Blog Posts by David Pennock

On Super Tuesday, the Signal got 9 out of 10 election predictions correct, following up on an Oscar night where we got 3 of 4 award picks right. Not bad, but we really wish we didn't have those two annoying blemishes, right?

In fact, we're delighted! When the markets are functioning properly, we expect to get a certain percentage wrong every time. (The exact amount depends on how certain the probabilities are for each election on a given day; on Oscar and election nights we actutally expected to get about one wrong each.) If we had swept all 14 predictions, it would have meant our confidence was too low, or what statisticians call "miscalibrated." It sounds strange, but it's actually possible to get too many predictions right.

Think of it like rolling a six-sided Monopoly die and predicting the odds that you'll roll a one, two, three, four or five. On any given roll, you can say with high confidence—83 percent—that you will succeed. But do it 100 times, and you would expect to roll a six about 17 times. If you got your one-through-five all 100 times, there's probably something wrong with your dice.

Russians will go to the polls on Sunday to elect their next President, and as over 30,000 web pages note verbatim, Vladimir Putin is "expected to win." But just how certain is "expected" in the often-shady world of Russian politics?

We're no Kremlinologists, but we can find a reliable gauge of Putin's likelihood of winning in the stinginess bookmakers in doling out winnings if that happens. Oddsmakers William Hill, Ladbrokes, and StanJames are each offering only $101 back for every $100 their customers risk on Putin. That puts the odds of a Putin victory at something just below 99 percent.

Strictly by the numbers, Mitt Romney's narrow victory last night in his home state of Michigan was modest. He won only 3 percent more votes than second-place finisher Rick Santorum and, because the primary is not winner take all, the two candidates will split the real prize -- Republican delegates -- nearly equally.

In his victory speech, however, Romney was clearly more concerned with the symbolic victory. "We didn't win by a lot, but we won by enough, and that's all that counts," he told supporters in Novi, Mich. While it's unlikely Romney was watching the prediction markets as closely as we do before he took the stage, he would be pleased to know that they agree. Within an hour of Michigan's outcome becoming clear, Romney's likelihood of earning the Republican party nomination jumped to 80.9 percent, up 8.3 percent from Tuesday evening. (No one likes a gloater, but we did call that.)

Some commentators still question whether Romney's win in Michigan gives him sufficient momentum

It's no secret that states with early primaries or caucuses have had an outsized influence on the outcome of the nomination. Cutting to the front of the calendar is such a boon, particularly given the economic boost that campaigns deliver, that states are willing to sacrifice their influence at the convention in order to hold their contests early. After weighing the benefits, for example, New Hampshire, South Carolina and Florida all chose to violate Republican National Committee rules and hold their primaries earlier than allowed, thus sacrificing half their delegates at the convention.

Romney in Iowa (AP Photo/Eric Gay)

There are many reasons why this is a broken system. Without sufficient penalties for states jumping the gun, the next cycle's primaries could easily spill into December of 2015, while states that play by the rules will remain insignificant.  So here at the Signal, we're proposing a simple way to fix this process, while preserving a staggered order of contests: Treat the nomination like a market, and let states bid on how early they want to go.

The rules are simple: The RNC sets the dates of the primaries ahead of time, with a limited number of coveted early contests. To determine the order, every state says what percent of its delegates it is willing to give up in order to go first. Whichever state is willing to sacrifice the highest proportion wins the first slot. The remaining primary slots would be allocated in much the same way. The states next say what percent of delegates they're willing to forgo to be second in line to vote--presumably less than they would pay to go first, but still a substantial amount. Whoever bids the most for second position wins it, and so on. It's a classic economics problem. We have a commodity--early primaries--that's in short supply and high demand. The delegate market determines how precious those slots are.

Almost immediately after polls closed at 8 p.m. ET, the major networks called the state of Florida for Mitt Romney. The markets were extremely confident in this outcome, as we noted yesterday, so there was no major movement in the overall odds for the nomination; Romney crept up about two percentage points to an 88 percent chance of being the Republican nominee for president.

