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Intrade vs. MSM: Sotomayor Nomination
What tells you more about the Sotomayor nomination, all of the chatter and debate in the MSM over her "controversial" remarks or the single number from intrade: bids at 98,5, i.e. an estimated probability of confirmation of 98.5% (as of July 14, 11:12 pm EST)?
Loyal-reader Jim Ward writes:
Do reporters and news Agencies even know to check the betting markets? Or do they just ignore it, because “X sure to happen, nothing to see” is not a story? Or they don’t want to seem biased, and have to provide 2 sides to every story...Why not just throw Intrade odds into every story as an addendum?
I'm actually amazed at how far prediciton markets have come. In Entrepreneurial Economics I wrote:
...perhaps one day, instead of quoting an expert, the New York Times editorial section will refer to the latest quote on "health care plan A" available in the business pages.
At the time, I didn't think that day would be just a few years in the future. Admittedly, we are not quite there yet but during the last election it was common for media outlets to refer to the prediction markets. I think this trend will continue. Can futarchy be far behind?
Posted by Alex Tabarrok on July 14, 2009 at 07:05 AM in Books, Current Affairs, Economics, Political Science | Permalink
Comments
Both tell you this country is in trouble.
Posted by: Andrew at Jul 14, 2009 7:12:01 AM
Sadly, Tradesports went out of business. Which is too bad because although I don't bet, using the $1.00 odds return system, it was always easy to figure out probabilities on my favorite teams.
Posted by: thehova at Jul 14, 2009 7:28:06 AM
If it ever happens, I bet ($0.90:$1.00) that media will attach clueless "expertly" commentaries to movement of prediction markets, just as it tries to expertly explain mostly random noise of daily changes in stock prices now.
Posted by: Tomasz Wegrzanowski at Jul 14, 2009 7:47:02 AM
The media will probably report the news as "95 dollars was bet today on Justice Sotomayor."
It irks me to no end that they report "Dow climbed 2 points today." That is non-news in non-informative terms. First, of all, the Dow? Secondly, climbed? Thirdly, sure, I could fire up a couple brain cells to figure out that amounts to 0.025%. Lastly, if it "climbed" that much every day, it would be below trend growth for the year. Why?!? Why!?!
Posted by: Andrew at Jul 14, 2009 8:15:42 AM
I agree that hopefully soon, publications will include wagering data as a prediction method. But I don't think that a 98.5% certainty of Judge Sotomayor's confirmation (or even a 99.9% one) should preclude end-to-end coverage of the confirmation hearings. Magnitude matters, yeah?
I'm pretty sure somewhere in the U.S., there is a similarly near-certain event occurring, which would yield a 98.5% probability of success given enough volume to be meaningful. Something like "Assistant Principal of East Meadow Middle School to Be Promoted to Principal" being the bet.
And I'm also pretty sure that there is a "formality" in the way, and the local newspaper is covering it: "Board of Education Holding Open Forum Tonight To Discuss Promotion of Junior High School Assistant Principal Smith to Principal." But the New York Times, WaPo, etc., aren't touching that story.
But the topic makes coverage necessary to the publisher's constituency. 99.9% sure that Billy will take a bath before bed? Not important. 99.9% sure that the stop light at 42nd and 5th will work? Same. The former is boring altogether; the latter is only interesting when it fails.
But in the context of Sotomayor and the assistant principal, that 1.5% (or even 0.1%) matters because of the sheer magnitude of the event. If Sotomayor is *not* confirmed, and the Times, Post, etc. did *not* cover the hearings because hey, she was a virtual lock!, then they lose out, and so do we. Same with the principal, to that audience.
Posted by: Dan at Jul 14, 2009 9:15:54 AM
I haven't heard anybody anywhere suggest that she won't be confirmed, only that she shouldn't be.
Posted by: josh at Jul 14, 2009 9:21:33 AM
Tyler wrote:
I think this trend will continue. Can futarchy be far behind?
