At this point, for many tax situations, you cannot rationally believe both 'Nate Silver is credible' and 'I should not be betting on Biden'. If you have any trust in Nate you cannot think Biden is below ~80% to win. You can get 'Biden' for 65-66c on Predictit. Notably, there are several de facto copies of the same bet (Female VP, Dems win presidency). Even with fees, you are making a lot of stochastic money. Your capital will probably not be held up that long.
If you are outside the USA you can plausibly get even better odds. There are many places you can get implied odds of 62-63%. This bet gets worse if you are paying tons of income tax and cannot offset losses. But this is a very good bet for lots of people.
I edited in an image of the rolling polling averages so people can judge this for themselves.
Here is another good analysis of why we should be confident in Biden.
In general, I think Rationalists should be a lot 'louder' about their advice when they are sure. For many tax situations, this is a complete slam dunk. I really wish rationalists had been louder about similar advice in the past when I could benefit.
Contest Entrants Think Trump is Going to Lose
Of the 98 entries, only six said that the Democratic candidate was under 50c to win the presidency. In fact, the median predicted probability for the Democratic candidate (hereafter Biden, for brevity) among contest entrants was 87%; notably, the median probability given by the models out there is also 87% (though Nate Silver has yet to release his and based on his fights with G. Elliott Morris it’s probably not going to come in very high).
This confidence in Biden (he is “Likely” to win the presidency, in the parlance of verbal handicappers) isn’t shared by the markets. Both BetFair and PredictIt price Joe in the low 60s, suggesting that the presidency “Leans” Biden (the price ranges on PI depending on the market you’re looking at). Even Silver thinks that’s too low: “I don’t think people realize how dumb and sometimes even irrational the prices are at political betting markets as compared to almost every other type of market (which is not to say other markets are always rational, either).” and “Too low on Biden.”
Note: My claims are completely orthogonal to whether Biden should win. Rationalists, in general, have some faith in Nate Silver and similar analysis. This post is about the logical conclusion of that faith. Please do not discuss the merits of which candidate is better for the country.
edit: At this point if anyone is reading and can access international markets the 'safe' line is to buy both 'pop vote' and 'Biden'. Pop vote is safe so you can 'hedge' Biden bets with a safe +EV pop vote bet. This way you win money unless Dems lose the pop vote (extremely unlikely).
I'm debating to what extent to write a detailed explanation, but
(1) yes the odds are insane at this point, and I felt the need to note this in my weekly Covid post. Trump is not 0% but he sure isn't 38%.
(2) the relative odds between the odds now, and the odds earlier in the year, are how you know the market is insane here. Nate's update from 71% to 87% reflects that Trump's position is obviously vastly worse than it was before, with less time to go, fewer opportunities for things to change, many votes in the bank and Biden several points farther ahead when the baseline was tightening. Yet the odds on Trump remain stubborn.
When I wrote my recent review of PredictIt prices, I thought Trump's odds were very generous but perhaps plausible. That's no longer the case.
Only the first article in the comment is by Silver, on whose expertise the original poster is basing his recommendation. That article doesn't discuss mail-in ballots or voter suppression, and in fact his main point is that the time remaining until election day (almost three months when the article was written) combined with uncertainties due to Covid-19 meant that the race was still open back then. Those considerations have much more limited force at present, when only 16 days remain, and Biden's lead has widened considerably.
If you've been at all listening to Silver recently, you'll know that he thinks his model probably underestimates Biden's chances. This shouldn't be surprising, since as Silver acknowledges, in this new version of the model he has made a special effort to build conservative assumptions into it.
In any case, I would encourage people hesitant to bet for Biden to resist the temptation of "throwing in a bunch of considerations" for why the models may be wrong, and instead try to calculate what the correct forecast should be in light of those considerations. For example, if you think mail-in ballots will be a big factor, try to estimate the magnitude of this effect.
Following my own advice, I just built a simple Guesstimate model of the impact of mail voting on the popular vote. I created the model very quickly, so if anyone spots any errors, please mention them below. And if you think some of the parameters should be different, simply copy the model and adjust those parameters to your satisfaction. Note that the effect of "rejected" in-person ballots is not modeled. This effect favors Biden, since a greater proportion of Trump votes will be in person, and hence susceptible to being "rejected" (i.e., not cast due to failure to bring an ID, long lines, inability to find a polling station, etc).
