ….

Newt Gingrich: I bought my shares early this week, and am already ahead to the tune of $15.00. My reasoning is as follows. Even if he survives the harassment scandal (which looks less likely now than when I entered the market), Herman Cain isn’t a viable candidate. Perry and the other conservative candidates are already toast. So, Romney is the obvious favorite and is indeed odds-on to win.

But, as Eugene Robinson just pointed out, Romney isn’t as inevitable as centrist pundits think – on the contrary he’s quite “evitable”. There’s a large pool of conservative Repubs who would rather vote for (just about) anyone else*. Once Cain is out of the picture, Gingrich is the last choice left to them. And given their willingness to defend Cain, it will be that much easier to forgive Gingrich’s personal baggage, now long in the past.

A majority of Repubs will probably hold their noses and vote for Romney as long as he appears to be the only electable option. But if things turn up for Obama, or if the (entirely accurate) perception that Romney is the emptiest of empty suits, a haircut masquerading as a man, starts to take hold in the mainstream media narrative, that calculus might change. At that point, the conservative narrative might recast this election as a replay of 1964, a necessary defeat on the way to a greater victory. 

There’s plenty of “ifs” in there, but I still think Gingrich was badly underpriced when I bought at 5.0 per cent, and still underpriced at 7.5 per cent.  A quick look around the wingnut blogs (not an experience to be repeated often, so I won’t give links) suggests quite a few of them are thinking the same way.

Coming back to Intrade, what, if anything does all this prove. My guess is that, most of the time, betting markets display what’s called “semi-strong’ efficiency, that is, the market odds are about as good as you would get from a skilled analyst with access to published polls and the public predictions of other skilled analysts. By definition that has to be at least as good as any mechanical calculation based solely on poll numbers, so the markets should outperform the polls. On the other hand, the markets are thin and may be prone to panics or bubbles at times. And of course , if there were no polls, the markets and the pundits would be relying entirely on guesswork.

 

* The exceptions, for different reasons are Huntsman and Paul.

{ 49 comments }

1

Jeremy Fox 11.05.11 at 4:02 pm

In Everything is Obvious (Once You Know the Answer), Duncan Watts mentions attempts by the McCain campaign to shift the Intrade market during the 2008 election. Apparently, they were able to shift the odds, but only briefly. Presumably by lowering Obama’s odds they created a cheap buying opportunity for other people who (quite rightly) thought that Obama was going to win.

2

Henri Vieuxtemps 11.05.11 at 4:21 pm

Is it possible to sell short in Intrade now? I thought it was a straight ‘buy-hold-sell’ exchange.

3

Doctor Slack 11.05.11 at 4:39 pm

I’m sorry, how is Perry ‘toast’? The one who’s a joke within the conservative movement is surely Gingrich, not Perry. The likeliest outcome is surely that the ultra-conservative vote shifts behind Perry, as it was pretty much always going to once he entered the race.

4

Watson Ladd 11.05.11 at 4:42 pm

Henri, you can sell contracts you do not own, in effect being the counterparty. This isn’t shorting, but is isomorphic to it. In essence you are picking which side of the bet to take.

5

Metatone 11.05.11 at 5:22 pm

To join in with Doctor Slack @3, Perry is following a theory of how to campaign that he used in Texas – pouring money into particular kinds of street-level organising, holding off certain kinds of TV and PR for now, etc.

One can certainly argue that it won’t work, but I’m not sure his numbers at this point in the cycle are a good basis to do so.

The trick with “information markets” is that they aggregate the views of the participants. Since the majority of the participants on InTrade are political junkies, that’s the bias you get in the prediction. Throw in the thinness of the market and it’s typically good for the big question, but shakier on the breakdowns. Particularly if something doesn’t fit the pattern of previous occasions.

6

anon/portly 11.05.11 at 6:09 pm

There’s plenty of “ifs” in there, but I still think Gingrich was badly underpriced when I bought at 5.0 per cent, and still underpriced at 7.5 per cent.

