The Corner

Betting Markets vs. Opinion Polls: Scottish Edition

Especially over the last few weeks, the world didn’t know what to expect. Would Scotland leave the United Kingdom, or stay?

I hate to sound obnoxious, but I was pretty confident that Scotland wouldn’t leave. Why? I put a lot more weight on what the prediction markets were saying than on the results from polls, due in large part to a great paper by the economists David Rothschild and Justin Wolfers. And while the polls on Scottish independence were volatile, really only in the last month showed a close race, and even disagreed with each other once or twice towards the end, betting markets consistently predicted the probability of independence to be relatively low.

Indeed, if pollsters adjusted their strategies based on prediction markets, they would likely do a better job. Here’s Dr. Wolfers in today’s New York Times:

Instead of focusing on whom people say they plan to vote for, ask them instead to focus on who they think will win. Typically, asking people who they think will win yields better forecasts, possibly because it leads them to also reflect on the opinions of those around them, and perhaps also because it may yield more honest answers.

It’s an idea with particular relevance to the case of the Scottish referendum. As Stephen Fisher, an associate professor of political sociology at the University of Oxford, has noted, there is a historical tendency for polling to overstate the likelihood of success of referendums, possibly because we’re more willing to tell pollsters we will vote for change than to actually do so. Such biases are less likely to distort polls that ask people who they think will win. Indeed, in giving their expectations, some respondents may even reflect on whether or not they believe recent polling.

And in this election, too, voters’ expectations yielded a much clearer signal. A recent IPSOS/More poll showed that voters’ intentions were so evenly balanced as to be within the margin of error, even as the share of the population who expected the No vote to win held a robust 11-point lead over those expecting a successful Yes vote. Lesson: The electorate knew who would win, even as most pollsters failed to ask them.

The lessons here, of course, apply to American politics as well. Something to keep in mind as we gear up for 2016.

Dr. Wolfers continues:

But my real beef with the polls concerns how badly they’ve failed at making useful long-run forecasts. Predicting what will happen tomorrow is never that hard, while predicting what will happen in several months or years is not only difficult but also much more useful.

I encourage you to read his entire column, which you can find here.

— Michael R. Strain is a resident scholar and economist at the American Enterprise Institute. You can write to him on Twitter at twitter.com/MichaelRStrain.

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