ETA: The upshot of the model is that mail voting shrinks the expect popular vote gap between Biden and Trump by about 2%. If we assume that the electoral college gives Trump a ~2% popular vote advantage, the model implies a drop in Biden's chances of winning the election from 87% to about 79%. [I modified the model and improved some of the estimates, and now the effect is less than 1%.]
(Disclosure: I have bet a total of USD 12k on Biden, mostly back when his odds where roughly equal with Trump's.)
This model seems reasonable, but I think bettors should mostly ignore the possibility of rejected mail in ballots, because the effect is extremely uncertain and around the same magnitude as many other idiosyncratic factors that should mostly wash out. For example, if there's severe weather or an outbreak of COVID on election day in a crucial swing state, that will hurt Trump much more than Biden because a much greater proportion of his voters are voting by mail (essentially the "rejected in person ballots" effect you mention).
The 538 distribution currently has Biden falling between... <squints> ~255 - 440 electoral votes 80% of the time (47% - 82%). Updating your guesstimate sheet with those ranges give a mean proportion to Trump of .38 with a range of .17 - 0.54
This is total misinformation; mail-in rejection will probably be cancelled out by increased turnout from low-propensity voters (it's much easier to vote by mail than to vote in person). In any case, the effect of a 1-3% rejection rate is minimal and indistinguishable from general noise/uncertainty.
Most of the claimed "GOP voter suppresion" either has a minimal effect or hurts the GOP, because the nuts and bolts of election administration are implemented on a county level. In most states, urban counties have the resources and inclination to counter the voter suppression, while rural (predominantly GOP) counties do not.
I was merely noting that 538, the makers of the prediction model that the post is discussing, believes in the voter suppression. If you think they're wrong about the voter suppression, then you probably also shouldn't believe in their prediction model. On the other hand, if you think they're right about the prediction model, then why are you doubting their voter suppression research?
Of course, it's perfectly consistent to think that they are wrong about both the model and the voter suppression, but the post was assuming that you believed in the prediction model.
If you have any trust in Nate you cannot think Biden is below ~80% to win.
That seems too strong. I'm assigning a 50% chance to Nate being the best authority on this, and a 50% chance to markets being the best authority. I still agree that betting on Biden has positive expected value.
My main reason for doubting Nate is the likelihood that the pandemic will have strange effects on turnout. I'm unwilling to bet on which direction that will surprise people.
For what it's worth, 538's final predictions have (narrowly) outperformed betting markets in 2008, 2012, 2016, and 2018 (I haven't looked at 2010 or 2014). Also, almost every consistently profitable politics bettor is putting massive bets on Biden this cycle, and my impression is that they either believe 538 is ~accurate or biased in favor of Trump. As an example, here's the twitter account of one of the best professional politics bettors around; he believes Biden has a ~96% chance of winning.
He's been a pro political bettor for years, so if he was betting based on biased odds he'd have gone broke a long time ago. It's just a fact that Trump is extremely overpriced, and his share price is being propped up by extremely -EV bettors; him using that as an excuse to attack Trump supporters doesn't undermine the quality of his analysis.
In general I'm more inclined the trust the market value than any particular prognosticator. Why shouldn't I be?
edit: The arguments here have convinced me to bet some money on Biden (on Betfair), but today the odds are still moving against him (down to just under 60% on electionbettingodds.com). This does leave me rather confused - surely the "dumb money" can't outweigh the "smart money" so heavily? Especially not on Betfair which doesn't have PredictIt's limitations.
Yeah, I think the OP's argument requires a good explanation of why the markets have failed to adequately price in Silver's prediction. I'm not saying markets are always right and impossible to beat no matter what, but the EMH is a pretty good default starting point, requiring strong evidence to overcome in any specific case. 'I trust this guy's public prediction, based on equally public information about his methods and track record' doesn't seem nearly enough.
The efficient market hypothesis is an overrated and dubious hypothesis when applied to the stock market (a market which could plausibly have the necessary conditions for EMH to be reasonable), betting market's like predictit though are nothing like the stock market and significantly more inefficient. The necessary conditions for a market to be efficient require the market to be heavily/majority used by profit maximizing investors and this just isn't the case for most gambling markets.