I’m with Doctor Slack. I think John Quiggin overestimates the desire of hard-core Republicans to let Obama be able to go on TV the night before the election, announce he was born in Kenya, give America the finger and still get over 70% of the popular vote the next day. I would take the risk-free 7.5% on the other side, and for that matter if Quiggin is right in his basic analysis why not just bet on Obama to win in the general? Or if it’s risk you want bet on Obama to be win big.

(Note: I’m actually a right-winger, albeit an eccentric one who will vote for Obama (again), and I try as hard as I can to avoid information concerning electoral politics – but the (entirely accurate) perception that Romney is the emptiest of empty suits, a haircut masquerading as a man, whether accurate or not, suggests to me that John Quiggin should really think about whether his views about Republican politicians are less like imaginative insights and more like one pool ball being hit by another. I mean, if Romney’s any good, and he really wants the nomination, of course he will have to appear as an empty suit to a highly intelligent left-wing slightly-obsessed-with-America foreigner like John Quiggin. What choice does he have?)

Another thing: if Gingrich really truly scientifically-like has a chance anywhere close to 7.5% right now, why aren’t we seeing Rush jump in the race? Or for that matter, half a dozen “serious” (yes, must use scare quotes) Republican politicians? That dog isn’t barking, is it?

7

Andrew F. 11.05.11 at 7:38 pm

I don’t know John… A 1 in 14 chance of Gingrich getting the nomination? Even aside from the polling, the relative size of donations and campaign war chests aren’t very supportive of that optimistic an assessment. Gingrich raised a little more than Rick Santorum in the third quarter, and it looks like he’s about maxed out available resources…

8

Henri Vieuxtemps 11.05.11 at 7:57 pm

We all should donate. Professor Gingrich for president!

9

Matt McIrvin 11.05.11 at 8:16 pm

It looks to me as if Intrade’s results generally overestimate the chances of weird, improbable things happening involving people with well-known names.

They’ve got Hillary Clinton as 2012 Democratic nominee at 1%. I could conceivably imagine things getting so dire for Obama that he pulls an LBJ and declines to run (not likely, but maybe more than 1% probability), but I doubt his Secretary of State would be the leading candidate under that scenario; the probability should be dominated by “someone else”. Biden (0.6%) at least has all the horror scenarios in which he becomes the incumbent President; I’d rank him above Hillary Clinton. I suspect she’s overpriced because she’s well-known and a former presidential candidate.

10

Tom M 11.05.11 at 8:17 pm

it looks like he’s about maxed out available resources
he could hock the jewelry. That would tell you what Callista thinks of his chances.

11

bigcitylib 11.05.11 at 8:18 pm

The number of junk emails from Newt’s campaign in my inbox has tripled during the past two weeks. He is clearly making his move.

12

djw 11.05.11 at 8:31 pm

Yeah, I think Gingrich’s actual nomination chances are essentially identical to Huntsman and Paul’s at this point. A static 14-1 bet on Gingrich would not be a wise investment.

That doesn’t mean Gingrich at 7.5 cents on the dollar isn’t a decent investment in the context of a market like intrade. the existing candidates are sufficiently uninspiring that there may be a mini-boomlet for Gingrich at some point that would push him into double digits. (Although it’s getting a bit late for this.)

Similarly, I invested in Clinton shares at about 15 cents on the dollar a few days before the Ohio-Texas primary in March 2008. If I were buying to actually win, that obviously would have been a terrible wager; anyone paying attention to the delegate count knew she was toast. While I didn’t think she had anywhere near a 15% of winning the nomination, but I did expect her campaign, the media, and her followers to vastly overstate the significance of her impending narrow victories in those states, giving me a window of opportunity to sell the stock at a high point (she peaked a day or two after those primaries in the upper 20′s). I nearly doubled my money in less than a week.

13

mw 11.05.11 at 8:36 pm

First, thanks (I assume) to US laws against online gambling, it’s quite difficult for Americans to participate in the market, which is, at least for legal purposes, based in Ireland.

