Tuesday, July 20, 2004
As I've discussed in previous posts, sites like Tradesports allow the masses to bet on political and other events in a futures-market-like format. The result is that contract prices can be read as market-based probabilities of something happening, which, for a contract with decent trading volume, seems likely to be superior to pundit-based probabilities (and, trust me Tom, it's far better than any econometric-based probability).
Anyway, the probability of Bush winning the election has in the past traded as high as about 70%, in early January, but has been on the decline since. For the last few weeks, it's been fluctuating between 50.1 and 53.0, never reaching that hypothetical point where the world thinks Kerry has exactly as much chance of winning as Bush does. But, today, I wake up and there it is at 50.0.
I recognize that this probably all sounds boring and that you have likely ceased reading this post by now, but you have no idea how excited this makes me. I have an extremely difficult time distinguishing when I'm being pessimistic and when I'm being rational, as the two in my experience are substantially correlated. So while I've wanted to believe that Kerry was going to win in November, I've always tempered this with the morose belief that, well, it probably wasn't actually going to happen. But, now, I can beat back the forces of pessimism by saying that if the market says it's a coin-toss, it's irrational for me to be so gloomy.
It doesn't take an avatar of probability theory to realize that this is making way too much out of a difference between 50.1% and 50.0%, but, I have very exacting criteria for when I will ever allow myself to feel even the twingiest twinge of hope in the actions of the American electorate.
But, even as I write this, the last contract price is back up to 50.3. Welcome back, despair!*
* Incidentally, despair always enters my body through my toes. The best way I can describe the feeling is that it's like the RV had commenced being flooded by cold water. I have no idea why. I once took a medititation class--hard to believe, I know, except for the part where I dropped out--where a key part of the instruction was that you were supposed to breathe through your toe. Right before saying the breathe-out-of-your-toe part, the instructor took pains to warn the class that parts of the instructions were more metaphorical than "in a strict scientific sense", which seemed like it was directed at me since I had freely admitted in the pre-enrollment interview that I was probably going to have trouble taking the class seriously and promised to try hard never to burst into my giggling-snort-thing and distract the rest of the class. But, when she told us to breathe out of our toe, I was probably less fazed by its anatomical impossibility since I was already accustomed to thinking of them as My Orifice of Despair.