Underwhelming New Ads from Obama, McCain

TPM has three new TV ads out today, two from the Obama campaign and one from McCain. Honestly, I think they're all pretty bad.

The first Obama ad, called "Still", criticizes John McCain as, basically, an old fart who can't use the internet or email and favors tax cuts for corporations. The ad's graphics are kind of crappy, so I assume it's web only. At least I hope for the Obama campaign's sake that it's web only, because I think it would be unwise to put this ad on the air.

I think the "can't send an email" thing mostly bothers young upscale liberals, not swing voters. Dissing McCain for not using email might actually backfire with seniors. And very unwisely, the ad pronounces that "things have changed in the last 26 years, but McCain hasn't." Certainly that undercuts another Obama message, which is that McCain sold out his "Maverick" principles to get the Republican nomination. In fact, "things have changed in the last 26 years, but McCain hasn't" sounds like something the McCain campaign would say to frame McCain as a Reagan Republican, not a Bush Republican.

The second ad ("Real Change") features Barack Obama talking to the camera, saying he's the candidate who will really bring change. This messaging is OK, but I'm not sure it's likely to have much impact; after all, McCain is out there saying essentially the same thing. Since the candidates have similar favorable ratings and are both associated with "change" or "reform" in the voters' minds, I doubt that either one saying "change" over and over is likely to matter.

The last ad ("Disrespectful") criticizes the Obama campaign for its own criticisms of Sarah Palin. Generally, I think whining about attacks against Sarah Palin is a bad idea, because it undercuts her image as a very strong woman who is unfazed by criticism. Mercifully, the ad does not claim that Obama's "lipstick on a pig" remarks were an attack on Palin.

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Sarah Palin, White Women Voters, and Abortion

Noam Scheiber over at the New Republic notes that, according to the most recent ABC News poll, John McCain has improved his standing among white women voters by 11 points since putting Sarah Palin on the ticket. Scheiber, however, caveats:

Once Palin's extreme anti-abortion positions become known (no exceptions for rape or incest!) and her halo wears off, I fully expect Obama to at least pull even among white women, which would give him a couple-point cushion in this poll.

Implicit here is an assumption that Palin's position on abortion particularly hurts her with women, or at least white women. Why would this be? One reason would be if women were more likely than men to support abortion rights; however, that's not true. Another possiblity is that pro-choice women are less willing to support pro-life (or strongly pro-life) candidates than pro-choice men are; i.e., that there's no aggregate difference in policy preference between men and women, but there is an aggregate difference in intensity of preference. That's plausible, but I wouldn't assume it to be so without evidence. Can anyone point me to polling data on that?

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What's the deal with Hillary on Intrade?

Warning: wonky post ahead...

I'm a fan of markets generally, and so I'm inclined to like the Intrade prediction market as a way to forecast the election. As a futures market, it asks the right question ("Who will win the election?") while polls ask the wrong one ("Who would you vote for, if the election were held today?"). Polls tend to overstate the importance of the most recent news cycle and are subject to systematic biases, most notably the "convention bounces" that follow the DNC and the RNC. There is debate about whether prediction markets are more accurate than polls; it's clear that they are better than unadjusted polls, but it may be equally good (or better) to adjust polls for known biases, which is the approach taken by the folks at FiveThirtyEight.

Here's a little background about Intrade: contracts on Intrade trade on a scale from 0.0 to 100.0. Each point represents ten cents. If you buy an Obama contract at 40.0, that means you pay $4 today to win $10 if he wins the election. Conversely, if you sell at 40.0, you receive $4 today and agree to pay $10 if Obama wins. The higher a number a candidate trades at, the more likely he is deemed to win the election. For note, the market prices are supposed to track percentage likelihood of winning, not the likely percentage of the vote the candidate will garner.

I see two key peculiarities in the recent activity on the Intrade market. Peculiarity one: the candidates have often been trading at a sum significantly over 100.0. Since the prices represent a candidate's odds of winning, the current trading prices for all candidates should add to 100.0, or a figure very close to it. Howeer, as of 1:37 PM today, here are the most recent prices for the three candidates that had contracts traded within the last day:

52.9 B. Obama
46.0 J. McCain
03.4 H. Clinton

That's a total of 102.3. For note, the bid prices also sum to more than 100 (currently 101.6). That means an arbitrageur could come in, receive $10.16 for selling contracts on all three candidates at the current bidding prices, and know he'd only have to pay out $10.00 on election day (because only one candidate can win), for a sure profit of $0.16 per contract.

