Since Monday’s now famous Galaxy poll in News Ltd tabloids, Centrebet’s odds on who will win the next election have moved a little in the government’s direction. On Monday morning you would only get $1.69 for a Labor win, now it’s $1.72.

That sound you can hear is sheep dawdling after the latest poll. B-a-a-a-h.

Over the last few years there’s been an explosion of articles and academic papers spruiking the superiority of betting markets over opinion polls. Its genesis is economists who see Adam Smith’s invisible hand at work: a wondrous distillation, motivated by the dollar, of our collective knowledge about the upcoming election.

What rot. What you get is just distilled current received wisdom. And that received wisdom consists of some truths but also lots of woolly nonsense, all overlayed by the latest opinion polls.

If you had bet $100 in early 2001 on Howard surviving that year’s election you’d have got back more than $300. On the morning of New Zealand’s 2005 election, Centrebet was paying $2.10 for a Labour government.

Punters not too clever then, were they? They were, of course, following the opinion polls.

Proponents of the “betters know best” narrative often cite 2004 as their evidence. That was when the opinion polls usually had Latham and Labor ahead, while betting markets always favoured the government.

But that rests on a straw man: that opinion polls are supposed to be literally predictive. No-one, least of all the pollsters themselves, claims they are. Polls are instead imprecise dips in the public ocean (that get more precise as election day approaches).

Even before this week’s Galaxy, no-one seriously predicted Labor would win the next election by the 57 to 43 the polls were averaging.

Here’s something you can bet on. If the next polls show Labor’s gap increasing again, the betting money will follow. If they show a tighter election, money will move that way.

As I said, b-a-a-a-h.

Those current Centrebet odds imply a 54% chance of a Labor win and 46% chance of a Coalition one. This is probably about how the commentariat sees it also.

Personally, I reckon it’s closer to 65 to 35, but apparently I’m supposed to adopt the view of “the mob” instead.

Heeding the will of the majority is one thing, but that’s ridiculous.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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