Why are we listening to all this chatter and debate from a GMU professor and his readers? Shouldn't you just tell us the Intrade odds of futarchy as of your writing this post?
Posted by: Bob Murphy at Jul 14, 2009 9:35:23 AM
Oops sorry I assumed it was Tyler writing; just saw it was Alex.
Posted by: Bob Murphy at Jul 14, 2009 9:36:48 AM
Yeah, while I have grave concerns about her decisions in Maloney v. Cuomo (2nd Amendment not incporated), Didden v. Village of Port Chester (even obviously pretextual eminent domain okay), and Ricci v. DeStefano, and the way in which in all three she failed to even address the arguments of the other side, I'm fairly certain she'll be confirmed.
Even if the Republican Senators were all rabid partisans and voted against her like Senator Obama voted against Roberts and Alito, she'd still be confirmed.
Posted by: John Thacker at Jul 14, 2009 10:06:03 AM
Not sure the tradesports odds tells us anything about what the coverage should look like.
Just because something is inevitable to happen does not make it non news, particularly if many people find the outcome offensive.
For instance I am sure at some point just before (and certainly just after) our invasion of Iraq the odds that we were going to invade would have been very high. Yet huge populations disagreed, was this non news?
Just because something is destined to happen does not make it not news worthy or make the criticisms of opponents less valid.
Posted by: eccdogg at Jul 14, 2009 10:42:17 AM
Even if the outcome is certain there can be important information to glean from the confirmation hearings and the surrounding hubbub, so it'd be wrong to ignore them. That said, as a member of the MSM myself, I would have no problem placing InTrade probabilities in all stories that could reasonably be benefited by such data.
Posted by: Barrett at Jul 14, 2009 10:42:46 AM
It is very likely that she will be confirmed. The real question is how much will the Republicans manage to expose the liberal orthodoxy on race, and how much outrage will ensue?
Posted by: PeterW at Jul 14, 2009 10:43:28 AM
Here is a series of possibilities.
1. The hearings are relevant to the future success of the Democratic Party or the Republican Party among various demographics: probably Latinos and possibly women and the legal profession.
2. Journalists feel obliged to report on something, anything, about an important event in the U.S. political process.
3. The hearings themselves are informative about the future behaviour of Judge Sotomayor in rulings.
4. Reporting only the prediction markets quote would be negligent if important information which materially changes the probability of Judge Sotomayor's nomination is ignored.
5. Low volume on the prediction markets implies an unreliable result in this case.
6. The prediction markets aren't informative about the probability beyond common sense, i.e. there are sixty Democrats and enough moderate Republicans.
Posted by: Millian at Jul 14, 2009 10:52:53 AM
Is it really that surprising that the MSM would report otherwise? Think about it; by covering the so-called 'controversy' they over-inflate the perception of uncertainty surrounding it. The higher the perceived information entropy of the outcome, the more viewers will tune in to try to update their levels of certainty by gluing their eyes to the screen. Or so the MSM's model goes.
From a profit-maximizing point of view it makes perfect sense - they're not providing any deep misinformation about the events in the event space - only misinformation (or no information) about the probability of the story unfolding the way it will to get more viewers. And because the MSM has no intelligent conception of probability, they think they're maintaining their journalistic integrity.
This has been a hallmark of television news for years, both national and local ("is your peanut butter KILLING YOU? Find out at 7"). It'd probably also explain why they WON'T simply post the betting market probability. No 'story,' no eyeballs.
Posted by: Hamilton Ulmer at Jul 14, 2009 10:56:27 AM
Don't focus on the "yes/no confirmation" bet. More interesting is the confirmation margin. There are bets on how many votes she get, and I see the best opportunity in betting against her getting 70+ votes to confirm. Yesterday, another anonymous gambler and I were one-upping each other on ask prices. I offered at 90, then someone else at 89.9, then someone else at 89, then someone at 89.9 then me at 89.8, while people were offering to buy at 85.
