Polls vs punters: an explanation?

Nearly a month ago, I noticed that betting markets were giving long odds (3.5 to 1) against a Labor win in the (presumably) forthcoming election. That would be a good bet if you thought Labor had a better than 22 per cent (1/(1+3.5)) chance of winning. Given that the polls were pretty much tied, I thought those were good odds.

Since then, the polls have moved steadily in Labor’s favor to the point where their lead is just about statistically significant in a meta-analysis (add lots of independent samples and the margin of error declines). At the same time, the government has barely had a good news day. Their one big hit, the kerfuffle about 10-year projections of tobacco tax revenue (a bipartisan policy) blew up in their faces a few days later when Turnbull and Morrison couldn’t/wouldn’t state the cost of their company tax plan. It seems that they had the $50 billion number ready, but had hit on the clever plan of having the Treasury announce it today, just before Parliament is dissolved so that Labor couldn’t … I’m not sure what (cue underpants gnomes). As a result of all this, the pundits, who dismissed the idea of a Labor win as implausible until very recently, are now coming around to the idea

Yet despite all this, the odds are barely unchanged at 3.3 to 1. That’s good for anyone who gives Labor a 23 per cent chance. There are a few possible explanations of this

(a) The idea that betting markets are highly rational aggregators of information is wrong
(b) Those betting in these markets have inside information or else insights unavailable to the rest of us.
(c) The markets don’t really exist in any substantial form and are just a publicity stunt for the bookmakers. That’s the argument of this 2013 article by Michael West, whom I’ve usually found to be sensible and reliable.

35 thoughts on “Polls vs punters: an explanation?

  1. @Donald Oats

    I don’t like the idea of any public purse funding of political parties. The way to go would be to permit only personal donations, not company or corporate donations. In addition, personal donations should be limited to a maximum of $100 per person per year. Fund raising events would also need rules and regulations. I am not sure what rules should be put in place for that but they would have to prevent unusually generous payments seeking to circumvent personal donation rules.

    Another way to approach it would be that company and corporate donations to political parties could attract a punitive 1,000 % tax.

  2. BilB, I don’t know the rules of the betting game. Under some rules your suggestion is conceivable.

  3. Michael West reports the unwillingness of the bookies to take bets for large sums of money. That’s not the same thing as not taking bets at all. Peter Brent at his Mumble blog has more than once recorded bets he’s placed (and so, presumably, had accepted). If they’re only taking small bets, I’m not sure how much that reduces their value as evidence.

  4. Ernestine, yesterday I floated the following notion to my economist friend expecting a resounding verbal thumping but got the opposite.

    Given that our inflation is heading to near zero on the back of stalled income growth driven weak consumer spending and the Reserve Bank is going to great lengths to prevent this while also attempting to hold our dollar low, it occurs to me that, following the evidence of many failed economies, the fast turnaround for this situation is for the Reserve Bank to print a measured amount of money for the government to disburse, not through banks, but through carefully targeted direct stimulus programmes such as regional development incentives, employment based environmental restitution programmes, and youth entrepreneurial programmes.

    I’m sure you will see some fish hooks in there, what might they be?

  5. Surely there’s also (d), that the bookmaker thinks, without the need for inside knowledge, that the 2 July poll will favour the Coalition more than current polls

  6. BilB @29, I can’t reply on this thread because, I am sure you agree, the content is not obviously relevant to the topic of the thread. There is a new Sandpit. If you wish, repost on the Sandpit and we can have a conversation.

  7. what about the fourth explanation – the natural electoral map skew in favour of the coalition – they need to lose by at least 51:49 for labor to have a chance

  8. @Kevin Cox
    That’s my strategy. I put $50 on Labor when they were 4.5:1 (plus SportsBet gave me another $50 of their money to play with). If the Libs get close to even money, I’ll put $50 on them.

  9. Maybe as a reaction to today’s news of Chris Brown’s dumping as the ALP candidate for Fremantle which has featured prominently throughout the MSM and fair enough too. Those odds are definitely attractive.

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