Harrop: Bet not on polls and pundits, but on wagering markets

By Froma Harrop / Creators.com

Don’t you love those polls that have pundits racing to the news channels bucked up with hyper confidence? When you have one like the recent New York Times/Siena College poll saying that Donald Trump was leading Joe Biden in five of six battleground states, the click-baiting headlines virtually write themselves.

But do the “early data points” say much about what will really happen a year from now? The pundits doing the hard-sell on their powers of divination say yes. After all, if the polls don’t mean anything, who needs their interpretations?

On Election Day, Democrats did far better than expected in an actual vote. Possibly good news for Biden, no? But to many who make a living off polls, good news for Biden can’t be real if it somehow clashes with their numbers.

“The contradiction between Democrats’ success at the ballot box and their struggles in surveys seems to suggest the polling can’t be right,” political analyst Nate Cohn wrote in The New York Times. “It’s an understandable response,” he adds sympathetically, “but it’s probably wrong.” So don’t think for a minute that the electoral results change the outlook for Biden in 2024.

But there happen to be better numbers than the ones Cohn and his prophesizing colleagues are citing. And they show Biden well ahead. The prediction markets for elections — essentially investors putting money on candidates — has a Biden win trading at 43 cents, which implies a 43 percent chance of victory, according to the Financial Times. Trump is trailing at 37 cents, while the other candidates are long shots.

What might make these markets a better indication of the candidates’ prospects than those political polls? For one thing, they have a better record of accurately predicting the winner.

PredictIt is currently the biggest legal site for political-prediction trading in this country. A smaller political predictions market is Iowa Electronic Markets, at the University of Iowa. Like PredictIt, the Iowa market operates under the academic exception made by the Commodity Futures Trading Commission. PredictIt works in a nonprofit arrangement with Victoria University in New Zealand.

The Financial Times sets forth the argument made by PredictIt founder John Aristotle Phillips that “prediction markets are a truth generator, powered by the invisible hand. … If you trade based on fake news or half-baked punditry, you’re going to lose your money.”

Last summer, six U.S. senators wrote to the CFTC, calling political prediction markets “a clear threat to our democracy.” Concern is warranted, but big money is already riding on electoral results, not the least of which are zillions in government contracts.

Wagering on presidential elections has been around since George Washington. Formal markets were organized around the time of Abraham Lincoln. Major newspapers would carry daily reports of their latest prices. These markets went into eclipse with the invention of scientific polling and the growth of other forms of betting, such as on horse races.

As the Financial Times reports, scholars who have studied political prediction markets found that “their collective forecasts were more accurate than even the most careful aggregations of polls.” That seems the case especially for elections that are months off; like now.

Defenders of these markets further argue that letting the public put money on the line encourages civic literacy. As Kevin Clarke, a PredictIt trader, said, “It provides checks on how to interpret media, how to not just go by a soundbite, how to not allow a headline to take on a life of its own.”

Undeterred by such criticism, mainstream punditry continues to place enormous importance on that Times/Siena poll “finding” that Biden is in trouble. Both legal political prediction markets, PredictIt and Iowa, say it’s quite the contrary.