So, why isn't arbitrage pushing the markets to an equilibrium where the candidate prices equal 100.0 in total (or, more specifically, one where the sum of the bid prices is always less than 100.0, and the sum of the asking prices is always more than 100.0)? One possible answer is that markets are pretty thinly traded, and there wouldn't be a lot of money to be made with an arbitrage strategy. Unfortunately, that points toward overall inefficiency in the market; because the amounts of money involved are not very high, time itself may impose significant transaction costs that interfere with accurate price movements.

Astute readers may have already spotted peculiarity two: that is, Hillary Clinton continues to trade at a price representing a non-trivial likelihood of winning the presidency. For note, there are a lot of candidates with a last trading price greater than 0.1: Mike Huckabee, for example, last traded at 0.2. However, Huckabee contracts are no longer actively traded, and that most likely reflects a final trade well before John McCain accepted the nomination at the RNC. Hillary contracts, however, retain moderate trading activity; indeed, just today, she has traded as low as 3.1 and as high as 4.1.

Why is her contract trading so high? The contract could be acting, morbidly, as a future on the likelihood of Barack Obama's ceasing to be the Democratic Party nominee for President, either through death or removal. However, there are several key problems with that interpretation:

1. Under this theory, the contract should fall in price with each day that Obama remains the Democratic nominee and the election draws nearer; however, the price had been relatively flat since Hillary suspended her campaign, and actually spiked in the last week. At the beginning of the month, she was trading below 1.5.
2. Such trading assumes that Hillary would be the replacement nominee for Obama. Now that Joe Biden is the VP candidate, he seems like a much more likely choice. However, Biden's contract is traded much more thinly than Hillary's (with no trades at all today) and last traded below 1.0.
3. 3.4 seems like an implausibly high price under this kind of thinking. That's especially true because the contract represents a three-part, composite probability: (1) that Obama ceases to be the nominee, (2) that Hillary is his replacement, and (3) that Hillary defeats McCain in the election. For the conjoint probability of all three events to be 3.4%, the probability of part (1) must exceed 3.4%, assuming that the conditional probabilities (2|1) and (3|1,2) do not equal 100%.
4. There is no similar actively-traded contract (say, on Mitt Romney) to reflect the possibility that John McCain ceases to be the Republican nominee. However, point (4) is weaker evidence, as it is plausible for the market to hold that the probability of a Republican win after McCain's removal as nominee is close to zero; as such, the possibility of McCain's death or removal would be included in the Obama contract price, not some other Republican's price.

So, why else could it be that this contract is still trading, and at such a high price? Are active Hillary supporters artificially driving the price up, either out of a desire to make their candidate look good or a mistaken belief that she might somehow still win? Because the Hillary trading is active but not heavy (much lighter than trading in Obama and McCain) some dedicated supporters could do this pretty cheaply. And, given the efficiency issues discussed above, they could probably do it unmolested by arbitrageurs who would otherwise bring the price down to reality.

One bonus for Intrade is that this explanation of peculiarity two might actually reduce the importance of peculiarity one. The high Hillary price is non-market, but it's not worth the time involved for arbitrageurs to exploit it. However, traders of McCain and Obama contracts are correctly disregarding the recent Hillary trades and treating her price as properly zero. Once you exclude prices on Hillary contracts, the McCain and Obama contracts are behaving as expected: that is, their total bid prices are less than 100.0, and their total ask prices are more than 100.0.

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Council Approves Congestion Pricing

In a 30-20 vote, the New York City Council approved a congestion pricing plan for Manhattan. Opposition to the plan had been fierce and this is a major coup for Mayor Michael Bloomberg and Council Speaker Christine Quinn.

I made a map (below) of the vote results by district. Green indicates a yes vote, red no; the yellow district's member was absent and the orange district is currently vacant.



The geographical distribution of votes was largely as expected: every councilmember from Manhattan voted yes, as did every member from the Bronx, where institutional support for congestion pricing is strong and significant MTA service improvements are promised with its proceeds. In the other outer boroughs, members voting yes tended to be either from (1) close-in districts with excellent public transit and few drivers to the CBD, or (2) specific areas that have been promised improved transit (e.g. Flushing, F-Train Brooklyn).

