Halfway horse-race commentary

Four weeks in, and with the two parties neck and neck, this ought to be an exciting point in the election campaign. But thanks to Turnbull’s trickiness* of calling a double dissolution requiring eight weeks of campaigning, it’s anything but. Still, it seems like a good time for some horse race commentary, partly repeating what I’ve said before.

* First, taking the horse race analogy seriously, the behavior of betting markets is as if two horses had run neck and neck in a dozen minor races, but one was still the overwhelming favorite for the big done. To spell this out, the polls have been virtually level pegging for many weeks, but the betting markets have barely moved. On past history, the two will converge by election day. If, as I expect, that means the betting odds will move towards the poll, this campaign will count as a major piece of evidence against the idea that markets are good aggregators of knowledge. And, of course, the converse is true

* Second, the likelihood of a deliberative Parliament, with neither major party having a tame majority is increasing all the time. That’s a good thing in the abstract; how good depends on whose votes turn out to be critical

* Third, the one consistent trend has been the precipitous fall in Malcolm Turnbull’s standing across a wide range of measures. Whatever happens on election day (short of a surprise LNP landslide), I don’t expect Turnbull to be PM a year from now.

* To be sure, Julia Gillard’s attempt to hold on to her leadership by calling an election eight months in advance makes Turnbull look moderate. But that was an absurdity doomed to fail, as it did.

49 thoughts on “Halfway horse-race commentary

  1. “It seems to be accepted that Turnbull will scrape back in.”

    zoot, I think people like Mark Kenny in the SMH want to suggest that’s the inevitable outcome.

    Swinging voters want to pick a winner. Convince them Labor has no real chance, even though they’ve run a decent campaign, and they’re less likely to change their vote. That’s pretty much the motivation of his last couple of articles to my mind.

    In the real world, at the half way mark…

    Turnbull looks shitty and tired.

    Shorten looks like he’s just warming up.

    I don’t see any reason at this stage to suggest Labor can’t win the election.

    For those above who think the “odds” tell the story three weeks out:

    Queensland Election 2015: Odds shorten on LNP victory

  2. @Moz of Yarramulla

    @Ben

    Notwithstanding policy gaps, they have, I consider, a very good website. They may well have set the benchmark. Moz and Ben they asked for criticism, I hope you took up the offer. As for their idea of an new constructed city, with the proposed name Turing – I am not sure about wanting to live there – nonetheless it reflects that they are positive, not negative in their policy formation. Presumably, for example, if elected to the Senate, their representative could describe megadata.

  3. Half way in an election race between two hobbled and blinkered horses, ridden by two jockeys named “Captured By Factions’.

    Riveting…

  4. Comment in moderation.

    I’ll just add, if you look at the ABC and Fairfax tabloids websites today, you can see there’s virtually no Australian election coverage on their home pages.

    That’s not accidental.

  5. Punter @21, you’re right that I was loose in my use of punting terms. Though note even in a two horse race the favourite need not be odds on – that depends on the size of the house’s vig. And $1.20 is nowhere near an unbackable favourite – plenty of people will be putting money down at those odds.

    But on the substance of the 1998 election, I still think it was the sitting member effect that mattered. One Nation in fact improved Howard’s vote – like the DLP it was a way that some Labor-inclined voters ended up voting via preferences for the tories – but it still wasn’t enough to give him a majority of votes.

  6. @derrida derider

    Though note even in a two horse race the favourite need not be odds on – that depends on the size of the house’s vig.

    You’ve got it the wrong way around. In a two horse race, the favourite is always odds-on, but if the vig is big enough, both horses could be odds-on. This happens often with betting on football games between two roughly equally matched teams.

    As for whether $1.20 is “unbackable”, sure, plenty of people will be putting money down. This is why bookmakers are rich, and the term “mug punter” was invented. It’s just not a value-for-money bet.

    However, I don’t want to imply that political betting markets are infallible. You can get $2.25 on Leave to win the Brexit referendum, with Remain at $1.62. Yet Leave is far ahead in the opinion polls. Somebody is going to end up very wrong.

  7. dd, punter is right on this note at least.

    The favourite is always odds-on in a two horse race. It’s the only way for the bookmaker to prevent arbitrage from occurring.

    ie. if they offered a return of >100% on both parties, you’d simply bet on both parties.

  8. The average guy would not know the odds so it is easy to challenge them with :”Labour has no chance” until someones says “Wanna bet”. You might get away with an implicit even money bet or even say giving 2 to 1. You then lay off a bit of the proceeds at $4 to cover a Labour win and pocket the rest. Beats working!

  9. @Mpower

    Actually, that’s still work. And you are going to have a lay a lot of little bets (which is all you will get) to clear say $20 an hour for 40 hours to make a little more than a minimum wage. Laying off “a bit” will be the tax you pay when you don’t pay tax.

    Footnote: I said it’s “work”. I didn’t say it’s “productive work”.

  10. John Quiggan, At this point in the election race the media is on ‘who can be trusted to bring the deficit back to surplus?’. I gather you are a critic of MMT. Why?

  11. @Ikonoclast
    David Walsh made what he called advantage betting into highly productive work. My example was more about male bravado pub betting which is more about egos than money.