I expect that you’re half right — the chilling effect is not from the law against Internet gambling itself (which has been around for 5 years), but rather from the new interpretation and hyper-aggressive federal prosecution this year:

http://sports.espn.go.com/espn/poker/news/story?id=6362238

14

Lemuel Pitkin 11.05.11 at 8:57 pm

My guess is that, most of the time, betting markets display what’s called “semi-strong’ efficiency, that is, the market odds are about as good as you would get from a skilled analyst with access to published polls and the public predictions of other skilled analysts. By definition that has to be at least as good as any mechanical calculation based solely on poll numbers, so the markets should outperform the polls.

Isn’t this exactly the claim that needs to be tested empirically?

15

Lemuel Pitkin 11.05.11 at 8:59 pm

… for instance, djw’s experience @12, if generalized, would be pretty decisive evidence against semi-strong efficiency.

16

Lemuel Pitkin 11.05.11 at 9:06 pm

… and in fact, John Q.’s guess that he can make money on his Gingrich bet is proof that he himself does not believe that the betting market displays semi-strong efficiency, despite what he says in the final paragraph quoted above. If the information available to John Q. (well, assuming he doesn’t have some secret in with the Romney campaign or something) is sufficient to conclude that Gingrich is underpriced, then the market does not display semi-strong efficiency, period.

17

djw 11.05.11 at 9:26 pm

I would add that while I haven’t followed intrade closely over the last year (and no longer have an account), when I have paid attention to it, it seems that the political prediction markets are following a somewhat less moronic strain of conventional wisdom than they did in 2008, which was a bonanza of free money for anyone with half a clue.

18

John Quiggin 11.05.11 at 9:50 pm

Well, LP, I did say “most of the time”. I agree with djw that these markets tend to over-react to news. A striking case (IIRC) was the 2004 election when some very early exit polls favoured Kerry – the odds plunged even though the information value was small. So, I only need the assessment that the recent news has been good for Gingrich (primarily because Perry and Cain, who are the relevant rivals, have had bad news, while Gingrich hasn’t had any). If so, he should rise allowing me to sell out at a profit.

Also, don’t hold me to this but I think it that even under semi-strong EMH above-average analysts can still profit at the expense of the below-average. That seems clearly right if no one bets very much so, that the good analysts don’t drive out the bad. Of course, the Dunning-Kruger effect is relevant in general and perhaps to my strategy.

19

Lemuel Pitkin 11.05.11 at 10:07 pm

Well, LP, I did say “most of the time”.

OK, I should have added a caveat at the end, like “in this case.” But is there any reason to think that semi-strong efficiency would be less likely for the US presidential race than in other cases? I would think that as one of the most widely followed political prediction markets, with (I assume) some of the highest trading volumes, it would be among the most likely to come close to efficiency. If semi-strong efficiency doesn’t apply here, why assume it applies to other prediction markets?

I agree with djw that these markets tend to over-react to news.

OK. But that’s just another way of saying, they don’t display semi-strong efficiency. :-)

20

Lemuel Pitkin 11.05.11 at 10:11 pm

Also, if prediction markets overreact to recent news, and recent news has been good for Gingrich, doesn’t that imply he should be overvalued right now?

Unless, of course, you assume that you got the news before everyone else. And if market participants generally do assume that, then … markets overreact to recent news.

21

casino implosion 11.05.11 at 10:31 pm

I haven’t been following Intrade, but if Perry is a good buy now, he’s the one you want to back, not Gingrich.

