Sunday, June 15, 2008

Tamino's Bet - Month Five

As has been noted in previous posts, Tamino has made a "bet" that global temperatures would continue to increase between now and 2015 in line with the 1975 to 2007 trend. The conditions of the bet for the year 2008 are as follows:

1. If the average global temperature anomaly, as measured by NASA GISS, equals or exceeds .7350 degrees Celsius, the "still-warming" side will receive one point.
2. If the average global temperature anomaly, as measured by NASA GISS, is less than or equal to .4035 degrees Celsius, the "not-warming" side will receive one point.
3. If the average global temperature anomaly, as measured by NASA GISS, falls between these two figures, both sides will receive zero points in 2008.

The May figures show a modest decline in the NASA GISS global temperature anomaly from April as well as a second, more modest, downward revision in March's global temperature anomaly from the previous month. There was also a .02 degree upward revision in the January 2008 anomaly. The May global anomaly was .36 degrees Celsius, .05 degrees lower than the April global anomaly of .41 degrees. The average NASA GISS global temperature anomaly thus far for the first five months of 2008 is .348 degrees Celsius. In order for the "not-warming" side to win a point in 2008, the average anomaly for the reminder of the year would need to be below .4431 degrees. My own forecast for the remainder of the year is for the global temperature anomaly to average .5113 degrees. Thus, I don't expect that the "not-warming" side will win the point in 2008. However, the threshold below which the "not warming" side would win the bet slowly creeps higher with each passing month.

Intrade Election Forecast II

If the perceptions of people risking their money are to be believed, Barack Obama's Electoral College margin over John McCain has increased over the past week. According to current prices for the derivatives for each of the 51 states and the District of Columbia on the Intrade trading platform, Obama now leads in New Hampshire and (by a razor thin margin) in Virginia. The addition of these two states gives Obama 306 electoral votes to 232 electoral votes for McCain.

As I noted last week, these derivatives are based on which political party will win the electoral votes in a given state. The "price" of the derivative is the perceived probability of the event taking place, that is, the price ranges between 0 and 100. The current "price" in a given state therefore reflects the market's perception of which candidate is ahead in a given state. For example, the current "price" for the Democratic candidate in New Mexico is 68.5, meaning that the perceived probability the Democratic candidate will receive more votes than the receiving Republican candidate in New Mexico is 68.5%.

The map below shows the market's perception of which candidate is ahead in each state as of June 14th:

Check back next week for the weekly update of this map.

Monday, June 9, 2008

The Electoral Map

Below is the electoral map assuming a perfectly even 50-50 divide between the two major candidates. Those states labeled as "weak Obama" are those states where Obama would likely win in a close election but for which his margin of victory would be less than five percentage points. Similarly, those states labeled as "weak McCain" are those states where McCain would likely win in a close election but for which his margin of victory would be less than five percentage points.

There are 12 states that lean weakly for either candidate. These states will be the battleground states in this upcoming election.

Obama would appear to have a very slight advantage in a close election since those states leaning to him in a close election have 272 electoral votes compared with 266 electoral votes for those states leaning to McCain in a close election.

Note that this map is very similar to one found on the New York Times web site. However, I have come up with the above map by developing a model that takes into consideration the change in Black and Latino populations in each state since the last presidential election and potential levels of support from each ethnic group for each candidate. In other words, I think the NYT map just about gets it right.

Sunday, June 8, 2008

Intrade Election Forecast I

Nothing helps to focus the mind like money. Intrade, the web site that creates derivative markets for various events, has created derivatives for each U.S. state in the upcoming presidential election. These derivatives are based on which political party will win the electoral votes in a given state. The "price" of the derivative is the perceived probability of the event taking place, that is, the price ranges between 0 and 100. The current "price" in a given state therefore reflects the market's perception of which candidate is ahead in a given state. For example, if the current "price" for the Democratic candidate in New Mexico is 55, the market is saying that the perceived probability of the Democratic candidate receiving more votes than the Republican candidate in New Mexico is 55%. In other words, the market would in this case perceive that the probability of the Democratic candidate winning the most votes in New Mexico would be higher than for the Republican candidate.

We can therefore use these probabilities to show the market's perception of which candidate is ahead in the upcoming U.S. presidential election. The map below shows the market's perception of which candidate is ahead in each state as of June 7th:

The market believes that Obama would win the election, if it were held today, by a margin of 289 electoral votes to 249 electoral votes. I'll be updating this map on a weekly basis.

Thursday, June 5, 2008

The Meaning of Barack Obama's Victory

While Barack Obama's victory over Hillary Clinton is being hailed as significant because a previously unbreachable racial barrier has effectively been dissolved, of potentially greater long term significance is the fact that his triumph essentially completes the Democratic Party's transformation from being the champions of America's social and economic outsiders into that political party representing America's social, intellectual and economic elite.

If you are skeptical of this claim, please look at the map below. This map shows the tendency of each state to vote either Republican or Democrat in the 1916 presidential election. That is, the map shows how each state would have voted in that particular election had the national popular vote split exactly 50%-50%.


The map somehow seems familiar because the areas in blue stretch from the "conservative" south through the "conservative" Rocky Mountain states (with the exception of New Mexico). Meanwhile the "liberal" northeast and the north are solidly red, except for ("conservative") Ohio and two of the three "liberal" Pacific coast states are also red. It all seems familiar - until you realize that the blue states are Democratic leaning while the red states lean Republican.

In fact here is the 2004 presidential election map of Democratic and Republican leaning states:

The 2004 map is, with a few exceptions, a virtual negative image of the 1916 map. The once solidly Republican north and northeast has become solidly Democratic while the once solidly Democratic south and mountain west has become solidly Republican. But although the colors have reversed and although 88 years separate these two elections, the pattern is essentially the same.

Why does this pattern exist, what does the pattern have to do with Barack Obama and what does it tell us about the likely shape of the upcoming general election? Those states leaning Democratic in 2004, taken as a whole, represent America's economic, cultural and intellectual elite. America's eight largest urban regions (New York, Los Angeles, Chicago, Washington, San Francisco, Philadelphia, Boston and Detroit) are located in these blue states. The blue states contain the most important centers of finance, media, technology and the arts. Of the top 26 rated universities in America, 19 are located in these blue states. As I have shown in previous posts the core of Barack Obama's support is concentrated in large urban areas, particularly among better educated voters (with the exception of Black voters). Exit polling suggests that higher income Democratic primary voters were much more likely to support Obama than were lower income voters.

Of course, Barack Obama is not the first Democratic presidential candidate whose core support is located in these northern and Pacific coast states that form America's elite. John Kerry in 2004 and Al Gore in 2000 were candidates whose appeal was primarily to urban elites. However, Barack Obama's base of support appears to be far more narrow than even these two (defeated) Democratic presidential candidates. In a very real sense, the rejection of Hillary Clinton (and of Bill Clinton) means that, at the national level at least, the Democratic party has in a very real sense become the party of the elite. How ironic it is that, Barack Obama, the first Black presidential nominee of a major political party, is in a very real sense the candidate representing America's elite.

What does this mean for the upcoming campaign? It means that Obama's electoral strategy will focus on holding the core blue states and battle for those one or two swing states that may decide the election if the popular vote is evenly divided. In upcoming posts I will show how the electoral college map will look like if the election is close.