From now to the election, Obama’s economic record is set in stone (Originally posted on Yahoo!'s "The Signal" Blog)

June's tepid job growth, which led to no change in the unemployment rate, prompted the usual sour notes over for President Barack Obama's reelection chances. While the news is unquestionably bad for the president, the big picture is better for him than it may seem. In 1992, the economy added 379,000 jobs in the first half of the year. In 1996, when Clinton won reelection, the economy added 1,439,000 jobs in the first two quarters, and in 2004 it added 1,183,000 jobs in the same period. The economy has added 902,000 jobs in the first six months of 2012-not has high as Clinton or the younger Bush, but well over twice the growth during the first Bush's reelection campaign.

For the Obama campaign, this is a mixed blessing. While the President's economic numbers are not as bad as they may seem, his record is also largely set in stone. If history is any guide, neither a collapse or an economic miracle at this point will make much difference with an electorate whose mind is increasingly made up.

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Is the healthcare decision a failure for Intrade? Maybe not (Originally posted on Yahoo!'s "The Signal" Blog)

Prior to the ruling, there was no meaningful correlation between the healthcare decision and the presidential election. There was no discernible impact on Obama's reelection odds, for example, from the major shock in the likelihood of the Supreme Court ruling after the oral arguments. Now, we finally see that relationship: After the decision, Obama's odds of reelection ticked up a few points. The political markets-which are considerably more precise than the judicial pools-clearly see this a political victory for the White House, albeit a slight one that could evaporate quickly.

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Supreme Court could disrupt prediction markets with nuanced decision on ACA (Originally posted on Yahoo!'s "The Signal" Blog)

Many people have money riding on the Supreme Court's verdict on the Affordable Care Act, which is expected Thursday, from health care executives to 24-year-olds hoping to stay on their parents' insurance a few more years. But none have a more direct financial interest in the decision than those who have gambled on the outcome on Intrade.com. The price on the site currently rests at a 75 percent chance that the court will overturn the individual mandate provision at the center of the case. When the court issues its decision, those who placed bets will find out if they won or lost-probably.

Situations like this test the strength of the online prediction markets in two ways. First, it can be tricky to define court decisions in a way that's precise enough to make it clear who won, particularly if the court takes a surgical approach to the law. Second, the crowd is less precise when it assesses the judgments of nine secretive people, compared to predicting the outcome of a popular election.

First, there's the difficulty in deciding what to bet on. The Affordable Healthcare Act consists of many different initiatives packed into one large law. At the core is the individual mandate requires that all Americans have healthcare or pay a tax. Several additional provisions stand out. The law requires insurers make insurance available to people with pre-existing conditions, expands Medicaid eligibility, sets up health insurance exchanges, and allows dependents to stay on their family's health insurance through their 26th birthday, to name a few. It would be interesting to see how the wonkiest gamblers predict the fate of any of these provisions. But it would be a nightmare to write a legal contract in a way that would make it clear who won and who lost under the almost infinite possibilities available to the court.

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Can Republicans take the Senate? The odds are in their favor (Originally posted on Yahoo!'s "The Signal" Blog)

With the unrelenting focus on every aspect of the fight for the White House, it's easy to forget that the Senate is also up for grabs on Election Day. In fact, it could be the presidential election that determines the upper body's control: If the Republicans win a net total of three seats, the Senate will be divided 50-50. In that case, control will go to the party that wins the presidency. (If you need an eight-grade civics refresher, this is because one of the vice president's few official duties is to break a tie.)

Currently, the Democrats control 54 votes: 51 Democratic senators, two independent senators who caucus with them, and one vice-president. But the way the dice fell does not favor them: Democrats control 23 of the 33 Senate seats that are up this cycle, giving them much more territory to defend and many fewer opportunities to pick up seats. Of those 23 races, seven are open seats (i.e., the Democratic caucusing member is leaving the senate), while four of the 10 Republican seats are open.

The prediction markets are aware of this, of course, which is why the odds that Democrats will retain their majority currently rest at 41.5 percent. That's a major improvement for them since the beginning of the year, when their odds clocked in at 25 percent.

