Alex Tabarrok has a great piece on Marginal Revolution this morning explaining why he has confidence in the prediction markets. It is very difficult to argue, while predicting, against people who put their money on their predictions.
Like Alex, I’ve followed those markets closely, which is why I’ve been telling friends that I expect Donald Trump to win the presidential election and the Republicans to take the Senate.
I had my prediction machine that told me Trump was going to win. Granted, it was after polls closed in the eastern time zone, but it was only a short time after that.
If you follow the election, you know that one of the biggest issues is how Pennsylvania will go. If Donald Trump were to win Pennsylvania, he would likely win the general election. We all knew it would be close but we were also told it could take hours to count the Pennsylvania vote, as it did.
But New Jersey outranks Pennsylvania. I thought why not use New Jersey as a leading indicator of the vote in Pennsylvania? I said to my wife, while we were watching the results live, that if Donald Trump wins at least 4 points in the popular vote in New Jersey than he won against Biden in 2020, he will win Pennsylvania. Why? Because in 2020 Trump had lost Pennsylvania by only 1.2 percent. So with a gain of at least 4 points in New Jersey, relative to his share in 2020, he is likely to get at least a 1 point margin in Pennsylvania. We found out early that Trump beat his 2020 New Jersey percentage by about 5 percentage points. He ended up with a 2-point margin in Pennsylvania.
I am not saying that my method was better than the prediction markets: my method was clearly worse because it gave me results much later. But it was much better than sitting there in the evening PST or evening EDT, wondering, like millions of Americans, who will win.
Note: Well, I won $40 from a Facebook friend and $10 from a neighbor, betting that Trump would win. I made this bet 2 to 3 days before the election, and what gave me confidence were the prediction markets. These are the ones I follow.
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