22

David Moles 11.06.11 at 1:16 am

One thing I’ve never understood is how InTrade is supposed to be an actual market, and not just a bookie. Presumably in a market one buys shares or futures or what have you in the expectation that those things will have real value at some point — eventually the stock will pay dividends (to you, or the future owner you sell it to a a higher price), eventually someone will want to turn copper bar stock into wire or pork bellies into bacon, but ten shares of Newt Gingrich, even if he wins, gets you nothing but a chunk of the money put up by everyone betting against him. Is there actual math showing that short-term oddsmaking is functionally equivalent to real markets? Do you have to believe in the EMH for this to work? And if you don’t believe in the EMH, doesn’t the market have to be a certain size, and the players invested to a certain degree, before you can expect it to aggregate enough crowd-wisdom to be predictive? Is InTrade big enough to do that, or do people just think it’s a market because the bookie’s dressed in a cheap stockbroker costume?

23

someguy 11.06.11 at 1:36 am

anon/portly,

I live in the US, I consider myself a conservative, I am Republican, I pay a moderate bit of attention to the process, I want Romney to win and in my opinion Romney “is the emptiest of empty suits, a haircut masquerading as a man.”.

24

anon/portly 11.06.11 at 2:29 am

someguy,

My point wasn’t that Romney isn’t an empty suit – he may well be (about 50% of what I know about him, I read on Wikipedia this morning). My point was, how could a person of any substance hope to win the Republican nomination if he didn’t come off as an empty suit to people like JQ. I suppose he could contradict my point by suggesting some recent, viable Republican presidential candidates that were not, in his view, empty suits. Maybe Dole?

25

MPAVictoria 11.06.11 at 2:32 am

“I live in the US, I consider myself a conservative, I am Republican”

If we lived in a more civilized world this pronouncement would be viewed the same way as announcing that one likes to fornicate with sheep.

26

Walt 11.06.11 at 7:16 am

David, betting markets _are_ markets. Bookies are market makers.

27

John Quiggin 11.06.11 at 10:52 am

@portly: “slightly-obsessed-with-America foreigner” is a little more comprehensible if you replace “foreigner” with “citizen of a US client state”.

As regards the emptiness of suits, all candidates, particularly Repubs have to dematerialise somewhat to make the transition from primary to general, and their suits tend to flap a bit as a result. But inside Romney’s is the perfect vacuum of outer space. McCain and even Bush were much more substantial.

And, contra your implication, this view isn’t confined to leftwing inhabitants of the outer provinces. Google tells that its widely shared on both the Dem left and Repub right. The only question is whether the centrist press establishment will eventually adopt it.

28

Rich Puchalsky 11.06.11 at 12:47 pm

Isn’t the Romney-as-empty-suit bit already the media narrative? Other than a few Villagers… but people pay less attention to them than they once did. The growing primacy of far-right-wing media means that the empty suit bit is already out there.

Not that I’m a Romney defender, exactly, but I’ll remind people that Romney, unlike most GOP candidates, has actual accomplishments. For instance, my family gets health care that we could not afford if we weren’t in Massachusetts. Sure, he’s systematically disavowed all of his actual accomplishments in an attempt to get through the primaries, but that’s not exactly his fault.

29

Matt McIrvin 11.06.11 at 1:01 pm

Romney is smart and competent. What drives the “empty suit” narrative is that, even by the standards of national-level politicians, he seems to have no persistent principles whatsoever. He sounds like a pragmatic moderate, a quasi-liberal or a wingnut ultraconservative demagogue depending on what he perceives to be an electorally advantageous position at any given moment. You have to be this kind of chameleon to some degree to make it, but with Romney it’s unusually transparent.

30

engels 11.06.11 at 2:28 pm

[Accuracy is] as good as you would get from a skilled analyst with access to published polls and the public predictions of other skilled analysts. By definition that has to be at least as good as any mechanical calculation based solely on poll numbers, so the markets should outperform the polls. On the other hand, the markets are thin and may be prone to panics or bubbles at times.

Aren’t you almost contradicting yourself here? As the last sentence rightly implies, analysts can be prone to herd behaviour, etc. Therefore they are not necessarily ‘at least as good as’ a mechanical calculation based on the underlying data.

cf. active vs. passive fund management

31

SamChevre 11.06.11 at 2:35 pm

I’ll remind people that Romney, unlike most GOP candidates, has actual accomplishments.

