Adrian Beaumont draws our attention to the betting markets and to the controversy that surrounds those markets relating to election outcomes. He suggests the betting markets follow polls and conventional wisdom, and questions whether they really predict election outcomes. In doing so he points to those (rare) instances when the markets have actually gotten the prediction wrong and by pointing to Peter Brent’s (here, here and here) thoughts on the issue.
I am an avid consumer of the betting markets and follow them quite closely. Not that I actually gamble beyond the office footy tipping competition (yes, I tip the market favourites each week). As an economist I find the prices set in the betting markets quite informative and useful.
Australia’s leading expert in the economics of betting markets is former ANU economics professor, and current ALP backbencher, Andrew Leigh. I suspect right now he is hoping that his own careful research into their predictive accuracy is wrong. I suspect, however, that he isn’t wrong and there will be a change of government on September 7.
Here is Andrew Leigh comparing his view of the world - and more importantly the empirical evidence - to Peter Brent’s view of the world.
To give a comparison of where we are compared to this stage of the election in 2010 I plot the prices (for the ALP in 2010 and the Coalition in 2013) taken from Centrebet.
Readers will recall that the ALP had a terrible campaign in 2010 with leaks and accusations of disunity and the like. But the probability of ALP victory never fell below 58 per cent (a price above $1.60) and the ALP did eventually form government. It was a close thing - but a probability of victory of 58 per cent suggests a close result. Overall, despite volatility in the betting market it did consistently point to an ALP victory in 2010.