The Odds in California

The Iowa Electronic Markets webpage has opened a futures market on the recall. The contract structure makes it a little tricky to go from the prices to predicted outcomes, but Davis is about a 70-30 underdog, and the market is predicting the recall will carry by about 10 percentage points; you can get an effective 20-to-1 against the election’s not being held in October. [*]

(That last bet seems tempting to me; if I were a judge, I’d have a hard time wrapping my head around the idea that recounting some of the votes in Florida was an equal protection violation but running a governor’s race in California 40% of the usual polling stations closed isn’t an equal protection violation, especially since California has four counties covered under the Voting Rights Act.)

In Round II, it’s Bustamante 60% to win, Schwarzenegger 40%, rest nowhere; the market predicts that Bustamante will get about 45% of the vote, Schwarzenegger 35%, and the rest 20%.

I’ve been more pessimistic on Davis than 70-30, and more optimistic on Bustamante than 60-40, but not enough so to want to put any money down at current prices. Multiplying out, we get Bustamante with about a 40% chance of being governor when the dust clears, Davis and Schwarzenegger with about a 30% chance each. Update: Wrong! See correction [*] above.

If California’s political insiders agree, then Bustamante shouldn’t have much trouble raising the money he needs.

Too bad the market didn’t open a week ago; it would have been interesting to see what happened to the Schwarzenegger prices when Simon dropped out. The current vote-share prices seem to reflect a fairly strong belief that McClintock will stay in to the end.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com