Sure; he made a multi-billion dollar fortune transferring jobs from the US to China.

Definitely an accomplishment, just not one I like.

32

John Quiggin 11.06.11 at 2:42 pm

@Engels Yes, the final sentence you quote is meant to contradict what goes before. I’ll put in a para break which will hopefully make this clearer.

33

David Moles 11.06.11 at 5:33 pm

@Walt: Okay, but it’s not the market for actual presidents; that’s something people pay $2000/plate of rubbery chicken for a tiny speculative share of. But we talk about InTrade as if it was as predictive as the actual market? What’s the basis for believing that InTrade aggregates all the knowledge available to the economy on the candidates’ chances? Surely most of that knowledge is held by people who are not at all invested in InTrade, and they’re applying that knowledge to completely different (and probably larger, certainly more numerous) investments the prices of which InTrade doesn’t capture. Do we assume that once InTrade’s a certain size it’s a statistically valid sample? I’m not trying to argue here; I genuinely don’t understand the principle.

34

John Quiggin 11.06.11 at 5:41 pm

@David The argument (not that I’m endorsing it, mind) is that people who pay attention to Intrade are a sufficiently large representative sample and that, if Intrade prices are well out of line with their average view (or, as Keynes pointed out, their average view of what the average view will shortly be), some of them will invest to capture the perceived arbitrage opportunity.

35

anon/portly 11.06.11 at 6:00 pm

But inside Romney’s is the perfect vacuum of outer space. McCain and even Bush were much more substantial.

If you compare Romney to November 1999 Bush, you might call them a wash, empty-suit wise (I wouldn’t, because Bush’s business and gubernatorial record seem less substantial and because his father was much more obviously responsible or potentially responsible for his success). But then you have 8 years of Bush as president – are those eight years, and all we know about them, evidence of substance? The first president in my lifetime where people actually talked and thought a lot about the vice president? I would have said no. Maybe I was overly influenced by reading all those bits of evidence to the contrary adduced by Delong. Maybe there were other bits of evidence I wasn’t reading.

And the comparison with McCain surprises me even more. My impression has been that detailed analyses of his senate career show a man who embraced the “maverick” label without actually demonstrating any “maverick” tendencies. I thought the smart, informed view of McCain was the one being made here about Romney, as sort of the quintessential empty suit.

We know relatively little about Mitt, at this point.

particularly Repubs have to dematerialise somewhat to make the transition from primary to general, and their suits tend to flap a bit as a result

But I think this just makes the forming of an accurate impression really hard. If Mitt looks too substantial, maybe that means he isn’t really very smart. See comment 28 (RP).

Google tells that its widely shared on both the Dem left and Repub right.

I would say such views re a more moderate Republican are simply generic – their informational value is nil.

“slightly-obsessed-with-America foreigner” is a little more comprehensible

But still accurate! I didn’t mean it as an insult, merely as a good short description. I still think your paragraph 6, the one about how Newt might actually win, may demonstrate the difficulty of understanding American politics too deeply without living here. I lived in a Commonwealth country for a few years, and though I could have voted, I never did, feeling that I didn’t really understand their politics well enough. Then again my votes in the US have often turned out so poor I have considered not voting here too.

36

anon/portly 11.06.11 at 6:03 pm

I am kind of wondering if it isn’t possible that everyone (excluding the JQ of paragraph 6 but including the JQ of comment 18, not withstanding the objection of comment 20 (LP)) who has bought Gingrich shares on Intrade is buying them not because they think the chance of his winning the nomination is significantally higher than zero, but because they think others will think so. Or they think others will others will think so. (Etc.?) I.e. a true speculative bubble.

37

chris 11.06.11 at 6:11 pm

Even if he survives the harassment scandal (which looks less likely now than when I entered the market), Herman Cain isn’t a viable candidate.

What scandal? He’s a Republican. It’s OK if you are Republican. Maybe he’s a viable candidate, maybe he’s not, but scandal has nothing to do with it.

