Nation of Beancounters

Observation regarding the US political economy or economic polity, whichever it is

Posted in Uncategorized by Navin Kumar on September 25, 2012

I don’t follow the US election. But as a part of a bet I did start following Obama’s re-election odds on intrade.com. Between the beginning of this year and now, he’s gone from less than 50% to over 70%, a huge bump coming the last week or so, perhaps because of with Romney’s ‘makers vs takers’ gaffe:

‘Price’ here reflects the odds of winning. A price of ’65’ means the market thinks that Obama has a 65% chance of winning. If you’re more optimistic, you buy and hope the price goes to 1. If you’re pessimistic, you sell and hope it closes at 0. Interestingly, I also found this contract on the likelyhood of a recession in the US in 2013:

So just as Obama’s chance of winning rises, so does the economy’s prospects. Interpretations:

1. It’s just a coincidence.

2. The economy has unexpectedly improved in the last few weeks, boosting Obama’s re-election chances. I haven’t heard of any improvements, although this may just show that the players at intrade are smarter or better informed.

3. Obama’s much better for the economy than Romney.

4. Neither is particularly better, but uncertainty over who would come into power was really messing the economy.

5. Obama is worse, but the uncertainty was even more so.

6. Neither is particularly better, but the players at intrade erroneously think Obama is.

7. Uncertainity isn’t a problem, but the players at intrade erroneously think so.

8. Obama is worse, but the the players at intrade erroneously don’t think so.

My intuition says #3, followed by #1. Another NoBC intrade post can be found here.

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