This is my last post before the US midterm elections on Tuesday, so I’ll leave you with a prediction for what’s coming.
Who is the best predictor of elections? Nate Silver at FiveThirtyEight has had a pretty good run since 2008 using weighted polls. Ray Fair, an economics professor at Yale has a venerable and well-credentialed model based on fundamentals. I typically favor prediction markets, because they incorporate a wide range of views weighted by how willing people are to put their money where their mouth is, and traders are able to incorporate other sources of information (including predictors like FiveThirtyEight). But which prediction market should we trust? There are now many large prediction markets, and the odds often differ substantially between them.
When there are many reasonable ways of answering a question or looking at a problem, it can be hard to choose which is best. Often the best answer is not to choose- instead, take all the reasonable answers and average them. Dan Gardner and Philip Tetlock call this approach Dragonfly Eye forecasting, since dragonfly’s eyes see through many lenses. So what does the dragonfly see here?
Lets start with the US House, since everyone covers it.
- FiveThirtyEight’s latest forecast shows that Republicans have an 85% chance of taking the House; it shows a range of possible outcomes, but on average predicts that Republicans win the popular vote by 4.3% and take 231 House seats (substantially over the 218 needed for a majority)
- The Fair Model predicts that Democrats will win 46.6% of the two-party vote share (leaving Republicans with 53.4%). This has Republicans winning the popular vote by 6.8%, a moderately bigger margin than FiveThirtyEight. The reasoning is interesting; the economy is roughly neutral since “the negative inflation effect almost exactly offsets the positive output effect”, so this is mainly from the typical negative effect of having an incumbent party in the White House.
- Prediction markets: PredictIt currently gives Republicans a 90% chance to take the House. Polymarket gives them 87%. Insight Prediction also gives them 87%. Kalshi doesn’t have a standard market on this, but their contest (free to enter, 100k prize) predicts 232 Republican seats.
Its a bit tricky to average all these since they don’t all report on the same outcome in the same way. But the overall picture is clear: Republicans are likely to do well in the House, with an ~87% chance to win a majority, expected to win the popular vote by ~5.55% and take ~232 seats.
The Senate is closer to a coin flip and harder to evaluate.
- FiveThirtyEight gives Republicans a 53% chance to win a majority (51+ seats for them; Democrats effectively win if the Senate stays 50-50 since a Democratic Vice President breaks ties for at least 2 more years). The most likely seat counts are 50-50 or 51-49, but confidence intervals are pretty wide and 54-46 either direction isn’t ruled out.
- The Fair Model doesn’t make Senate predictions, only House and Presidential predictions.
- Prediction markets: PredictIt gives Republicans a 70% chance to win a Senate majority, probably with 52-54 seats. PolyMarket gives Republicans a 65% chance, as does Insight Prediction. Kalshi predicts 53 Republican seats.
Overall we see a much higher variance of predictions in the Senate; a 17pp gap between the highest (70%) and lowest (53%) estimates of Republican chances, vs just a 5pp gap for the House (90% to 85%). This shows up with the seat counts too; everyone agrees there’s a substantial chance Republicans lose the Senate, but if they do win, it will probably be by more than one seat. The average estimate is ~52 Republican seats. FiveThirtyEight and PredictIt agree that the closest Senate races will be Georgia, Pennsylvania, Arizona, Nevada, and New Hampshire (though they rank order them differently), so those are the races to watch.
Forecasts for governors aren’t as comprehensive, but FiveThirtyEight predicts we’ll get about 28 Republican (22 Democratic) governors, while PredictIt expects 31+ Republicans; I’ll split the difference at 30. Everyone agrees that Oregon is surprisingly competitive because of an independent drawing Democratic votes. The biggest difference I see is on New York, where PredictIt gives Republican challenger Lee Zeldin a real chance (26%) but FiveThirtyEight doesn’t (3%).
Overall forecast: moderate red wave, Republicans take the House and most governorships, probably the Senate too. But if they lose anything it is almost certainly the Senate.
These forecasts seem about right to me. Democrats are weighed down by an unpopular (-11) President and the highest inflation in 40 years. This would lead to a huge red wave, but Republicans have their own weaknesses; an unpopular former President lurking in the background, and the Supreme Court making a big unpopular change voters blame them for. This shrinks the red wave, but I don’t think its enough to eliminate it. The effect of Roe repeal is fading with time, and the unpopular Biden is more salient than the unpopular Trump; Biden is the one in office and is more prominent in media coverage. Facebook and recently-acquired Twitter may be doing Republicans a favor by keeping Trump banned through Election day. But if he drags Republicans down anywhere, it will be the Senate, where candidate quality (not just party affiliation) is crucial and his endorsements pushed some weak/weird/extreme candidates through primaries. We’ll also see this “extremist” Trump effect (abetted by cynical Democratic donations to extreme-right candidates) dragging down Republicans in some key governor’s races like Pennsylvania, where Democrats are now 90/10 favorites..
Im going to be that guy and ask… do these models factor in cheating? 2020 was just far from normal with counties won it really is hard to believe there wasn’t a good amount of cheating in the bid generally liberal cities.
The 538 and Fair models don’t. Prediction markets could, I’m sure some traders do, but its hard to know how many.