Further adventures on Intrade

by John Quiggin on February 11, 2012

As I mentioned last time I wrote about my adventures on Intrade, I’m sceptical of the claim, a special case of the (semi-strong version of the) Efficient Markets Hypothesis, that the odds in betting markets provide the best estimate of the probability of political outcomes. I managed to double my small stake betting on Newt Gingrich, and might have made more if I had not overestimated the efficiency with which the Republican electorate processes information. I sold on the news of his work for Fannie Mae, and thereby missed the peak of the market when he won South Carolina.

Having made my point and learned a bit about the practical operation of markets, I meant to cash out my winnings, but that turned out to be a complicated process, and I couldn’t resist another flutter. Rick Santorum was trading at 100-1, and while I didn’t think much of his chances, those are pretty good odds in a four-horse race, especially one with no particularly attractive candidates.

He’s now 17.9 per cent (nearly 4-1 in the old language, if I recall it correctly), so I’ve now made a pretty substantial gain. There’s a bit of a cognitive consistency problem here – I didn’t really mean to make money backing Santorum, so now I need some suggestions as to an appropriate use for the money, one which would offset any damage done by backing him when he was down where he belonged. Orientation can be US, Australian or global.

 

 

{ 41 comments }

1

faustusnotes 02.11.12 at 6:17 am

I think some kind of gay rights organization would be the way to go. Or maybe there’s a bestiality legalization lobby group you could give the money to?

2

joel hanes 02.11.12 at 7:38 am

Planned Parenthood does good work wherever they are.

3

js. 02.11.12 at 7:47 am

Seconding joel hanes. PP would be the way to go I think. (Also because even if there’s a comparable organization in Australia [or the UK, etc.], Santorum obviously is not going to do any damage in Australia, the UK, or wherever else.)

And… a shout-out t0 bestiality legalization! (jk)

4

Eli Rabett 02.11.12 at 8:53 am

Donate it to the Graduate Student Union and the University of Michigan

5

FMguru 02.11.12 at 8:59 am

Agree with those who say, if you want to go US, giving the money to Planned Parenthood would probably be the most poetically just outcome, especially after the events of this week. NARAL would be a good choice, too. Perhaps someone could suggest a good Pennsylvania-focused charity for LGBT rights?

6

Merp 02.11.12 at 9:33 am

Let it ride, baby, let it ride! Do a three-prop teaser with PPACA being upheld in the SC, Elizabeth Warren winning, and the Dems keeping the Senate! Then move the winnings to an all-in on Boehner losing the speakership!

CHASE THE DRAGON QUIGGIN FEEL ALIVE AGAIN

But yeah Planned Parenthood, etc. Maybe a crisis teen hotline that scared and confused LGBT kids can call? A little ixquicking reveals that The Trevor Hotline is the only national (US) round-the-clock crisis and suicide prevention hotline for LGBT youths. Their Charity Navigator page makes them look pretty solid. There’s something poetic about having money made off of Lil’ Ricky go to consoling those kids instead of scaring them.

7

Henri Vieuxtemps 02.11.12 at 9:35 am

Keep the momentum going, bet it all on another dark horse.

8

bert 02.11.12 at 12:14 pm

What’s Palin trading at now? She’s delivering the keynote at CPAC today.
God has a mysterious tendency to whisper in her ear, but even if she doesn’t intentionally put herself back in the mix, I think the chances of a rapturously received barn-burner are high, and Intrade being what it is you stand to gain if you back her beforehand.

9

bert 02.11.12 at 12:30 pm

By the way, improving Rick Santorum’s chances of the nomination, even if only marginally and indirectly, is nothing to apologise for. It counts as sabotage.

10

Guido Nius 02.11.12 at 1:46 pm

Actually it is sabotage of sabotage, making any take-down of Santorum into a sabotage of sabotage of sabotage.

11

James Wimberley 02.11.12 at 3:01 pm

You have much more professional cred on climate-change denialism. Give the money to the noisiest climate activist group you can find. Greenpeace?

