Peter Brent in February:
Centrebet is paying $1.90 for a Labor win and $1.80 for a Coalition one. These (I think) are shortest Labor odds (ie longest Coalition ones) since around September/October 2001. Andrew Leigh has a lot to answer for. This â€œthe betting public is better at predicting election results than opinion polls!â€ shtick has become a standard roll-out for journos and commentators; SMH today two pieces on or alluding to it. (See also Simon Jackmanâ€™s take.) You know, the punters, who had the Coalition at over $3.00 in early 2001, but changed their minds when the government took the lead in opinion polls later in the year. Not too bright in early 2001 (or for most of the 2005 WA campaign), were they? Or the dills who on New Zealandâ€™s election day in 2005 had the Nationals winning? All these positions were based, mainly, on whatever the polls said at the time. The punters are sheep who reflect the current received wisdom, which is usually correct, but sometimes wrong.Â B-a-a-a-a-h. Iâ€™ll follow my own judgement, thanks.
Peter Brent in Crikey today:
Since Monday’s now famous Galaxy poll in News Ltd tabloids, Centrebet’s odds on who will win the next election have moved a little in the government’s direction. On Monday morning you would only get $1.69 for a Labor win, now it’s $1.72. That sound you can hear is sheep dawdling after the latest poll. B-a-a-a-h. Over the last few years there’s been an explosion of articles and academic papers spruiking the superiority of betting markets over opinion polls. Its genesis is economists who see Adam Smith’s invisible hand at work: a wondrous distillation, motivated by the dollar, of our collective knowledge about the upcoming election. What rot. What you get is just distilled current received wisdom. And that received wisdom consists of some truths but also lots of woolly nonsense, all overlayed by the latest opinion polls. If you had bet $100 in early 2001 on Howard surviving that year’s election you’d have got back more than $300. On the morning of New Zealand’s 2005 election, Centrebet was paying $2.10 for a Labour government. Punters not too clever then, were they? They were, of course, following the opinion polls. Proponents of the “betters know best” narrative often cite 2004 as their evidence. That was when the opinion polls usually had Latham and Labor ahead, while betting markets always favoured the government. But that rests on a straw man: that opinion polls are supposed to be literally predictive. No-one, least of all the pollsters themselves, claims they are. Polls are instead imprecise dips in the public ocean (that get more precise as election day approaches). Even before this week’s Galaxy, no-one seriously predicted Labor would win the next election by the 57 to 43 the polls were averaging. Here’s something you can bet on. If the next polls show Labor’s gap increasing again, the betting money will follow. If they show a tighter election, money will move that way. As I said, b-a-a-a-h. Those current Centrebet odds imply a 54% chance of a Labor win and 46% chance of a Coalition one. This is probably about how the commentariat sees it also.Â Personally, I reckon it’s closer to 65 to 35, but apparently I’m supposed to adopt the view of “the mob” instead. Heeding the will of the majority is one thing, but that’s ridiculous.
Well, if Peter’s just going to repeat himself, I guess I’ll take the liberty of doing the same.
Justin Wolfers and I have two papers now in which we show that in Australia, the betting markets are better predictors of election outcomes than the polls. Internationally, others have published maybe two dozen papers showing the same thing. The betting favourite doesnâ€™t always win, particularly when the two parties are closeÂ (the answer to the NZ 2005 example is simple: a party with a 45% chance still wins about half the time). But I am aware of no paper that finds that the polls outperform the betting markets as a prediction tool (which is what youâ€™d find if betting markets just followed polls).Â
I’m grateful that smart political scientists like Peter are interested in this debate, butÂ I find it a bit odd that he’s continuing to make the claim that betting markets are nothing but a reflection of the polls, given that all the academic evidence points the other way.