<script language="JavaScript1.1" src="http://images.ads.fairfax.com.au/cui/F2NEWS.js"></script>

<script language="JavaScript1.1" src="http://campaigns.f2.com.au/js.ng/Params.richmedia=yes&adspace=468x60&loc=top&site=newsstore&cat=f2"></script>
<noscript><a href="http://campaigns.f2.com.au/click.ng/Params.richmedia=yes&adspace=468x60&loc=top&site=newsstore&cat=f2"><img src="http://campaigns.f2.com.au/image.ng/Params.richmedia=yes&adspace=468x60&loc=top&site=newsstore&cat=f2"></a></noscript>

f2 home   >   News Store
>   News Article

Quick Search
| Advanced Search
| Company Search
| Browse Archives

Lies and statistics

Author: Justin Wolfers and Andrew Leigh
Date:
19/12/2003 19:24:00
Words: 593
Publication: Financial
Review
Section: Comment Opinion
Page: 71
Source:
AFRBreaking

How likely is Mark Latham to win the next election? Early polls
point to a real chance of success; various pundits describe him as a
risk.

To parse out honeymoon effects from real effects, we need a more
reliable indicator than the polls - one that helps reveal Latham's
true potential in the 2004 election.

In an article published in the Australian Journal of Political
Science last year, we argued that betting markets provide such
an indicator. In the 2001 federal election, the daily odds posted by
Centrebet, Australia's largest private bookmaker, predicted voting
patterns far better than any pollster.

By forcing punters to put their money where their mouth is, we
learn their true feelings. And with powerful financial incentives in
play, the betting market aggregates information across the nation's
political pundits, insiders and informed gamblers.

According to the betting market, Latham was a sound choice for
the ALP. That Simon Crean's number was up was clearly reflected in
the odds: he had drifted in the betting, with the probability of a
Labor victory in the next election falling to 28 per cent just
before his resignation.

These odds remained unchanged when Crean announced his
resignation, indicating that the ABC slogan ("Anybody But Crean")
was not supported by the betting market.

Following Latham's elevation to the leadership, many press
pundits initially thought that the ALP caucus had pulled the wrong
rein - so too did the bookies, letting Labor's odds drift further to
a 25 per cent chance of winning.

But it seems that the punters disagreed, and there has been
nearly $20,000 bet on Labor since, with the latest odds of a Latham
prime ministership improving to 33per cent (about the same as John
Howard's odds six months before the 2001 election).

Centrebet's Gerard Daffy admitted that "we got it wrong",
suggesting that Latham "has been fairly impressive to date".

The betting odds can also suggest what would have happened under
Kim Beazley. If the pre-ballot probability of a Labor win (28 per
cent) reflected an average of the election-winning abilities of
candidates Beazley and Latham, we can infer from the fact that, with
Latham as leader, Labor is a 33 per cent chance, and that Beazley
would have been about a 23 per cent shot.

According to the punters, the Labor caucus backed the more likely
winner.

As for opinion polls, our research suggests that long-range polls
are generally so inaccurate that they are best ignored.

While polls taken a year before an election have predicted vote
shares with an average error of about 5 percentage points, simply
guessing that previous election's results will recur is about as
accurate, and guessing that the election will be close actually
yields more accurate predictions.

So if you want to predict the outcome of the next federal
election, remember, the current favourite in the election
forecasting stakes isn't the polls - it's the bookies.

Dr Justin Wolfers is an
assistant professor of political economy at Stanford Business
School.

Andrew Leigh is a PhD student at Harvard's Kennedy School of
Government.

Back
to Search Results

Advertise
with Us | f2 Network Privacy Policy | Conditions of
Use | Member Agreement
© 2003 f2 Australia & New Zealand
Ltd.