Polls and punters
I’ve written a few times about the idea that betting markets provide a more accurate guide to political outcomes than do polls or ‘expert’ judgements or statistical models (which usually incorporate polls along with economic and other data). The problem is that, close to an election, they all tend to converge. So, the best time to do a comparison is early in the election cycle. Right now there’s quite a sharp contrast. The polls have had the (federal) ALP and LNP just about level for months, but the betting markets have the LNP as strong favorites.
One possible explanation is that governments generally do worse in polls than in election, so that the polls underestimate the government’s support. I’ve heard this claimed, but never seen any systematic evidence to support it. Another possibility is that market participants know something that’s not reflected in the polls. I’m sceptical on this.
The final possibility is that betting markets this far out from the election are thin and inefficient. If that’s right, then the odds for Labor look very favorable. I’m not going to bet myself (I did OK on my one foray into the US Republican primaries, but the hassle involved was too much to make it worthwhile), and I’m not giving betting advice.
Still, I’d be interested in responses from those among my fellow economists who’ve claimed efficiency properties for betting markets. I guess Andrew Leigh is precluded from commenting, and Justin Wolfers is a long way from the action in Oz, but I’m sure there must be others willing to jump in