From Polling to Prediction Markets: How Reliable Can We Predict Elections?

You know, we can't not talk about betting in prediction markets.

You know, you have Kalshi, you have Polymarket.

You know, these are legal, heavily traded, and increasingly cited by journalists right alongside polls.

Are they a competitor to polling, a complement, or are they gonna be something else entirely? And what, what information, if any, do the markets capture that polls miss or vice versa?

I would put them in, like, kind of a complement, and that has two sides to that.

So one side to that is they're gonna take basically similar information and then kind of push it.

So it, it can, like, kind of take the starting point and move one way or the other.

But it's also a complement in the kind of negative sense in that the weaknesses of polls, they roll right up into the, um, into those prediction markets, right? And so it's not-- It's kind of fun.

It's kind of dangerous in other contexts.

But I think in polling, it's, it's kind of harmless in a small net value add, I'd say.

But I don't think, case after case when the polls miss, I don't know that we've had a case where, like, the betting markets have, have really, you know, seen behind the scenes and seen what the polls are gonna get wrong.

I also think, uh, complement.

The way I look at it is, for those of us who study or try to gauge opinion out there, they are an expression of viewpoint for those people who are trading on the markets.

We can do well to see what those folks are thinking and what they're willing to trade on.

I also think you can use them or look at them to understand what people think of, let's call it, sort of downstream effects of one race on, you know, on others.

So some markets might have, "Will a party take control of the House or the Senate?" And then a poll comes out or some rating comes out for one of those races that goes against that grain.

Does the market for the overall Senate or House control then move, you know, attendantly? And that's a way of, again, looking at, uh, at, at least among traders, the-- that kind of confidence that they're expressing in, um, in the available information out there.

One thing that, that the prediction markets can definitely do is they can be instantaneous.

So if there's some gaffe or something, [chuckles] you know, or some new news leak of something, then the, obviously, the prediction markets can respond, and that's gonna take pollsters, you know, a week or so to, to, uh, nail that down.

Polling usually is not just about who's winning, who's losing, 'cause it's lots of things about what the voter's thinking, lots of other things, right? Now, initially, when I start thinking about this marketing stuff, seems like you're gonna shift attention or it become winning and losing, that seems like will be a negative, you know, distraction, in the sense you're losing lots of informations or about the voters' behaviors, so on and so forth.

But you just reminds me, it could also be a, a, a gain in terms of, at least for group of people, seeing how they express their confidence.

And, uh, Michael, your point of something being, being instant, that's actually really important, right? There's a time, temporal component is obviously important for all of the things.

So, so it just like a little bit of follow-up question on this.

Like, do you guys see this, particularly from a research angle, what are, what are things like, for example, for someone like me as a statistician or for Michael, that we, we do research is, you know, are there some good thesis topic here for PhD students to work on those things? Hey, you know, this is, uh, something really quite interesting.

So one is there's just a general kind of discussion of what really happens and kind of what this conversation is.