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Narrative Power and the Predictability of Electoral Prediction Markets

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Here's a fun little way to make (a tiny amount of) money:

Mitt Romney is currently trading at $4.16/share on Intrade. That translates to the collective wisdom of the Intrade Public (intradians?) giving Romney a 41.6 percent chance of winning.

The Republican convention is in two weeks. Both Romney and Ryan will give big, primetime speeches.

Those speeches will go well. Buy Low. Sell High.

I don't know what will be in those speeches. It barely matters though. The general contours of the narrative are already clear in advance. Here's why:

Most reporters will be tasked with focusing on the drama, the soundbites. More of the public will see/hear the headlines then will pay attention to the speeches themselves. And the headlines and soundbites will all be geared towards advancing a predetermined narrative. Fox News will call Romney's speech a landmark event that reignites his campaign. They'll call Ryan's speech Reaganesque. CNN and the major news networks will talk about how the speeches couldn't have gone much better. They'll ask a panel of commentators to rate the speech. A token Democrat will give it a 1, a token Republican will give it a 10, and the other analysts will all give it an 8 or a 9. They'll focus on how close the polls already are and speculate on how big of a convention bump we'll see. MSNBC will stand alone, with Rachel Maddow and Chris Hayes talking about the lack of policy details, the errors, oversights, and outright lies, and the threat to popular government programs. Politifact will issue "mostly false" statements. No one will pay any attention to Politifact. Each of these networks is playing to a niche audience that tunes in for their brand of commentary.

All of this is utterly predictable ahead of time. It's a basic narrative arc. The conventions are a spectacle, a performance. The mass audience isn't paying all that much attention. Those who are watching closely have already made up their minds. Media commentators are part of that spectacle. Romney and Ryan's speechwriters are as well. All have a role to play. All will play those roles (more or less artfully).

And the Intradians will dutifully play their part as well. As a result of this tidy narrative arc, I can comfortably state in advance that Romney's stock on Intrade will go up. Not necessarily very much. But some. In two weeks, Romney's stock will increase.

It will then go down one week later, when the Democratic convention follows a parallel narrative arc.

Incidentally, it's for this same reason that Romney should have known in advance that his criticism of the London Olympics was a fool's errand. Set aside the diplomacy angle for a moment.* Was there ever any chance that, at the end of the Olympics, they would be viewed as anything other than a brilliant success? There's a basic narrative arc to the Olympics as well: Before the Olympics, everyone will fret about the logistics. That's partially because it's a huge, complicated event. But it's also because there is a finite number of compelling human interest stories one can run before the games begin. Then the opening ceremonies will be very long and very weird. And then our attention turns to the games themselves. The world's best athletes competing at the highest level, with the entire world watching. It is innately compelling. Logistics and weird opening ceremonies and tape delay hassles all fall by the wayside. By the end, the criticisms of the organizers sound foolhardy. Of course the London Olympics were wonderful! Once the competitors themselves take the stage, the host city receives accolades-through-osmosis. We'll see the same narrative arc in 2016. (1) Media commentary questioning the city's preparedness. (2) weird opening ceremony. (3) innately compelling sporting events. (4) reflection on the stunning success of the 31st summer olympiad.**

Recognizing that this narrative arc exists does not negate its meaning. The size of the bounces can tell us something about the state of the race. They also impact the narrative arc in September and October, when low-information voters start to tune in further. In the course of all this drama, internal contests are won and lost within the party networks, with real impacts on future policymaking. The details do matter. But not in ways that are directly reflected either in tracking polls or prediction markets.

But in the meantime, it's useful (and perhaps the slightest bit profitable) to map our expectations against the predictability of narratives. Paul Ryan's vice presidential rollout isn't going very well quite yet. This sets the stage for a basic redemption story. If the pundits aren't talking about how wonderfully he "changed the narrative" immediately after his speech, then that would be noteworthy. His speech is itself part of the narrative. We know this in advance, yet we'll respond all the same.

Days later, the Nate Silvers of the world will weigh in with data analysis. They too are playing a part -- a sort of meta-role, offering another type of narrative for a geekier audience whose tastes and preferences lean towards charts, graphs and models.

That's all politics as performance. You can bet on it.

*Or don't. My god, how does he manage to fit his entire foot into his mouth?

**This happens to also be the secret to throwing an excellent party: step 1, invite interesting people. Step 2, let them be interesting. No need for a step 3.