Elections

Manipulated Markets?

by

I’m becoming less confident about the accuracy of the online futures markets in predicting the outcome of the presidential race. Intrade’s Bush re-election market sold off into the debate, rallied during and sold off after. This behavior seems odd, and is similar to what the same market did during the previous presidential debate and the vice-presidential debate. (I didn’t follow the first presidential debate.)

It’s occurred to me that partisans might be trying to manipulate the markets (Glenn Reynolds and Tom Smith have similar ideas, as I suspect do other observers). While I have no evidence for this possibility, consider it on a cost/benefit basis. Political futures markets aren’t so deep that a trader, or consortium of traders, willing to spend a few hundred grand couldn’t bias them against Bush for days or weeks at a time. Given the increasing credibility of these markets, and given the high cost of conventional advertising, selling a big lot of Bush re-election futures might be a relatively inexpensive way to help Kerry. (Of course the bill would come due eventually, if Bush won, but in that case the inevitable market pop might not occur until shortly before the election, in which case money invested in holding down Bush’s numbers would have been well spent.)

I think that these markets are a great tool, and that they will eventually equal or surpass conventional opinion-polling in the degree to which they become accepted by the media and public for political prediction. But markets aren’t perfect. Someone told me that James Cramer on CNBC suggested that Democratic hedge-fund managers are buying oil futures in an attempt to boost oil prices and hurt Bush politically. I am skeptical about Cramer’s idea: oil has been rallying for a variety of reasons, it’s a huge market and manipulation of huge markets tends to be prohibitively costly for prospective manipulators. But if Cramer is saying it, it means other traders are thinking it. And if they think it about oil, what about the relatively illiquid elections markets? It seems likely that politically engaged traders have considered, if not actually attempted, trying to push those markets their way. I don’t know whether they have succeeded. Perhaps this would be a fruitful area for systematic research.

OTOH, it could be that the election really will be as close as the online markets suggest it will be. We’ll know soon enough.

(Previous related posts: here and here)

UPDATE: Lex reminds me that the election odds shown by online bookmakers have roughly paralleled the odds shown by Intrade and the Iowa Markets. His observation supports the close-election hypothesis.

UPDATE2: Don Luskin suspects manipulation.

Afghan Results

by

Afghan results appear mixed. Much criticism (as in our newspaper’s political cartoons) has been directed at potential violence. Apparently, that was not a problem. (Another dog that didn’t bark but whose absence is not likely to be noted.) On the other hand, the ink that marked someone as having voted washed off too easily and some may have voted repeatedly. Links:

Fox; Instapundit ; Jericho . All with pictures. An intro to the issues: Norvell.

The problems appear similar to those expected in Dailey’s Chicago and Johnson’s south Texas. This may well be simple incompetence; if it is venality, it is venality rather than violence. That does seem to indicate a real step toward democracy. Still, with several of the candidates boycotting, the election will not have the authority we would like. (Snarky moment: I wonder what Carter will do – perhaps he could bless it with a Venzuelean validition? Or, perhap not, since the project was undertaken under Republican leadership.) Frankly, it is hard to be snarky and look at the pictures; these are moving. I hope it proves, finally, a fair election.

More on the Globalization of American Politics

by

Val Dorta has another take on this issue. Worth reading.

WRT Val’s observations about foreigners who move here, become citizens, and then repeat the irresponsible voting behavior that wrecked their countries of origin and got them to emigrate in the first place, similar patterns are evident within the United States. For example, Californians fled burdensome taxes and regulations and moved to Arizona, where they proceeded to vote like Californians and drive up their new state’s spending and taxes. And refugees from New York and the socialist Northeast have helped to transform Florida from a conservative stronghold into a state that’s almost evenly divided between red and blue political cultures.