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Tuesday, Nov 24, 2009
Are political gamblers conservative by nature? Do New Beetle owners care about the environment? Salon's readers share their opinions on recent Salon Technology & Business stories.
Sep 1, 2004 | [Read "Kerry's Iowa Problem," by Farhad Manjoo.]
I've been fascinated by Farhad Manjoo's columns about the Iowa Electronic Markets.
I think another reason Bush's share prices are higher than Kerry's is that there are single events that could make Bush absolutely win reelection, such as the capture of bin Laden or even a few strong reports on job growth before November.
There's really nothing similar that could bag this election for Kerry.
Also, the debates. Informed investors know how important these babies are. And they certainly remember that intelligence played no factor in who won in 2000. Bush kicked Gore's ass.
-- Joe Caucci
Farhad Manjoo surprisingly misses a major point on his coverage of the IEM as a predictive political tool. I would expect conservatives to be more likely to invest in the IEM, as they do with traditional "gambles" such as the stock market.
Supply and demand -- as conservative pro-Bush backers are more likely to be on the IEM, the demand for Bush is likely to be higher. Also the market then is more likely to track with changes in conservative news, such as Reagan's death. The cultural contexts in which many conservatives live are likely to provide a slight to moderate bias to their ability to judge true probabilities. This is true even if money is involved.
As a professional survey analyst, I would point out to readers that any normal survey is flawed because it asks for (mere) opinions, rather than reflecting something more serious from the respondent, such as actions or money. In theory the IEM or other similar venues will return better results because they reflect participants' actions. However, in practice, until someone demonstrates that in our polarizing rich-poor society the disadvantaged are just as likely to be gambling on political futures as the well-off, rather than trying to scrape by in their daily lives, I would rate the IEM as an exotic conservative toy.
-- Steve Robison
What the IEM seems to generate most is "cash cowards," not insight. To see this effect, you have to look no further than the IEM over the Democratic primaries. Kerry does well early, and then Howard Dean begins to surge -- but only well after he's gone up in the polls. When Dean falters in Iowa and New Hampshire, Kerry skyrockets on the IEM. But the IEM responds to these events, not predicts them.
The idea that the IEM, through the weight of numbers, has some great insight into the race, or that the participants are looking beyond their own noses, is hard to prove by the data.
-- Mark Sumner
The Iowa Electronic Markets currently overvalue at least one of the two candidates by a significant margin. The payout from one stock of each candidate is a buck (in either the winner-take-all market or in the "proportion of the popular vote that goes to one of the two candidates" market. The total price of those two stocks -- right now, as I type -- is currently $1.009 (for winner take all) or $0.999 (for fraction of the popular vote). This is pretty representative of what the prices have looked like for a while.
That means that if I give up a dollar today, I can expect, on average, just about a dollar in three months' time. I'd make a dime on $100 in the popular vote, or lose a dollar on $100 on the winner take all. That's actually a worse return than my checking account.
The people taking part in the IEM, on the whole, aren't a "wise crowd" like those investing in stocks (tech bubble, anyone?). They're just gamblers.
-- Chris Morling
