Bookmakers must make an accurate line or they lose — period.”
“In presidential races such as 1896, 1900, 1904, 1916, and 1924, the New York Times, Sun, and World provided nearly daily [betting] quotes from early October until Election Day,” write Rhode and Strumpf.
He didn’t hesitate. “I watch CNN too, out of the corner of an eye, but it’s not necessary.”
With University of Arizona economist Paul Rhode, Strumpf authored a study — “Historical Presidential Betting Markets,” published in Journal of Economic Perspectives — that demonstrates that the betting market’s forecasting superiority is nothing new. “When scientific polls came along, newspapers had something to report other than markets they were oftentimes uncomfortable with.”
Relative to the polls, the betting markets have to think hard about what they’re saying since they are putting their money at stake. Several newer off-shore sites are more lenient, however. Nor do polls take into account how each state’s secretary of state factors in, or systems within a state designed to eliminate voters; Jimmy the Greek called these ‘the intangibles.’”
It’s still illegal for United States citizens to wager on the presidential election; Betfair and Intrade try to bar American bettors. And the gamblers might have had a perfect record had the Curb Market stayed open long enough to take into account late-breaking news from the West.
Maloney is a youthful fifty-two, with alert, light blue eyes and a cheerful demeanor. Probably hundreds of fifth-grade social studies students correctly predicted Bush’s margin of victory to a decimal place, right?
For a second opinion I went to Ray Paulick, who was a protégé of notorious oddsmaker “Jimmy The Greek” before becoming a handicapper for the Daily Racing Form.
Recently I was in Kentucky, reporting on horseracing for Garden & Gun. Accordingly little data exists from 1940 through 1984, though it’s enough that Strumpf concludes gamblers were more accurate than the pollsters in that period too. I have reason to believe he’s a sort of mathematical genius. A John McCain win would pay $6.80 for every dollar bet. A pollster can still bill for an inaccurate poll. Betting persisted, but in the shadows. He’s in no way a Damon Runyon character. Now he’s editor of the thoroughbred industry insiders’ must-read Paulick Report.
Responding to such discomfort, state laws increasingly limited organized election betting. Polls don’t. A “whale” (bettor of thousands of dollars per day) I interviewed, Mike Maloney, successfully traded securities, options and futures, but chose to go to the track every day instead because it offered him a greater challenge. “They take voter fraud into their metrics. “Gamblers have more experience with cheaters,” he said. He doesn’t chomp on a cigar.
The advent of polls marked the end of an era.
Michael Robb, political expert for the British bookmaking site Betfair.com, lets the record speak for itself: Halfway through Election Day in 2004, when a CNN poll showed Kerry taking the lead, Betfair had Bush with a 91% chance to win.. Betting on political outcomes often drew huge crowds to Wall Street and exceeded trading in stocks and bonds. People may say what is politically correct, the questions may be leading, the pollsters may be biased.
The papers’ sources were betting firms, which had men present at speeches made by the candidates in order to make “unbiased reports of the psychological reactions of the audiences.”
Koleman Strumpf, a University of Kansas economics professor who tracks betting trends, believes wagering is an incomparable barometer of an election.
Of course that’s just one election.
Currently, Betfair lists Barack Obama as an overwhelming 1-7 favorite (paying $8 for a $7 winning bet). “Polls can be inaccurate. Among the reasons he gave me:
The advent of internet wagering offers a clearer picture: “Since 1988, the betting markets have definitely been more accurate,” Strumpf said.
As did rival site Intrade. “Prior to Gallup’s introduction in 1936, newspapers had little else to report about the election horserace other than the betting markets,” Strumpf said. Also polls tend to reflect what people are thinking at a given moment, versus a forecast of what will happen on election day — post-convention bounces, for instance.
The multi-billion dollar online gaming industry offers evidence that Maloney and Paulick are, as usual, on the money.
“On Election Night I’ll look at the movement on the betting sites to see what’s going on,” Strumpf says.
Betfair also had all 50 states right in 2004.
They begin with America’s long history of wagering on political outcomes, which boomed in the 1880s when betting moved from poolrooms to the Curb Exchange, the predecessor to the American Stock Exchange. “There are many, many, many more factors to consider in betting horseraces,” he said.
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I asked him: “Do you think handicappers can forecast the outcome of the presidential election better than polls?”
In the fifteen elections between 1884 and 1940, the betting firms were wrong just once, in 1916, when Wilson upset Hughes
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