Romney, unlike most GOP candidates, has actual accomplishments. For instance, my family gets health care that we could not afford if we weren’t in Massachusetts.

Since I’ve already made a habit here of repeating, at possibly tedious length, that legislation is done (or not done) primarily by legislatures, I may as well say it one more time, in a state rather than federal context. How much involvement did Romney really have in this, and how should it be interpreted? Massachusetts is a very blue state and might plausibly have gone single-payer like Vermont; instead it has a centrist half measure very similar to the one for which Obama gets so much criticism. That outcome may or may not be near the liberal end of what is achievable in federal politics, but it’s clearly much further right on the scale of what is achievable in Massachusetts.

38

Watson Ladd 11.07.11 at 2:10 am

To all the people who wonder about bubbles:

Let’s do some backwards induction. The day after the election we all know who the president is (modulo hanging chads). The day before your best estimate of what people will think tomorrow is the actual probability given what you know today, and therefore what you think today. Predictions are martingales, and beliefs about beliefs are belief.

39

Eric 11.07.11 at 4:07 am

It seems like a waste to balance out two candidates with zero chance (Paul and Huntsman) with one with zero change (Gingrich). You’re basically making the claim that Gingrich’s odds are higher than Paul’s & Huntsman’s combined. as Casino points out, you might as well go with Perry as the most undervalued of the realistically possible candidates.

40

jfxgillis 11.07.11 at 1:52 pm

John:

I’ve played the ur-original prediction market since before the 2000 election (legal in the USA since it’s been ruled an academic exercise, not gambling): Iowa Electronic Markets

What you said about panics and bubbles is true but much more important than you might think. That is because whereas in commodity market panics, bubbles, corners and such are relatively rare as a ratio to the ordinary workings of the market (the housing bubble might’ve been huge and devastating to the global economy for years, but there was only one housing bubble), in presidential elections there are a rolling set of panics and bubbles.

Even in a banal election season like 2008 there were probably five bubbles on the Dem side, at least three on the Repub side and two in the McCain/Obama matchup (people forget how inflating Palin was before she deflated). It happens so much and so violently that playing the bubbles really is the correct strategy.

41

Lemuel Pitkin 11.07.11 at 3:48 pm

It’s really interesting to see the contrast between Watson’s doctrine and jfxgillis’s concrete experience. Watson knows from first principles that bubbles Just Cannot Happen, so he needn’t learn anything about the operation of actual prediction markets.

42

Tony C. 11.07.11 at 4:58 pm

While I do follow politics more closely than most, I have little interest in wagering on contests. Having said that, I know quite a bit about markets like Intrade, and I can assure you that the thinness of the market is a major problem. In other words, the *true* accuracy of various odds will always be much higher in deep, substantial pools.

I trade on Betfair, though my focus in horse racing. And it is almost invariably the case that deep pools are far better predictors – especially of relative long shots – than shallow pools. Horse racing events are quite different than political contests, though, in that the vast bulk of the bets are placed in a short span of time leading up to the event.

43

Lee A. Arnold 11.07.11 at 5:38 pm

Gingrich left his wife (with cancer in the hospital) while having an affair with another woman. He is unelectable, and it would appear that most Washington insiders think he is in this for the continued notoriety, which translates directly into private speechmaking money in the future. He is currently up to about $150,000 per appearance.

Romney is a welfare state liberal. His basic problem is that footage exists of him taking both sides of every issue, back to the beginning of his career. There is a bounty of contradictions to use against him in the general election. A month ago, he stated that he has always believed the SAME things, then a week later he stated that it is right to CHANGE your mind, if the facts change — so he has actually flipflopped on the issue of flipflopping. Now he is taking the tack that he is just another human being, which may be some sort of precedent in U.S. elections… Usually, these things would not be good for getting conservative Republican votes, nor is being a Mormon good for getting fundamentalist Christian votes, but there is ample polling evidence that the Far Right is moving into “Anyone But Obama” mode, and may be convinced to overlook such problems (consistency was never their strong suit anyway — something you might get Romney to admit, if you could infuse a few chocolate liqueurs into him).

