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The Problem With Political Betting Markets

Political junkies should check out the always excellent David Leonhardt's NYT piece on the political betting markets. Leonhardt accurately notes the main problem with the markets, which is that they give long-shots too much of a chance:

Mr. Ravitch has made a nice profit betting against Ron Paul, the libertarian who late last year was, amazingly, given almost a 10 percent chance of becoming the Republican nominee. “If you asked anyone in politics whether there was ever, at any point, a 10 percent chance of Ron Paul being the nominee,” Mr. Ravitch said, without finishing the sentence. “That sort of makes my case for me.”

In a more liquid market, Mr. Paul’s small band of intense supporters wouldn’t be able to affect his price. On Intrade, they can. Along similar lines, Al Gore is now given an 11 percent chance of being the Democratic vice-presidential nominee, which Mr. Ravitch considers silly.

Remember, there was a period a few months ago when Paul was considered to have a better chance at the nomination than McCain! Anyway, read the whole thing.

--Isaac Chotiner