In general betting on a gambling market is a much worse idea than betting on stocks, since the transaction costs are a lot higher and you are betting on a zero-sum game instead of a historically positive-sum one. That being said there are some notable examples of the market completely failing. Take the Mayweather vs McGregor fight where the best boxer in the world for a decade only had a -400 edge against someone who had never had a professional boxing match (the line started at a much more reasonable -2500). If I had more money back in 2017 I would have bet that line heavily. Just because you are betting on a usually subpar market doesn't mean there aren't still good deals to be had on occasion.
My argument doesn't require the EMH to be true in any strong sense, just true enough that you can't beat a big, liquid market by a large margin via easy analysis of very public information. Predictit's price is similar to Betfair's -- in fact Betfair is currently slightly less favourable to Biden -- and presumably won't diverge too far in either direction due to arbitrage. Betfair has matched about $180 million on its 'next US President' market. Of course a lot of its users are wild gamblers, but it is big enough to attract serious professionals (and smart opportunists with plenty of capital) too.
Can you elaborate? I'm not sure what the point of disagreement is here.
For a big market like this, on an exchange like Betfair, my rough mental model is that there is a combination of recreational/compulsive gamblers, more serious professional/wannabe professional gamblers, and (given that the US election captures the attention of a great portion of the world) people who don't bet for a living but will keep an eye on the market and take any obviously profitable bets on offer.
So a lot of the bets that get matched will be between unserious players (who either don't care or don't think carefully about whether the price is rational) and serious players (who do). Others will be matched within the group of serious players, who of course can disagree with each other about the 'correct price'. But if there's a mispricing obvious enough that you or I can detect it just by reading 538 or Less Wrong, and large enough to be hugely +EV after transaction and opportunity costs, my default assumption is that it will probably self-correct before I get a chance to take advantage. Not all the money in the market is rational, but there are rational bettors with enough capital to keep the prices roughly where they should be.
edit to clarify why I'm focusing on Betfair: I don't know a lot about Predictit, but I believe it heavily limits the amount any individual user can bet. In isolation, that could be enough to allow it to stay surprisingly irrational for surprisingly long. But I assume its prices for any significant market will stay relatively close to those of a big exchange like Betfair, because of the easy arbitrage opportunities when they diverge. And the 65-66c you quote is very close to the Betfair price of about a day ago (though the latter has since tightened to the equivalent of about 62c).
At least a couple of people have downvoted this without replying. One of the things I usually like about LW and similar spaces is that good-faith comments get a reply, not just a silent dismissal.
I get that the comment is not exactly punchy or brilliantly written, but I was trying to do the right thing and explain some of my own assumptions, rather than write the equivalent of 'wat?' and leave deluks917 to do all the work of bridging our communication gap.
The arguments here have convinced me to bet some money on Biden
Which ones convinced you? I still haven't seen a serious explanation for why everyone is apparently leaving so much expected value on the table. It seems to me that the market is big enough to be worth the attention of serious people, but not so big that it would take a huge number of them to snap up all the 'dumb money' and push the odds somewhere reasonable.
The main factors were Nate Silver's record of good calibration, and (alleged) "smart money" successful bettors (including local Zvi) being onto it. I'm still uncertain why the market could be so inefficient in this case, so I'm not betting a lot of money, but it's possible that institutional factors prevent large amounts of smart capital coming in - perhaps directly betting on the election is still too weird for a large investment firm.
For whom is betting for Biden actually a good idea? Can non-US citizens effectively participate? What when you factor in transaction costs? What are my expected gains (are they high enough to register an account and go through the hassle)?
Do you have an estimate of expected profit per $100 bet (for a few of the most plausible scenarios)?
My impression is that PredictIt is +EV is you make lots of not-too-correlated bets so that your losses can offset your wins (though maybe not by enough to be worth the time & effort), but it's generally -EV (or at best barely +EV) if you deposit to make a one-off bet where you have to pay fees & taxes on your winnings (and don't get any tax benefit from your losses).
