February 6, 2008

Presidential futures market

I'm not a huge fan of the markets that let people buy and sell shares of a candidates chance to win a nomination.I don't think they can predict the future better than an average reader of a couple of blogs could do. However, they are useful when a big event happens and it is unclear the the real impact of the event was.Yesterday, for example, I don't think anyone was entirely sure who was the winner on the Democratic side. Obama didn't pick up a few states that some people thought he might have a chance in, but then again, he did pick up a few states that he really shouldn't have had a chance in (like Connecticut).This is where a market like InTrade comes in handy. Late last night InTrade had Hillary up about 5 points and Obama down about 3 (about 55-45). This was probably a reflection of early results in California, New Mexico, and Missiouri.Then, this morning New Mexico went to Obama (although now he has just a 50 vote margin with 98% reporting), California ended up being a lot closer than 55-35, and Missouri became an Obama state.InTrade has reflected that this afternoon with Obama up 12 points and Hillary down 13, which puts the two of them at a dead-even 50-50.This seems about right to me.Update: Obama is now up 58-42. This seems a little bit much to me. Clinton might not have a ton of money but campaign spending doesn't have that big of an impact on outcomes (all else equal). Just look at McCain's success this year if you don't want to read Levitt's paper.