12

M. Allen 02.11.12 at 3:01 pm

At what volume do you trade at monthly? Do you recoup the $5 a month fee?

13

Watson Ladd 02.11.12 at 3:35 pm

You made money, that doesn’t mean that other people were wrong. If we have a betting market on a coin flip, the winners might crow about how the doubling of their money shows the market was wrong.

14

Cranky Observer 02.11.12 at 4:52 pm

The fascination with these small-time gambling sites, I mean, “markets”, among the political and economic has and continues to confound me. It it crystal clear to those not under their spell that they are far too small, with too few participants, and too easily manipulated (proved during the 2008 election season) to have any meaning. Yet there continues to be a fascination bordering on obsession amongst those who should certainly know better.

Cranky

15

Cranky Observer 02.11.12 at 4:52 pm

Sorry – that should be “political and economic blogging elite”

16

StevenAttewell 02.11.12 at 5:33 pm

What damage exactly was done by betting on Santorum? He didn’t get any of the money.

I say donate it to a worthy cause, but I’d put a flyer bet on Romney losing Michigan first to build up your stake/contribution.

17

Antonio Conselheiro 02.11.12 at 8:04 pm

Buy some dogs, name them all something Santorum, and have sex with them.

18

Peter Hovde 02.11.12 at 9:40 pm

A practical question-does anyone know the best way for someone in the U.S. to transfer money to an Intrade account? Last I checked, it was on the list of blocked institutions for financial transfers under U.S. online gaming restrictions. (Note that the regulations target the financial institutions, not the punters, so I am not soliciting advice on how to commit illegal activity).

19

MarkUp 02.11.12 at 10:09 pm

Put the nut back down and donate the vig straight to the nut, Santorum. While all the other places may be admirable and worthy causes, none will provide the humor that Rick could let alone the likely larger contributions they’d get if he gets the nomination.

20

neonnautilus 02.11.12 at 10:27 pm

Donate it to Santorum’s campaign. Obama has a better chance against Santorum than Romney, in my view.

21

Michael Bérubé 02.11.12 at 11:30 pm

John, you’re missing out on a once-in-a-lifetime opportunity if you don’t donate that money to the new Abortionplex. (Customer reviews available here.) You did a great deal of damage by backing Santorum when you did, and this is clearly the best way to atone.

Unless you want to buy contraceptives for employees of Catholic hospitals and universities in the US. Your call, just so long as potential human beings (pre- or post-conception, it doesn’t matter) are destroyed.

22

Jeffrey Kramer 02.12.12 at 2:27 am

Michael, I believe the Abortionplex is a for-profit enterprise, and so wouldn’t qualify for a tax deduction. Might be safer to donate directly to the Church of Satan.

23

parsimon 02.12.12 at 2:40 am

I’ll say it out loud: I don’t like playing with what I assume is discretionary money to bet on these things.

24

bert 02.12.12 at 12:56 pm

Here you go. No need to thank me.

Palin to be Republican Presidential Nominee in 2012
Today’s Change: +$0.01 (+100%)

To be serious for a second, it seems to me that in a properly liquid market you’d be seeing action on frivolous sidebets like this.

25

chris 02.12.12 at 1:39 pm

I second StevenAttewell — you didn’t “back” Santorum in any meaningful sense, you just bet on him. So you really have nothing to apologize for.

However, if you’re still determined to dispose of your filthy lucre, I think none of the above would get Santorum’s goat as much as the ACLU or Americans United for the Separation of Church and State. Not even Planned Parenthood (which, whatever he may say for public consumption, he must know isn’t really an abortion mill. Mustn’t he? It’s pretty frightening when bad faith is the comforting assumption…)

26

Nick 02.12.12 at 3:05 pm

A vote for Planned Parenthood or PFLAG.

27

Davis X. Machina 02.12.12 at 4:06 pm

What’s Palin trading at now?

The exchange price of Palins is quoted in florins. Or piastres. It’s hard to remember which.