I would say Biden is conservatively 80% to win from here. Polls are incredibly good. The election is in sixteen days. When I made the thread you could get Biden for 0.65.
You need to pay 3.5 cents tax on winnings if you buy at 0.65. There is also a 5% withdrawal tax. So if you win you get (100/0.65)(0.965)(0.95)(0.8) = 112.8 . 12.8% returns in 16 days is nothing to laugh at. You are still getting almost 6% expected returns if you think Biden is only 75% to win. This all assumes you immediately withdraw your winnings from Predictit which is obviously bad for your expected value.
If you are not in the US you can both get better odds than 0.65 and you don't have to pay the insane rake.
Ok so I am through the process of making an acount and adding funds to it. You have to transfer your money into the Cryptocurrency DAI. The bet with the lowest fees and the longest expiration date (to allow for a longer time until the results are known), has Trump at 62%. The cheapest NO-share that you can buy immediately is at .69. There is a 0.77% market fee. But there is a relatively high fee for making a transaction which is payed in Etherum. it currently costs the equivalent of around 10$. But this transaction doesn't scale with your bet, so if you already plan to make a big bet (<500$) this shouldn't affect your decision much.
I went the crypto route a bit, but then decided to funnel it through an acquaintance and use predictit instead.
If I understand everything correctly and calculated all the fees properly (probably haven't), then the overall deal from the point where money leaves my paypal to the point where hopefully more comes back, is analogous to betting on Biden as if he had a 73,6% on the markets. Which I guess is still pretty good, but man do I wish that there was just one large market with minimal fees, instead of fees on transferring, currency conversion, profit on predictit, and withdrawal from predictit. So many fees :x
Also, it takes a few more days. I hope the markets don't shift in Biden's favor in the meantime (then the deal obviously gets worse). It's amusing how I now want them to move into the opposite direction.
And all that is assuming a 0% risk that the person just screws me over and keeps the money for themselves, which is probably roughly accurate.
I concur with this. In my case, I set aside some amount of money I was comfortable losing, calculated the Kelly bet based on the expected win, and bet some amount on Biden. I used Betfair, which is available to Europeans.
Some commenters mention the EMH. As counterevidence, I present that Betfair is offering even odds that Biden will win at least one state Trump won last time. (The 538 model gives 96% to this) (This was wrong)
Anyone with available capital interested in making money from this election should spend ~1hr researching TX, come to the accurate conclusion that Biden is favored there, and bet accordingly (buy Biden in TX, Dems to win TX senate race, Biden electoral college margin >210 EC votes, etc). The expected returns are much higher than betting on Biden to win overall, because Biden TX is currently trading at around 30% to win TX, when fair value is ~65%. These twitter feeds from (semi)pro politics bettors are a good place to start: 1, 2.
The key argument is that polling systematically underestimates Democrats with Latino voters in Texas, and that the electorate will be much more favorable to Democrats than in 2018, when Dems lost the Senate race by ~2.5 points in a worse national environment.
Do you think FiveThirtyEight and the Economist haven't appropriately accounted for these considerations in their models? I don't think the discrepancy with the markets are so large. Where did ~65% come from?
I do not know of any safe to do this. If you are found out you risk losing money if they freeze your account. This bet looks a lot worse if you are risking your account when you get found out. If you have outside friends who trust you maybe they will 'bet for you'.
There are some offshore sites taking American bets. You can also place bets online legally if you are in NJ (I think).
I'm not a gambler so forgive me if these questions are stupid:
How are these odds being calculated in the first place? I think we all remember the odds of 2016 versus the outcome. What were the various pundits being touted this time saying back then?
Why would bookies be offering odds that they know they're likely to lose out with? What are their profit margins? I know that casinos are a business that depends on extremely high volumes of bets, are bookies the same?
Is it possible to bet on the results of voting by state? That seems safer to me (well, as safe as any prediction of the future can be).
Can I bet on how long it takes before Biden is retired by Harris/the Dems?
I know that it is possible to hedge your bets and place bets on both outcomes (that take advantage of different odds). Is anyone suggesting a strategy like that?
I know the election is flashy and topical but if we are talking gambling for profit then are there better bets in general for other things? It seems silly to bet on something just because it's there.