While I'm pretty sure she'll be confirmed, I can't see many Republicans going along, and there's a chance conservative Senate Democrats may vote no. Remember, since the confirmation is so secure, that allows Senators to cast symbolic votes.
Posted by: Silas Barta at Jul 14, 2009 11:27:41 AM
If you don't ignore prediction markets in your decision, they quickly become worthless.
Posted by: Doc Merlin at Jul 14, 2009 11:49:10 AM
Which MSM are you reading. Mine has the quote of some senator, unless you have a complete breakdown you will be confirmed. NYT makes it clear, it will be a formality.
I think msm knows it will be a breeze through, but deliberatly plays up controversy for all the usual reasons.
Posted by: JSIS at Jul 14, 2009 12:49:44 PM
I don't think the MSM is saying anything much different from Intrade. I haven't read anything that suggests there is any more than a very small chance she won't be confirmed.
The confirmation hearings, so far as I can tell, are mostly about Senators playing to their constituents, reassuring them how important they think certain issues are. That's why they mostly make speeches instead of really asking questions.
Posted by: Bernard Yomtov at Jul 14, 2009 12:59:09 PM
The whole idea of betting markets is that they are independent. By making them self-referential you end up with skewed analysis and a cascade/bubble of self-reinforcing news and analysis.
Yes, they become worthless if you check them and anchor on them before coming up with your assessment.
Posted by: Bruce at Jul 14, 2009 1:59:43 PM
Every nomination has become a contest of wills & ideologies. Can you imagine a white male even being nominated who had a record of comments mirroring hers? What were the disqualifying factors for Al Gonzales? (The first Latin nominee to the court.)
These hearings are important because they shape the debate and lay the groundwork for what happens next. Every hear of Lino Gralia? He was the one that Reagan wanted to nominate, instead of Bork. Bork's defeat meant that the more conservative Gralia was not even considered. In this case, the numbers mean that the nomination itself is assured. However, the fallout from the hearing will affect the entire Obama program.
Posted by: Right Wing-nut at Jul 14, 2009 2:01:27 PM
To tell the truth, if the MSM relied too much on Intrade, it would be bad journalism due to the ridiculously thin trading volumes. Even if you believe the market price to be off, the opportunity cost of entering the market would cancel out the small profit that you might be able to make, given that the thin markets will give you market power to quickly push the price to your expected value of the outcome.
Posted by: liberalarts at Jul 14, 2009 3:04:01 PM
Volume and liquidity are also two things to consider. If you bet $100 either way and the number moves significantly, it isn't a great indicator.
Posted by: borninlasvegas at Jul 14, 2009 7:53:00 PM
If the traders in prediction markets weren't reading MSM, how would they determine the prices/odds/wager they use in the prediction market?
A Ouija board?
As noted previously, this is all about the posturing and positioning. I believe Sessions stated yesterday "unless you have a melt down, you will be confirmed." He then proceeded to politely skewer and misrepresent her statements, in the sort of political hockey checking of an irrelevant opponent merely to send the message he is the enforcer and he's gunning for Obama's next player.
I wonder is Alex watches a game when the odds are totally against one team? If so, why? Worse, wouldn't watching the sports highlight of the game where the winner was a virtual lock, and the highlight in introduced by "and in going down to defeat, the quarterback threw these three interceptions, and after the game said this 'I had a bad night and they took every advantage'"
Posted by: mulp at Jul 15, 2009 12:33:51 AM
.
You fail to grasp the mission of the Media Formerly Known As Mainstream: They manufacture genuine artificial news & views, they don't report on actual existing news & views.
See, I can do it too: Sessions to Sotomayor: "DO YAWL HAVE ANY NIGRA BLOOD?"
Except mine is closer to the actual subtext. And intentionally funny. I hope.
.
Posted by: cosanostradamus at Jul 16, 2009 10:35:24 PM
The Economist was one of the earliest publications that started using tradesports quite regularly.
Posted by: mkamdar at Jul 19, 2009 12:17:04 PM
