Wednesday, June 11, 2008

Political News from the Prediction Markets

Intrade has some interesting things to say to political junkies. According to the prediction market, the hot VP options right now are:


These folks are notable because they are ranking in the double digits, as of yet no one is more likely to win than the field (someone yet to be named). But unless some dramatic news story erupts (a certainty in politics), support will probably gravitate around one of these early market leaders.

Another important piece of political information you can get from these markets is perhaps more interesting: what will the electoral college breakdown be for the election?

If the markets are perfectly accurate (an unlikely scenario), then the electoral count will be 306 Obama over McCain's 232. That's unlikely because a lot of these states are really just too close to call. That leads into the next thing the markets can tell us: what are the potential battleground states? The following states are the closest, and they are states the Republicans would be wise to fight for:
  • New Hampshire (4 electoral votes): 50.1% Dem, 46% Rep
  • New Mexico (5): 60.1% Dem, 34% Rep
  • Ohio (20): 60.5% Dem, 39% Rep
  • Virginia (13): 45.5% Dem, 45% Rep
To win, the Republicans need Virginia, Ohio and New Mexico. (Before New Mexico, Obama has 273 and McCain only 265, NH just brings it to a tie).

Meanwhile, they would have to keep the Democrats from picking up:
  • Missouri (11): 39% Dem, 55% Rep, or
  • Nevada (5): 48.5% Dem, 50.5% Rep
Any two of these three makes the gap all but impossible to close, so I would expect heavy campaigning in Nevada this election. I know Richardson is essentially off the list of possible VPs, as EP said over lunch, because "he lacks any charisma." But if Richardson could remotely strengthen Obama in the Southwestern states of Nevada and New Mexico, he's suddenly a really strong VP for the ticket. I know party balancing went out the window in 1992, but balancing was a smart idea for a long time because it's just very hard for smart people to throw away a sure shot at the presidency.

Of course, it's almost a sure thing for Obama if he just wins any one of the above 6 states. The probability of that happening is somewhere over 95%, if those odds above are remotely accurate. So maybe he can snag Jeremiah Wright as VP, and it wouldn't even matter.

Sources: Intrade State By State Presidential Election; Electoral College Calculators found here or here.

UPDATE: These statistical trends are to be expected for correlated probabilities. This is to say that if McCain wins one of these states, he has a better chance of winning the others (a rise in his nation-wide popularity due to a naton-wide media event, say). I foolishly overlooked this explanation, which explains all the data. I was tipped off on this in a kind email from the folks at the Freakonomics Blog. Thanks, Justin Wolfers.