The election presumably will have an effect on the stock market. Given that you can already 'bet' on stocks, directly, in futures, and in hedging, then is gambling better or worse than that?
I'm not a fan of investment advice on LessWrong. If these markets are significant (they aren't - there's just not that much money changing hands, and the fees and terms make it unattractive to pro bettors), there's something to explain, before advising to exploit.
I think you're well off the mark when you claim that "rationalists ... have faith".
This is extremely false; I know of multiple professional political bettors, and plenty more who make 5+ figures betting on election years. Also, PredictIt has $113m matched on the "Who will be the next president?" market alone, which is a lot of money by any reasonable standard...
The explanation for the mispricing is really simple: Trump supporters tend to think that the polls are rigged and he'll win, and Biden supporters tend to think the polls are off/Trump will rig the election/voter suppression will cost them the election/ etc etc so 90% of the square money is on Trump and there's not enough sharp money to balance it out. Elections are just too infrequent for biased bettors to lose money quickly enough that prices are efficient, and it doesn't help that Trump unexpectedly won the 2016 election, transferring a lot of money to biased bettors.
If it's that obvious, though, why does it persist? Elections might not be frequent enough to bankrupt the sources of dumb money, but why have the pros not eaten it up by now? Even if there aren't that many of them, and despite their skills they're not very rich yet, why haven't the people who do have enough capital to bring the markets back to their senses got involved?
That's a good question; I assume it's because they don't have enough domain expertise to make a confident judgement about the market, and they have more valuable things to do with their time than acquire that expertise.
Prices have been biased towards the GOP ever since 2016, and I'm pretty sure it's because most of the Trump bettors in 2016 were GOP partisans rather than sophisticated analysts. "Maybe they just had a good heuristic to do with preference falsification?" what does this mean?
I do know a number of professional bettors (poker and sports/horse, not political), who are only lightly betting on the political sites - the terms and vig are very unattractive to them.
I stand corrected if there's $113M on that specific bet, though - that's enough (presuming it's fairly active, not all placed months ago and just forced to resolve rather than hedging/adjusting) to indicate pretty broad belief. That does change it from "small-stakes very likely exploitable" to "reasonable stakes, but one should answer WHY there's a discrepancy before committing very much".
Have you actually tried checking with anyone resembling a 'pro bettor'? I predict the majority of them would say the bet is in fact attractive and you should put money on Biden. I see one person in the thread who is known for regularly making money betting on things other than stocks (Zvi). He said 'yes the odds are insane at this point'.
Terms are actually better right now outside of Predictit but Americans cannot legally use those. I have not look into all the options for getting millions into the markets (I do not have that kind of money). But you can certainly bet hundreds of thousands of USD easily if you are not American. This seems more than sufficient to be attractive to pro bettors. The things you list in parenthesis do not explain the current situation.
He had Trump at 28% chance to win, so while credible he is not 100% accurate. Let's say Trump actually had a 50% chance of winning last time, which is not outlandish seeing that he won the electoral college by a significant margin, so NS was off by ~22+%.
Now he says Trump is 87% likely to lose. Take off 22% and it's 65%. After costs, taxes, operational slip-ups, your time etc, and you have an expected loss at 60-65% odds.
Also, if Trump wins and you are a Biden supporter, you lose twice. That would be bad hedonics. On the other hand if you prefer Trump this could be a form of hedging.
Not only that there is time to the election during which a lot can happen. "A week is a long time in politics", So even if you are right at the moment, you are exposed to events leading up to the election, which could make you wrong.
For the record I think Biden has about 70% chance to win, so if you take this bet you will probably win. Still a bad bet though IMHO.
Source: I have made a large fraction of all possible investing mistakes. In betting markets I am ahead, having only ever bet on one horse race, in which my horse came in first.
Let's say Trump actually had a 50% chance of winning last time
What do you mean by this? That human behaviour is non-deterministic? Or that, given the publicly available information at the time, the best guess was 50 percent? If the latter, it's easy to get a better credence after the event happened. Look at Nate's track record. An event that he gives an x percent chance happens pretty damn close to x percent of the time. You could've just as easily said he underestimates the winners when he got it "right" (i.e. he said > 50 percent chance), and therefore Biden has an even higher chance of winning.