Politics

Manipulated Markets?

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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.

Wake Up and Smell the Futures

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Conservative-blogger triumphalism about Bush’s most recent debate performance ignores warnings from the Intrade and Iowa online political futures markets, which show the presidential race tightening. I hate to write this, because I want Bush to win and until recently I thought he would probably win in a landslide. Now I’m less confident.

Tom Smith has some interesting speculations here and here about why Bush’s re-election odds seem to have slipped. He thinks that forthrightly moralistic anti-abortion talk alienates liberal swing-voters. Could be. Unfortunately, we are not likely to know for sure until well after the election.

Bush’s fortunes may rebound, he may win big, and anyway I do not think that he should compromise his strongly-held positions to appeal to marginal voters. But I would feel more comfortable if his numbers were higher.

Australia

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Australian results. Jericho rejoices as does Chrenkoff. See O’Sullivan’s warm regard for Australia. Evidently an insufficient number of voters were convinced that the Bali bombing was Howard’s fault. Of course, Bin Laden had always had other motives, including his complaints about Timor. (And then there was the awkward fact that Bali was bombed before the “unilateral” – with Australia – invasion of Iraq.) (Updated.)

VP Debate

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One of the first questions that came to mind is: “Would you buy a used car from this man?”

I’m not kidding.

Cheney came across like the CEO of an innovative, well run company, giving a talk at a conference of business-school professors. Edwards came across like a PI lawyer arguing a slip-and-fall case. I think Cheney was much better on substance, but even on style I don’t see why anyone wouldn’t prefer Cheney.

OTOH, the reason why used-car salesmen and some lawyers are known as slick, fast talkers is that that style is effective. I suspect that it may be disproportionately effective on the kind of voter who is still undecided one month before one of the most important presidential elections in recent history.

The Libertarian Gap

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(crossposted on Flit(TM))

The Gap, or more formally the Non-Integrating Gap, is a concept at the core of Dr. Barnett’s The Pentagon’s New Map: War and Peace in the Twenty-First Century. But what is the Gap? This question comes to me every time I read a libertarian critic of the concept.

Gap countries are, by definition disconnected from the global rulesets that manage the Core, those states where a disturbingly large proportion of the world wants to get into. I say disturbingly because, all things being equal, there is really no reason for people socially acculturated and biologically specialized to warm climes to make their way in large numbers to nordic nations, but they do. Something pretty special must be attracting them while simultaneously repelling them from their ancient homelands. That something is clear after a bit of investigation, huge waves of horrifying violence interspersed with a daily brutality of individual denigration and lack of the normal rights to live out their lives in control of their own destiny.

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