When Barack Obama announced his support for gay marriage on May 9, most commentators immediately turned to how this would affect his chances in the 2012 campaign. Now that a few days have elapsed, we can say with confidence that the effect was negligible.

The following chart illustrates the most accurate and real-time forecasts, derived from prediction market data, two days before and after the announcement.

Sources: Betfair and Intrade.

When we think about this political issue as an economic problem, as I like to do, the first thing to ask is what new information has been introduced into the system. For anyone who regularly follows politics, the fact that Obama privately supports gay marriage is not really news. He quietly supported same-sex marriage in 1996, and many assumed he never really changed his position. Massachusetts Congressman Barney Frank, a Democrat, called the president's revelation a political "nonevent."

Nor did his announcement represent any change in policy. The

There are many ways to keep score on whether Barack Obama or Mitt Romney has better odds of winning the general election, which is almost exactly six months away. Here at The Signal, we are fervent evangelists of the political prediction markets, where people place real money on the line to bet on the winner. These markets proved to be more prescient than polls in the Republican primary.

Many journalists prefer to stick to reporting on raw daily polls. While these surveys offer valuable information, it is dangerous to read too much into the daily fluctuations, especially this far in advance. Currently, Rasmussen has Romney leading Obama 49 to 44, while Rueters/Ipsos has Obama leading Romney 49 to 42. This disagreement is due to several common sources of error that occur on any poll. Averaging several polls to get an aggregate figure, as RealClearPolitics does, helps ameliorate these errors.

Upcoming work by Bob Erikson of Columbia and Chris Wlezien of Temple, recently presented at the Midwest Political Science Association conference, demonstrates a second problem with following the daily polls too closely. The researchers looked through past presidential elections, aggregated the national polls, and created the most effective forecast based on that data. They found that, even when properly aggregated and averaged, national polls do not have predictive power at this point in the cycle.

The following chart shows Obama's likelihood of victory, utilizing prediction market data, and two-party poll share.

Polls vs. Markets

Sources: Betfair and Intrade for prediction markets and RealClearPolitics for polls.

Anyone who commutes in to New York from New Jersey knows that the smallest glitch can throw the entire rail system into chaos, delaying 1,300 trains worth of people. Many argue that there is an urgent need for a new rail link between the two states, but viable plans to build such a thing have yet to materialize.

Here's the economist's outlook on the problem: While a new rail link would provide positive returns for society, neither private nor public institutions are properly incentivized to make it happen.

Traffic on the current rail links, two 100 year old tunnels, is at full capacity and demand will only increase over time. Lawmakers and analysts dispute the cost of building a new tunnel, but it's generally estimated to be in the neighborhood of $10 billion. It will take decades to recoup the investment. This type of massive-scale infrastructure is beyond the scope of any corporation, but not for the simple reason of scale. Consortiums of private institutions can raise massive amounts of money. But can you imagine anyone in the private sector investing in a project that may not earn money for several generations?

More important is that the project would have many positive "externalities," or societal benefits that no owner can capture and charge for. If 100 people need to get from New Jersey to New York City every day, society benefits from them sitting in a single train, rather than 100 automobiles: less pollution and less congestion. But the owner of the train or the tunnel it goes through cannot charge one person for the value of slightly cleaner air. Only a government can internalize the value of clean air for all.

While the government can value something like clean air, it is not good at valuing long term investments. In the same way that corporations are obsessed with daily stock prices and quarterly earnings, politicians are obsessed with monthly poll numbers and biennial elections.