Members from other outer-borough districts tended to vote no; many of these districts have relatively poor public transit access and a higher concentration of drivers to the Manhattan CBD. The stereotypical drive-to worker in Manhattan may be an investment banker in a luxury sedan; however, many public sector employees in Manhattan get free or heavily subsidized parking and so are incented to (1) move to transit-poor neighborhoods in south Brooklyn, eastern Queens or Staten Island and (2) drive to work. For obvious reasons, these folks are not keen on the congestion charge, and their representatives on the council were most likely to oppose it.

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"Huge" Hawaii Turnout?

Over at The Plank, Barron YoungSmith calls turnout in Hawaii's caucuses "legitimately huge":

As previously noted, Hawaii caucus turnout has never been above 5,000. The Obama camp's pie-in-the-sky prediction was 18,000.

Final tally? 37,247.

Measured against previous Hawaii caucuses, this turnout certainly is huge. But Hawaii is a late-caucus state that ordinarily votes after the nominee has already been made clear. In most years, there is literally no good reason to waste your time caucusing in Hawaii. I don't think it's a very meaningful finding that many more people attended this year's relevant caucus than previous, irrelevant caucuses.

On the other hand, this year's caucus turnout is not huge compared to the size of Hawaii's electorate. Hawaii cast 231,708 votes for John Kerry in the 2004 general election. So, 2008 Democratic caucus turnout was 16.1% of that figure. Looking at figures I calculated previously, that's a bit higher than Minnesota (14.7%) and Nebraska (15.1%), and much higher than Kansas (8.4%), but significantly below early caucuses in Nevada (29.6%) and Iowa (30.6%). It's also way below primary state turnouts, from 37.7% in New Mexico to 86.3% in New Hampshire.

So, I think it's more accurate to say that Hawaii's turnout was a bit better than par for this year, for a caucus state, but not "huge."

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Wow...

I sure was wrong about Hawaii, huh?

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Veepstakes Gong Show: Haley Barbour

The Veepstakes Gong Show profiles spectacularly bad running-mate suggestions.

In Volume 4, we turn to Haley Barbour, former Washington superlobbyist, ex-chair of the Republican National Committee, and current two-term governor of Mississippi.

Whose hare-brained idea was this? Pretty much everybody's. National Review readers, for one; Lisa Schiffren, who's been collecting Veepstakes suggestions at NR, says Barbour is the suggestion she sees third most often, after Bobby Jindal and Tim Pawlenty. Marc Ambinder's readers are also pushing the idea. Fittingly for a superlobbyist, there is even a Draft Haley for Vice President PAC, which is currently seeking your donations to put this TV spot on the air:



Why might a sentient person, at first, think this idea makes sense? Barbour is a twice-elected governor of a southern state, and he's been widely praised for his administration's effective response to Hurricane Katrina. Also, Schiffren suggests that he's "immensely charming" and "very smart"-- valuable traits in any superlobbyist or vice-presidential candidate. (Actually, in one of the more dubious turns of praise I have seen in a while, Schiffren describes Barbour as follows: "Imagine if Trent Lott had been really smart.")

So why does this idea suck? Did we mention that Barbour's primary career was "Superlobbyist"? For nearly 20 years, he ran Barbour, Griffith & Rogers LLC, which Fortune named the most powerful lobbying firm in Washington in 2001. Today, BGR's clients include:

• Pharmaceutical companies and associations (Eli Lilly, GlaxoSmithKline, Pfizer, PhRMA, Wyeth)
• Oil companies (O2Diesel, Rompetrol)
  
• Health insurers and associations (The American Association of PPOs, UnitedHealth)
• A tobacco company (Lorillard)
• Various parties involved in the mortgage crisis (Citigroup, the Federal Home Loan Bank of Dallas, the Mortgage Insurance Companies of America)
  
• And, of course, overseas governments of dubious benevolence (Qatar, Serbia)

Needless to say, everybody loves a tobacco/oil/insurance/Serbia lobbyist.

Also, speaking of Haley Barbour being like Trent Lott: a 1982 New York Times story* on Barbour's failed Senate race of that year included this charming vignette:

The racial sensitivity at Barbour headquarters was suggested by an exchange between the candidate and an aide who complained that there would be 'coons' at a campaign stop at the state fair. Embarrassed that a reporter heard this, Mr. Barbour warned that if the aide persisted in racist remarks, he would be reincarnated as a watermelon and placed at the mercy of blacks.

That'll play in Peoria.

*Link is to a 2003 Boston Globe op-ed quoting the 1982 NYT article. The original article is available here, behind the Times' pay wall.

See previous Veepstakes Gong Show posts.

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