28

Salient 02.12.12 at 9:27 pm

Orientation can be US, Australian or global.

Why “or” though? Seconding FMguru; you should donate the money to an organization that supports all orientations…

29

Glen Tomkins 02.13.12 at 3:14 am

Cash out on Santorum, and bet it all on the Republican National Convention giving the nod to Jesus Christ after they deadlock hopelessly on nominating any actual flesh and blood candidate.

30

I'm Not Typing This Under My Own Name 02.13.12 at 5:11 am

Amending Antonio Conselheiro’s suggestion @15 about the dogs, it really should be anal sex. That covers all the bases…

31

Tedra Osell 02.13.12 at 5:39 am

I hardly need to put in my two cents for PP, but I will anyway. Maybe if we try hard enough we can get someone to denounce CT as a money-laundering operation for abortion or something.

32

Jeffrey Kramer 02.13.12 at 10:23 am

I am willing to donate $50 to Planned Parenthood, up to a limit of $2,000, for every Timberite willing to make an explicit confession/declaration here that he or she can sometimes be an obnoxious asshole. (This offer is sort of aimed at, but by no means limited to, participants in the “Do You Trust Women” discussion.) Personal variations are permitted and encouraged, so long as they keep to the spirit of the challenge.

Me first, obviously:

Sometimes I can really be an obnoxious asshole.

(I’m not sure how to confirm my good faith in this pledge. Suggestions?)

33

Guido Nius 02.13.12 at 10:24 am

Sometimes I can really be an obnoxious asshole.

34

ChrisTS 02.13.12 at 7:26 pm

I happily admit to frequent bouts of obnoxious assholeness. If I say that twice, will you donate $100?

35

Salient 02.13.12 at 11:23 pm

Sometimes I can really be an obnoxious asshole despite my best intentions, and sometimes I can really be an obnoxious asshole because my intentions aren’t the best.
With apologies for both, and with gratitude for your donation to PP on my assholish behalf,
Sal.

36

Barry Freed 02.14.12 at 12:52 am

Sometimes? Only sometimes? I’m being an obnoxious asshole RIGHT NOW D00D!

37

chris 02.14.12 at 1:19 am

Well, of course I *can* be an obnoxious asshole. Anyone can, it’s easy!

Usually I try not to. But I may not always succeed. And I may not even realize when I’ve failed to avoid obnoxiousness — there’s a sort of Dunning-Kruger effect that makes it obvious to everyone *except* the obnoxious person, sometimes. (Other times it really is done on purpose. Telling these apart is left as an exercise for the reader.)

38

Jeffrey Kramer 02.14.12 at 8:39 am

Up to $300! ChrisTS, you could sign in under a different name, and I wouldn’t be able to tell the difference, but that would be wrong. (Or maybe not wrong at all, from a certain utilitarian perspective.)

39

ChrisTS 02.14.12 at 5:47 pm

Jeffrey Kramer:

I thought of that and rejected it as a violation of fair play. No serpentine windings for me. :-)

40

Area Man 02.15.12 at 12:15 am

How did betting on Santorum do any damage? His campaign didn’t get any of the money, and it’s not like pushing his odds up by whatever tiny amount you did could affect the voters in any measurable fashion. I doubt that one voter in a hundred knows or cares what goes on at Intrade.

41

Tony C. 02.15.12 at 4:46 pm

Wagering so early in a betting cycle is not a serious test for whether or not “betting markets provide the best estimate of the probability of political outcomes”. They almost certainly are when the field is narrowed down to two, and especially when the actual election draws near.

You are engaging in, and experiencing a market driven in large part by arbitrage. The same dynamic can be found on exchanges when sporting events are in progress. There are invariably overreactions when a particular horse misses the break, or when Federer wins the opening set against Nadal, etc. Punters scramble to cover potential losses, or to take advantage of perceived, short-term opportunities. As a result, the odds on a particular horse/team/player during the action need not accurately represent their actual chances of winning.

As the race/game/match reaches its final stages, the odds will much more accurately reflect the likely outcome.

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