Latest reports show that Cain is losing points in the polls, due to the scandal.

I would guess that Perry is Romney’s most dangerous opponent, running for the “Whom would you rather have a beer with?” sweepstakes by trying hard to be Reaganesquely charming and folksy, while remaining indecipherable on any issue. (Being a vacuum is essentially identical to flipflopping.) Perry is so low in the polls that he may seem out of the running, but imagine, if you will, that Cain is knocked out because we find that he has propositioned dozens of women: which is the easiest prediction of his behavioral pattern. Then, his poll numbers will be transferred to someone else, and that someone else doesn’t have to be Romney. It is significant in this regard that the Cain camp has accused the Perry camp of bringing the scandal to the public’s attention.

I continue to hold that we are witnessing the symptoms of the Republican Party’s historical cul de sac. The Republicans often anoint their chosen one early and all fall in line, but this time they are slugging it out, and what we are seeing is the manifestation of the internal contradiction: the political-economic propaganda of Hayek-Ayn Rand-Reaganomics is revealed to be practically unworkable and intellectually bankrupt against the altruistic needs of the real world. At the same time, it is a strong ideology which still appeals, not only to the Right, but sometimes to the 7% of U.S. voters who are truly Independent, and who often decide the outcome of elections because the country is so evenly divided. (The other 23% or so of people who RESPOND as “independent” are actually regular party-line voters who very rarely, if ever, switch sides.) The most reliable Republican voters are blue-collars who ended education with high school. They are amply supplied with their fears and resentments from listening to talk radio.

44

jfxgillis 11.07.11 at 6:13 pm

@Lemuel #41

The IEM, because it’s an academic exercise, not a gambling site, keeps historical graphs handy. In the 2000 election AFTER the conventions, Gore bubbled and popped, then Bush bubbled and popped before the Gore popular-vote predictions paid off (handsomely for me, if it’s okay to brag).

45

John Quiggin 11.07.11 at 8:15 pm

@Lee Arnold: You are forgetting the Repub capacity for reinvention of history. The new view is that the Newt’s personal baggage is not so bad after all (the tumor turns out to have been benign). As I said in the OP, after going to the mat for Cain, they won’t find it hard to forgive him – things may be different in the general election.

http://www.bookwormroom.com/2011/11/03/rebutting-the-gingrich-cancer-stricken-wife-canard-thirty-years-later/

46

Watson Ladd 11.07.11 at 8:44 pm

Define bubble. Knowing the eventual outcome of the election its easy to say people were being irrational, but that ignores the actual information they had at the time.

47

jfxgillis 11.07.11 at 11:40 pm

@Watson:

???

I thought a bubble was an asset price appreciation based on speculative expectations of further appreciation.

And I think they should use the chart I linked in #44 in textbooks as a representation of it.

Correct me if I’m wrong, but I think you think the expectations were rational, not speculative. But I disagree. I think it was always the case that the 2000 election was approximately a 50/50 proposition, and you can see the market oscillated in a narrow range around that figure for most the year (rational) until the market got way out of range in both directions (speculative).

48

MQ 11.10.11 at 12:22 am

Does anybody else think the fad for prediction markets was itself the product of the ideological bubble that led to a massive overvaluation of free-market libertarianism?

49

jim 11.11.11 at 6:30 pm

Actually, I’ve taken a small position in Bachmann (she’s .005 bid, .007 ask on the IEM). My reasoning: Romney will win Nevada and New Hampshire. A conservative will win Iowa. That conservative will then become the anti-Romney going in to South Carolina. Neither Cain nor Gingrich has any hope of winning Iowa — organization is required. Bachmann and Perry therefore, regardless of polls and funding problems, are the sole possibilities. While Perry is the more probable, he’s not that overwhelmingly more probable.

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