Firstly (as a Brit) I'm fairly disinterested in US elections, but I still follow world news. It's interesting to see how some parts of your media portray the different GOP nominee candidates and feel that they can say who is, and isn't, electable.
I hear some say that if Paul was the GOP nominee he'd never beat Obama. I thought I'd check the data to see how electable the different candidates are.
There's something called conditional probability. It's fairly elementary mathematics it allows you to calculate what's the probability of an event given another event.
So:
P(A|B) means if B happens what's the probability that A will happen.
So (for each Republican candidate) if that candidate was to represent the Republicans what is the probability the candidate would beat Obama?
By calculating this for each candidate I can get a rough value for their "electability" and see quite how badly Ron Paul fares.
Now the mathsy bit.
P(A|B)=P(AnB)/p(B)
That is:
The probability that if a candidate is chosen to represent the GOP they'd win the presidency=Probability that they are chosen AND win the general election divided by the probability they are chosen to represent the GOP.
So how did I find the numbers for P(AnB) and P(B)? The most obvious place was to take the data from the betting exchanges. Gamblers tend to be quite good at assessing probabilities, and the probabilities adjust as more information is released. So using this model I was able to test the presidential potential hard-headed gamblers assign to Paul.
I was quite surprised by the results.
Disclaimer: This is a fairly simple model, and there are some obvious problems (e.g. no analysis of market depth, probability that Paul forms a break-away party and wins, etc.). This is just a quick media bullshit sniff test.
The vertical bars are error bars based on market spread, the horizontal bar marks the average probability of the candidate becoming president IF they were chosen as the GOP candidate.
According to this derivative data in the marketplace, if chosen to represent the GOP then Paul is the MOST likely to beat Obama, not the least. At the very least it's a stretch to say he's less presidential than the others.
I then figured that perhaps this is because Paul is the "flavour of the month". So I downloaded the last few months data to look see how Paul's electability has varied using this model (this is over the last two months).
Paul's electability has wiggled about a bit but the market seems to think that Paul (if chosen) would be the only candidate that has better than evens chance of beating Obama.
Now, I'm sure the journalists can tell me why all the gamblers are wrong, but journalists get paid whether they're right or not. Gamblers only get paid if they're right.
....So, the questions...
How efficient do you think markets are in assessing likelihoods? Are gamblers more accurate at predicting the future than the main stream media?
Oh yeah, and if you'd like Obama to see another term then start cheering for Bachmann!
I mean, same realm, different schools of thought.
