How Likely is 'President Donald Trump'? Apparently 5.2 Percent

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According to Intrade.com, at least. But don't scoff--these prediction markets are eerily accurate.

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Reuters/Joshua Roberts


As you wake up on the morning of November 7, 2012, it takes a split second to remember: Donald Trump was elected president last night.

It's a fairytale for some and a nightmare for others. But what are the odds?

Well, according to Intrade.com, the chances of Trump becoming president are 5.2 percent. Prediction markets like Intrade are transforming the way that we forecast tomorrow's news. Speculators can trade futures contracts on everything from political earthquakes, like the U.S. attacking Iran, to actual earthquakes, like a magnitude-9.0-or-higher quake occurring before the end of the year.

Prediction markets take advantage of the wisdom of crowds by aggregating the information of traders and assimilating their collective knowledge.

Prediction markets take advantage of the wisdom of crowds by aggregating the information of traders and assimilating their collective knowledge.

These markets can be eerily accurate. In the 2004 presidential election, for example, the market accurately estimated the winner of every state. Whereas several opinion polls had John Kerry winning Florida, the markets correctly foresaw a George W. Bush victory in the Sunshine State. Again, in 2006, the market accurately predicted every Senate result.

But prediction markets also encounter the occasional snafu. The contracts are designed to be "yes/no" propositions: like, will Trump win in 2012? Election results are easy to verify. But in 2006, one contract asked whether North Korea would launch a missile outside of its airspace. In July 2006, Pyongyang launched just such a missile. But the contract didn't pay out because the small print required confirmation by the U.S. Department of Defense. The White House press secretary said a launch had happened, but Defense never confirmed because it was considered an issue of national security. Cue many irate traders.

Some markets can prove politically explosive. In 2003, the Department of Defense developed a $3 million futures market to predict assassinations, coups, and terrorist attacks in the Middle East. After a congressional backlash, the plan was shelved. Deputy Defense Secretary Paul D. Wolfowitz said, "I share your shock at this kind of program ... it is being terminated."

Still, for those upset about missing an opportunity to profit from catastrophe--don't fear. Intrade allows a bet on whether "a successful WMD terrorist attack [will] occur anywhere in the world before midnight ET 31 Dec 2013." The current probability is 28 percent.

Perhaps political correctness--or simple human decency--prevents people from wagering on Obama resigning from the presidency, or dying in office. But there is a workaround, by betting that Joe Biden will be elected president in 2012 (0.6 percent).

Another issue is that in prediction markets, there is an opportunity to manipulate the contract prices, and therefore the apparent probability of an event. If Trump's supporters purchased Trump 2012 contracts en masse, it would boost his seeming chances of winning. In a world in which being seen as the winner can be self-fulfilling, the idea is not as crazy as it sounds.

And are prediction markets even legal? Good question. Intrade is based in the Republic of Ireland, and the legal status of prediction markets in the United States remains murky. Is it gambling or is it more akin to investing in the stock market? The jury is out.

So what do the Intrade tea leaves have in store for us?

Well, many of the current odds seem plausible enough, like the 70-percent chance that Muammar Qaddafi will be out of office by the end of the year.

Other probabilities appear a little skewed. Obama is only given a 59 percent chance of winning reelection in 2012. This strikes me as a little low, given that Obama has the advantage of incumbency, he likely won't face a serious primary challenger, the economy is improving (albeit slowly), the killing of Bin Laden may provide a small but permanent lift in the polls, and the Republican bench is lacking in star appeal.

Meanwhile, Trump's 5.2-percent chance of becoming president is surely generous and puts him roughly on a par with Tim Pawlenty.

Sarah Palin's star may have descended recently, but does she really have the same odds of becoming president as Ron Paul (1.4 percent)?

The occasional market doesn't make sense. The probability of a U.S. and/or Israeli airstrike against Iran by the end of June is 4.9 percent. But the odds are just 2.5 percent before the end of September--even though this is later.

I could be wrong and the market right. Or perhaps, pointing out these skewed figures is exactly how the market corrects itself.

Of course, if the markets do become accurate enough at predicting elections, none of us need bother to vote. That might be just what Trump needs to sneak home.

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Dominic Tierney is a correspondent for The Atlantic and an associate professor of political science at Swarthmore College. He is the author of How We Fight: Crusades, Quagmires, and the American Way of War. More

Dominic Tierney is associate professor of political science at Swarthmore College, and a senior fellow at the Foreign Policy Research Institute. He completed his PhD in international politics at Oxford University and has held fellowships at the Mershon Center at Ohio State University, the Olin Institute at Harvard University, and the John F. Kennedy School of Government at Harvard.

He is the author of Failing to Win: Perceptions of Victory and Defeat in International Politics (Harvard University Press, 2006), with Dominic Johnson, which won the International Studies Association award for the best book published in 2006, and FDR and the Spanish Civil War: Neutrality and Commitment in the Struggle that Divided America (Duke University Press, 2007).

His latest book is How We Fight: Crusades, Quagmires, and the American Way of War (Little, Brown 2010), which Ambassador James Dobbins, former Assistant Secretary of State for Europe, described as "A great theme, beautifully written and compellingly organized, it's a fitting update to Russell Weigley's classic [The American Way of War] and an important contribution to a national debate over the war in Afghanistan which is only gathering steam." (More on Facebook.)

Dominic's work has also appeared in The New York Times, The Los Angeles Times, TIME.com, and on NPR.
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