Greg Mankiw and several other economists frequently reference Intrade in discussing economic and political events. If you are unfamiliar with Intrade, you could describe it as a futures market for either/or events. Here is how it works.
Intrade works through $10 contracts. You think there is a 60% chance Obama will win the presidential election. You bid $6 to buy a contract that says Obama wins. If someone takes that offer, then you own a contract for $6. If you hold that contract to the end and Obama wins, then the contract will be worth $10. You will net $4. If Obama loses, then you lose $6. You can sell your contract any time before the event finishes so long as a buyer is willing to buy. (More here.)
During the 2004 election, Intrade picked the presidential race correctly in every state but Alaska. It picked every senatorial race correctly in 2006. So I thought I would see what Intrade says about today's presidential race. (I may make this a weekly update.)
According to state-by-state Intrade markets, Barack Obama will win by eight electoral votes. I broke the votes for both candidates into two categories. If the candidate is trading 60 or higher to win, then I consider them a solid state for that candidate. If the candidate trades in the 50.1 to 59.9 range, I considered that state leaning toward that candidate. Here is a map showing the outcomes by state:
Electoral Votes
McCain – 265
Obama – 273
Leaning States
In the following analysis, it should be noted that there are two types of contracts worthy of mention. One contract says McCain wins, and the other says Obama wins. Because they are traded separately, the sum of the two prices rarely equals exactly 100.
Colorado (9) – Currently leaning toward Obama at 54.9, with McCain at 47.8. There has been a steady movement toward McCain since about a month ago when McCain was trading at 35.
Nevada (5) – Currently leaning toward McCain at 59.8, with Obama at 45. Until the past month, Obama had been trading steadily at around 50.
New Hampshire (4) – Currently leaning toward Obama at 56.5, with McCain at 43.5. Over the last month, volatile prices with a net move of only a couple of points in McCain's direction.
New Mexico (5) – Currently leaning toward Obama at 59.5, with McCain at 39.9. As recently as September 8, McCain traded in the 26-28 range.
Virginia (13) – Currently leaning toward McCain at 57, with Obama at 44.9. Obama had been trading in the 50-55 range through most of August.
Four other states of interest (Winner in the 60-70 range.)
Michigan (17) – Obama is currently at 65. However, he had been trading in the 70s in July and August.
Minnesota (10) – Obama is at 68.5 after trading in the 80s last month and in the low 70s over the last week.
Ohio (20) – McCain at 60.9 after trading in the 30s in July and the 40s in August.
Pennsylvania (21) – Obama is at 66, a little lower than the low 70s range he had been trading at in recent weeks.
Thoughts
Assuming all this stays pretty much as is, but there is a 3.6 movement in Colorado in McCain's favor, then McCain wins. That is how close it is. Obama is winning now, but all the present trends are in McCain's direction. There aren't many places in play at the moment where Obama can pick up more votes, but there are several places he could lose, and he only has an eight-vote lead.
Intrade on the overall question of who will win the White House
McCain – 50.5
Obama – 48.9
To look at the election from polling data, you can visit Real Clear Politics. Here is their map.
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