  12. Skimming money from the losings of the stupid, the poor and the desperate is “highly productive work”?

  13. Julia, old fashioned mainstream neoclassicists like John (and I) agree with the MMTers that in current circumstances deficit fetishism is both absurd and harmful; in Australia as much as elsewhere the gap between the bipartisan political narrative and what most of the academic specialists are saying is a chasm. The right election question should be “who can be trusted to get growth back so the deficit automatically shrinks?”.

    In current circumstances the differences between modern Keynesians and the MMTers are largely theological (on the nature and purpose of money). The practical differences arise in how to keep the good times going, not in how to get past the tough times.

  14. @derrida derider

    Interesting comments. I agree with most.

    1. I am not sure J.Q. would call himself a “neoclassicist”. In economics isn’t the term “neoclassical”? In any case I don’t think J.Q. would call himself a “neoclassical” either. He might call himself “neo-Keynesian” but I am not even sure about that.

    2. “John (and I) agree with the MMTers that in current circumstances deficit fetishism is both absurd and harmful.” I also agree strongly with that.

    3. “… in Australia as much as elsewhere the gap between the bipartisan political narrative and what most of the academic specialists are saying is a chasm.” I agree.

    4. “In current circumstances the differences between modern Keynesians and the MMTers are largely theological…” I had a laugh at that way of putting it and have to agree.

    In relation to point 4, I developed a straightforward philosophical-logical argument demonstrating that modern Keynesians and the MMTers are really saying the same thing about modern fiat money. To give a simplistic mathematical analogy, I essentially demonstrated that one school was saying that x = +1 and the other school was saying x = – (-1). The inter-school “argument” about taxes and funding of expenditure essentially reduces to that absurdity so it is a non-argument. Strangely, each side is strongly wedded to telling their narrative of the basic logic their way and imagining (in some cases) that they oppose each other.

    I gave up on both schools some time ago after passing through infatuations with both. This is not to say they are wrong about fiat currency. Indeed both schools understand fiat currency and simply tell the story (of the money cycle) from opposite ends. Keynesianism is useful as macroeconomics of the extant system (really existing mixed economy capitalism) but it remains unable to make a complete analysis and critique of the capitalist political economy in total. I can’t go into the reasons here or my post will get far too long. MMT is limited to modern monetary theory as its name states. MMT neither attempts microeconomics so far as I know (which might be a good thing actually), nor critiques capitalist institutional economics beyond extant mixed economy institutions and practices UNLESS it also imports Marxist, Marxian, Veblenian or other left critiques.

  15. In my last phrases in post 38 above I should have written:

    “beyond technical analysis of extant mixed economy institutions and practices and their possibilities UNLESS it also imports Marxist, Marxian, Veblenian or other left critiques.”

  16. @Ikonoclast
    I’m curious about the harmful implications of MMT and the mechanisms that produce that harm. I’m guessing inflation would be a primary concern with economies that rely a lot on imports? Anyway, off topic for this thread, but it’s something that I’ve often wondered about which can hopefully be explained in a future more relevant topic.

  17. @Troy Prideaux

    Yes we need a sandpit. I yearn for the “old days” when J.Q. put up, every week, a Monday Message Board, A Sandpit (for idee fixes and long arguments) and Weekend Reflections for long (hopefully) well thought out pieces. That format made J.Q.’s blog nearly unique so far as I could find.

    Of course, that’s asking for a lot and J.Q.’s intentions, interests and even patience may have moved on considerably since the “old days”.

  18. @Tim Macknay

    Well, the Cossacks 3 game has been delayed about a year so that’s a hobby problem for me. If I go back to 4WD-ing and camping, which I did when I was young, then that’s a pretty bad outcome for my CO2 emissions, turning me into even more of a horrible environmental hypocrite than I am already. Blogging is relatively harmless. It’s not as addictive as RTS gaming and not as environmentally damaging as 4WD-ing. Of course, I can join the local library chess club and book club, and may do so, but that won’t be enough to keep me out of trouble… 😉

  19. Bill Mitchell reckons the federal government deficit needs to be between 1 and 1.5% of GDP larger than it is now in order close the output gap and achieve full employment with stable prices. Neither major party is offering a program that would come anywhere near satisfying the work desires of our people.

    I think that Bill Mitchell is Australia’s greatest economist, followed by Steven Keen and John Quiggin.

    http://bilbo.economicoutlook.net/blog/?p=33481

  20. @Nicholas

    Given that we are bordering on deflation, Bill Mitchell’s statement looks reasonable. Bill Mitchell has been annoyingly correct (from a neoclassical point of view) for a long time in his macroeconomic predictions. His warnings and predictions re private debt unsustainability, deflation, high unemployment, flat recovery and the complete unworkability of the EU currency union all have very good track records. He clearly knows a heck of a lot more than do neoclassical economists. Whether he knows more than Keynesians of various stripes is a moot point. However, he is not captured by the pressure to remain somewhere in the orthodox spectrum.

    The empirical evidence supports his theories so far as they go. As I said in a post above, MMT does not amount to a complete critique (or any critique) of mixed economy / capitalist political economy nor is it intended on its own to amount to such. It enables critiques of different macroeconomic settings within a mixed/capitalist economy with a fiat currency and that’s all. It appears to be preforming better at that task than any other non-Marxian macroeconomic theory.

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