Tradesports and Supreme Court Nominations:
I've seen lots of blogging about betting sites on who will be nominated to replace O'Connor, including Jim's post below about the betting at Maybe I am just missing something obvious, but I confess I don't understand why we would expect such sites to reveal anything particularly useful on the question of O'connor's replacement.

  Here's my thinking. The choice of O'Connor's replacement belongs to one man, George W. Bush. A few inside advisors are privy to his thinking, but I think it's fair to assume that neither Bush nor any of his inside advisors are placing any bets on sites like This means that the people who are placing bets presumably are outsiders who are getting their predictions from newspaper articles, blogs, horoscopes, etc., and then placing bets. As a result, a site like TradeSports would seem to just mirror the collective common wisdom of newspapers and blogs on a question like this. Am I missing something?
But don't you see? It's a market... and markets, like, have information, and its all markety, and there are these rationale actors, and, um, ...information!
7.19.2005 3:27pm
Joel B.:
I don't think you're missing something, but I guess it the people who believe the say the 3rd degree insiders. Not the top level but say friends of the staffers who work for people in the know. After all, if Bush already communicated to Specter who he's choosing then there may be a number of ancillary people who already know.

Granted Bush can change his mind, but the risk of that is probably partially reflected in the wager price.
7.19.2005 3:28pm
frankcross (mail):
It can be accurate because info leaks out. Thus, the sudden rush of bids on Clements after info began leaking in Republican circles. Same as for many businesses, markets are moved by info leaking out and newspaper reports, etc., as well as assessments of what the particular person is likely to do in the circumstances, from what you know about the person.
7.19.2005 3:33pm
DRB (mail):
I would assume that quite a lot of vetting and research occurs before a Supreme Court nominee is selected, and that research is not done by Bush's inner circle but by the inner circle's staff members/drones. Presumably these drones have some insight into who they've been asked to research. They also know how thoroughly and extensively different individuals were researched, and how recently that research was conducted.

The drones would therefore have a good idea who was on the short list. Are the drones placing bets on tradesports on the basis of this information? I don't know, but I have no doubt whatsoever that they've been talking to people who talked to other people who put bets on tradesports.
7.19.2005 3:34pm
Billy Flynn (mail):
markets are the best aggregators (sp?) of information.

i remember tradesports during the time of the election

it was fantastic and i think they got 50 states correct
7.19.2005 3:34pm
Proud Generation Y Slacker:
No, you're not missing anything. The volume of the SCOTUS market is well under $50,000 a day.
7.19.2005 3:38pm
Tbag (mail) (www):
The only thing you're missing is that market triumphalism has gotten loud enough that people who don't know why markets work know only that "markets work."

This includes people with money who ought to know better and leads to things like "markets" that trade on the whims of a single individual.

I think there's a grain of truth to what frankross and DRB say above, but I don't think that tradesports is quite that ubiquitous or plugged-in as a market.

Huge events like national elections with huge volumes being traded? Not a bad prediction tool (though certainly not the best). Some guy making up his mind with a small circle of people around him having some inkling of his general state of mind about the issue? Not so much.
7.19.2005 3:50pm
There is all sorts of info somewhere out there. Did this particular judge get on an airplane to Washington recently? Did someone see the judge visiting with this or that White House official? These buzzes are not perfect, but they are certainly more accurate than a random pick from the phonebook.
7.19.2005 3:51pm
The only difference perhaps is that blogs and newspapers are not immune from trying to influence the news. To the extent that markets are willing to ignore agendas and value accurate information, they would seem to be more effective.
7.19.2005 3:51pm
The Book (mail):

You are correct, but the what the markets can do is offer an unbiased assesment of the information we all have. Because they are investors and not partisans, their assesment of the avaialbe facts might be more sober and rational than a Bill Kristol or Paul Begala. But it isn't a magic eight ball. The market reflects the notion that Clement is the person objective observers believe most likely to be picked. Nothing more and nothing less.
7.19.2005 3:52pm
Glen Campbell (mail) (www):
Betting represents a form a Bayesian analysis that has been shown to be highly reliable; it's the "best guess" available from outside analysis. As you point out, insiders may have totally different information, but the suggestion is that the aggregate betting line will (typically) have a far better accuracy rate than the opinion of one or more individuals when the outcome is indeterminate (such as a football game or who's on the SCOTUS). Once the outcome is determined (and, presumably, it is already known to the President and various other insiders), the analysis is irrelevant.
7.19.2005 4:03pm
Goober (mail):
Quantification, is the word you're looking for. "Conventional wisdom" is too imprecise to be useful.
7.19.2005 4:05pm
42USC1983 (mail):
Well, people who received emails like this one might be making bids.
7.19.2005 4:08pm
Proud Generation Y Slacker:
I increased my Jones holdings because the contracts were trading at below 3:1, and I think that does not accurately reflect the probability of her nomination. Am I irrational?
7.19.2005 4:21pm
For an academic perspective on the predictive power of markets...

The Iowa Electronic Markets are real-money futures markets in which contract payoffs depend on economic and political events such as elections. These markets are operated by faculty at the University of Iowa Tippie College of Business as part of our research and teaching mission.
7.19.2005 4:44pm
jallgor (mail):
I remember reading an acadmic article that studied this phenomenon after the 1986 explosion of the space shuttle Challenger. It took months to officially pinpoint the cause of the accident. Yet within hours of the disaster, the stock market had correctly singled out engineering firm Morton Thiokol for punishment among the major contractors.
It's also the same reason why the spread in sporting events is so often right on the money. Sometimes the "best guess" of enough people (especially when they have money on the line) is a pretty good predictor of things ot come.
7.19.2005 4:49pm
Cass Sunstein has a few thoughts related to this on Lessig's blog.
7.19.2005 5:14pm
J (mail):
A very important issue seems to be how predictable the event is. All the individual or collective wisdom in the world won't help markets predict tonight's lottery numbers, nor did they help predict the decisions made by two independent-thinking Supereme Court justices. On the other hand, as Asimov conjectured (as the basis of his Foundation series), it's much easier to predict the decisions of large groups of people - hence the success in calling the 50 states' election results.
7.19.2005 8:40pm