Recently I was in Kentucky, reporting on horseracing for Garden & Gun. A "whale" (bettor of thousands of dollars per day) I interviewed, Mike Maloney, successfully traded securities, options and futures, but chose to go to the track every day instead because it offered him a greater challenge. "There are many, many, many more factors to consider in betting horseraces," he said.
Maloney is a youthful fifty-two, with alert, light blue eyes and a cheerful demeanor. He doesn't chomp on a cigar. He's in no way a Damon Runyon character. I have reason to believe he's a sort of mathematical genius.
I asked him: "Do you think handicappers can forecast the outcome of the presidential election better than polls?"
He didn't hesitate. "Polls can be inaccurate. People may say what is politically correct, the questions may be leading, the pollsters may be biased. A pollster can still bill for an inaccurate poll. Bookmakers must make an accurate line or they lose -- period."
For a second opinion I went to Ray Paulick, who was a protégé of notorious oddsmaker "Jimmy The Greek" before becoming a handicapper for the Daily Racing Form. Now he's editor of the thoroughbred industry insiders' must-read Paulick Report. "Gamblers have more experience with cheaters," he said. "They take voter fraud into their metrics. Polls don't. Nor do polls take into account how each state's secretary of state factors in, or systems within a state designed to eliminate voters; Jimmy the Greek called these 'the intangibles.'"
The multi-billion dollar online gaming industry offers evidence that Maloney and Paulick are, as usual, on the money.
Michael Robb, political expert for the British bookmaking site Betfair.com, lets the record speak for itself: Halfway through Election Day in 2004, when a CNN poll showed Kerry taking the lead, Betfair had Bush with a 91% chance to win.
Of course that's just one election. Probably hundreds of fifth-grade social studies students correctly predicted Bush's margin of victory to a decimal place, right?
Betfair also had all 50 states right in 2004.
As did rival site Intrade.
Koleman Strumpf, a University of Kansas economics professor who tracks betting trends, believes wagering is an incomparable barometer of an election. Among the reasons he gave me:
Relative to the polls, the betting markets have to think hard about what they're saying since they are putting their money at stake. Also polls tend to reflect what people are thinking at a given moment, versus a forecast of what will happen on election day -- post-convention bounces, for instance.
With University of Arizona economist Paul Rhode, Strumpf authored a study -- "Historical Presidential Betting Markets," published in Journal of Economic Perspectives -- that demonstrates that the betting market's forecasting superiority is nothing new.
They begin with America's long history of wagering on political outcomes, which boomed in the 1880s when betting moved from poolrooms to the Curb Exchange, the predecessor to the American Stock Exchange. Betting on political outcomes often drew huge crowds to Wall Street and exceeded trading in stocks and bonds.
"In presidential races such as 1896, 1900, 1904, 1916, and 1924, the New York Times, Sun, and World provided nearly daily [betting] quotes from early October until Election Day," write Rhode and Strumpf.
The papers' sources were betting firms, which had men present at speeches made by the candidates in order to make "unbiased reports of the psychological reactions of the audiences."
In the fifteen elections between 1884 and 1940, the betting firms were wrong just once, in 1916, when Wilson upset Hughes. And the gamblers might have had a perfect record had the Curb Market stayed open long enough to take into account late-breaking news from the West.
The advent of polls marked the end of an era. "Prior to Gallup's introduction in 1936, newspapers had little else to report about the election horserace other than the betting markets," Strumpf said. "When scientific polls came along, newspapers had something to report other than markets they were oftentimes uncomfortable with."
Responding to such discomfort, state laws increasingly limited organized election betting. Betting persisted, but in the shadows. Accordingly little data exists from 1940 through 1984, though it's enough that Strumpf concludes gamblers were more accurate than the pollsters in that period too.
The advent of internet wagering offers a clearer picture: "Since 1988, the betting markets have definitely been more accurate," Strumpf said.
It's still illegal for United States citizens to wager on the presidential election; Betfair and Intrade try to bar American bettors. Several newer off-shore sites are more lenient, however.
Currently, Betfair lists Barack Obama as an overwhelming 1-7 favorite (paying $8 for a $7 winning bet). A John McCain win would pay $6.80 for every dollar bet.
"On Election Night I'll look at the movement on the betting sites to see what's going on," Strumpf says. "I watch CNN too, out of the corner of an eye, but it's not necessary."