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Gambling on war: The dark side of prediction markets (Originally posted on Yahoo!'s "The Signal" Blog)

Prediction market-based forecasts place the likelihood of a strike on Iran's nuclear facilities in 2012 by the United States or Israel at 33 percent. This likelihood of conflict in Iran is down in the last three months, which we expect to see as the number of days left in the year dwindles and the expiration of the contract approaches. The number should trend toward zero every day there is no airstrike and no new development in the conflict. The main jump in the odds appeared in early March, coinciding with information that Iran had increased itsproduction of higher-grade enriched uranium. Those odds came down quickly as stalled talks with Iran resumed within days.

In addition to contemporary events, there's a historical precedent here that could inform the odds. In 1981, when Saddam Hussein was building a nuclear facility that Israel thought could help Iraq create nuclear weapons, Israel bombed the reactor. It is still unclear whether Iraq was actually trying to develop nuclear weapons and, if it was, whether the attack slowed it down. Similar questions arise with regard to Iran, where there is disagreement over what it is attempting and to what degree an attack would deter it if it is pursuing a weapon.

In Syria, meanwhile, the brutal massacre of more than 100 Syrian civilians last week has led to a 10-point jump in the odds of regime change, which now stands at 43 percent. President Bashar Assad has been leading a violent crackdown of his people since the uprising began in the spring of 2011.

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Save the American Community Survey! (Originally posted on Yahoo!'s "The Signal" Blog)

The purpose of the census, as outlined in the Constitution, is ostensibly to allot House of Representatives members. But it also provides an essential snapshot of the population. In modern society, however, the demographics of the country change far too rapidly to capture adequately in a decennial survey. That’s why the Census Bureau also conducts an annual poll of a large sample of the population, known as the American Community Survey, to fill in the gaps in the data. Now, the House of Representatives is threatening to cut this essential product on the basis that it violates one’s privacy.

Eliminating the ACS would be devastating to the economy. Just as political operators use polling data to guide the deployment of resources, governments and businesses use the data to decide how to invest on a much larger scale. A business involving transportation may need to measure a sample of commuters by distances and types of vehicles. A business involving construction may need to determine the sample of homeowners and renters by years of occupancy, and how they shifted over the last few years. Businesses of all sizes rely on its data to make investment decisions, meaning the United States recovers every penny invested in the survey in many times over in economic growth.

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The rational case for why Obama supported gay marriage when he did (Originally posted on Yahoo!'s "The Signal" Blog)

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.

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Pay no attention to the pollster behind the curtain (Originally posted on Yahoo!'s "The Signal" Blog)

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.

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Romney’s odds in Illinois safe as polls open (Originally posted on Yahoo!'s "The Signal" Blog)

Mitt Romney is poised to capture an easy victory tonight in the Illinois primary. The prediction markets currently give the former governor a 97.4 percent chance of winning the state, with Rick Santorum trailing at just 3.2 percent. We've seen Santorum overcome long odds before, but not at this steep of a disadvantage going into the day.

The following chart shows the progression of our forecasts, compared with the poll-based forecast that the New York Times' Nate Silver publishes on the FiveThirtyEight blog:

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NCAA Tourney: Kentucky is the favorite team and East is most wide-open region (Originally posted on Yahoo!'s "The Signal" Blog)

Kentucky is the top ranked NCAA basketball team in the country and the clear favorite to win the tournament at 26.7 percent odds. Those are tremendous odds, given that the team has to win six straight games against the best teams in the country (if you county an opening round game against 16-seed Western Kentucky).

The presence of Kentucky makes the South region the most dangerous for other top ranked teams: No. 2 Duke, No. 3 Baylor, and No. 4 Indiana all have the lowest likelihood of winning the title compared with the other teams of similar rankings.

The East is the most wide-open region due to the ineligibility of top ranked Syracuse's start center, Fab Melo. Second ranked Ohio State is 12.1 percent likely to win the tournament, the highest odds for a team not in the top seed. Fifth ranked Vanderbilt is the most likely seed outside the top 4 to escape their region.

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