The twittersphere erupted immediately, referencing the former Massachusetts governor at a rate of nearly 500 tweets per minute--for all of 10 minutes. (That's not necessarily abrupt, as far as Twitter goes.) Queries about Romney on Yahoo! Search also briefly spiked to about 10 times their usual rate. Romney enjoyed a second, lesser, spike as he delivered his victory speech. (Ron Paul, as usual, received the highest online interest among all the candidates during the Florida speeches.)

Our measure of Twitter sentiment found that, while the buzz around Romney was mostly negative at 8 p.m. as his victory in the

If you're curious why the candidates were tripping over themselves to out-praise Marco Rubio, Florida's Republican junior senator, at the last debate, look no further than the political market Intrade, where Rubio is in first place to be second fiddle with a 24 percent chance of being the eventual winner's running mate. (Meanwhile Joe Biden is the overwhelming favorite to remain Obama's choice.)

But who gets the would-be VP nod depends greatly on who is the nominee. As Newt Gingrich's odds of winning have spiked and dissipated twice in the last two months, the market for vice presidential candidates has reacted. Because the movement happened over a fairly short time period -- I analyzed the past 90 days -- and because not much else seems to have occurred to impact the veepstakes picture during that time, we can guess that most of the changes in the VP market are driven by the shifting fates of Romney and Gingrich at the top. With this assumption, we can compute estimates of which pairings are most likely.

If Mitt Romney is the Republican nominee, my model estimates that he is 25 percent likely to pick Chris Christie as his running mate, a popular moderate governor from New Jersey who himself flirted with running for president before strongly endorsing Romney. (This in spite of the fact that you'd have two Northeasterners on the ticket.) The market puts Christie's overall chance of being the VP of any Republican nominee at only 14 percent, but because his odds tend to rise in tandem with Romney's, my model boosts his chances to 25 percent in the scenario where Romney is the nominee. Rubio is a close second to be Romney's right-hand man at 22 percent. Rubio's VP odds actually drop whenever Romney's go up (they are anti-correlated), but because Rubio's such a likely overall pick, he's still the second-most likely Romney pairing. Rubio so far hasn't endorsed a presidential candidate and has repeatedly said he's not interested in the VP job. No other candidate rises above single digits as Mitt's pick for a-heartbeat-away.

Two days ago, Mitt Romney was looking at a clean sweep of the first three contests of the 2012 primary. With polls opening at 7 a.m. EST tomorrow, he's now looking at going one-for-three. First, he lost his technical 8-vote victory in Iowa to Rick Santorum (though let's face it: It was a tie.) Now, his once dominate odds of winning South Carolina have dwindled to 35 percent as of this writing, 30 points behind rival Newt Gingrich.

Newt Gingrich is two-for-two in standing ovations in the last two Republican presidential debates. After his well-received performance on Monday in Myrtle Beach, Gingrich earned a modest 3 percent boost in our prediction model, computed as the average of political stock markets Intrade and Betfair. But after Thursday night's debate in North Charleston, featuring a thrashing of CNN moderator John King over a question about his ex-wife's allegations that he asked for an "open marriage," a flurry of trading gave Gingrich a massive 20 percentage-point boost in the markets. In a matter of hours, Gingrich flipped entirely with Mitt Romney, going from a 40-60 underdog to become a 60-40 favorite in the markets.

Candidates' chances to win the South Carolina Republican primary, as of 1/20/2012

By many accounts, Newt Gingrich won the Fox News Republican debate Monday night in Myrtle Beach, S.C. He even received a two-minute standing ovation, apparently the first in a debate since 1980.

Meanwhile, Gingrich earned, if not a standing-O, at least a nod on prediction markets Intrade and Betfair, where political handicappers rate his chances of winning South Carolina's Republican primary Saturday by putting money on the line. Between the beginning and the end of the debate, traders bought into his Palmetto State candidacy a fraction more heavily, boosting his likelihood of winning from 5 percent to about 8 percent. The rise occurred within hours of the debate, leaving little doubt traders were reacting to what they saw—or, more accurately, what they felt the South Carolina electorate saw—in Myrtle Beach.

Republican candidates' chances of wining South Carolina primary, as of 1/17/2012

Mitt Romney fell, if slightly, for the first time in several days, from 90 percent to about 88 percent. This number says in effect that, if the final week of the South Carolina primary were to somehow play out ten times in ten different ways, Romney would win nine of them.