On this blog (here, here) there has been a great deal of attention to the use of political markets as a vehicle for predicting electoral outcomes. But are political markets also useful for understanding electoral consequences?
Intrade has a number of contracts that are either explicitly or implicitly related to the winner of the presidential election in 2008. For example, there are conditional contracts that explicitly link the winner of the presidential election and the predicted level of U.S. economic growth. Although the contracts are new and there has been light volume, there are contracts that pay off if Hillary Clinton is elected president and economic growth is at least 2.5% over the next three years. Likewise, there are contracts that pay off if John McCain is elected president and growth is at least 2.5%. Similar contracts exist for all of the major candidates and for other important outcomes (e.g. crime rates).
By comparing these contracts, we might be able to discern why voters vote the way they do. Even more important, if the contracts had the volume to produce reliable predictors, voters could employ this information as a short-cut for making electoral decisions. Who needs parties?
If one reads the language associated with the contracts, Intrade makes clear that the contracts were suggested by Politimetrics. Politimetrics is run by a research group at the University of Westminister’s business school. So my hunch is that more information will be coming soon to a journal near you.