The federal election has officially kicked off, and just in time. The NHL season doesn’t start until October and hockey pool enthusiasts have nothing to talk about.
Election pools are a lot of fun. You can compete with friends and family to predict how many seats each party will get, spiced up with side bets on the electoral fate of prominent politicians. Money has even been known to change hands.
If you want to dive even deeper into the fun, you can sign up for the University of British Columbia’s federal election stock market, run by UBC’s Sauder School of Business. You can put real money where your mouth is by buying or selling “shares” in political parties.
You can go “long” on a political party, and end up making money if they do better than today’s market consensus. Or you can “short” a party you think is over-rated in the polls.
UBC doesn’t make any money from the market. It’s a teaching exercise based on a long-standing economic theory that markets are good at predicting outcomes because the price at any given moment is formed by the opinions of large numbers of people who have money at stake. Legendary economist Friedrich von Hayek described markets as “mechanisms for collecting vast amounts of information held by individuals and synthesizing it into a useful data point.”
Economists have tried the predictive market concept on elections, court case outcomes, Oscar winners, climate change predictions and more. The “wisdom of the crowd” often—but not always—turns out to be more accurate than experts. “The UBC Election Stock Market has consistently predicted election results as well or even better than pollsters,” says Associate Professor Werner Antweiler, who runs the project.
So let’s try it out. I have given two fictitious personas $100 each to invest in the UBC market, with any profits going to charity.
Constance is an oil-and-gas engineer who is convinced Canadians will come around to the Conservative Party’s “It’s time for you to get ahead” economic plan. Furthermore, she is convinced that Canadians will sour on the incumbent as the campaign proceeds, and that the Liberal Party will shed votes to the Greens, NDP and Conservatives.
Therefore, she is going long on the Conservatives, Greens and NDP and short on the Liberals in the UBC “Seat Share Market.” In this market, you predict what percentage of seats in the House of Commons each party will win. On Wednesday, as this column was written, she bought 100 shares in her “long” parties and sold 100 shares in the Liberals, reinvesting the proceeds in more Conservative shares.
For example, the market price of 100 Conservative shares was $38.56. If they win 38.56 per cent of the seats in the House of Commons, the pay off will be zero. If they win a majority government, with say 55 per cent of the seats, Constance will make the difference or $16.44.
Louie, is a professor who is a big fan of the Liberal government’s Canada Child Benefit program and its impact on child poverty. He thinks that as voters get closer to election day, they’ll remember this and solidify behind the Liberal Party.
He is going long on the Liberals. But he isn’t sure how the votes will spread out across different constituencies, or how surges in the Greens or slumps in the NDP vote might affect Liberal MPs in specific ridings. So he is going to invest in another UBC product, shares in the national popular vote.
In the 2015 election, the Liberals got 39 per cent of the national vote. On Wednesday morning, the price of a Liberal share in this market was 34 cents. This implies the Liberals getting 34 per cent of the national vote. This is in line with many polls, but Louie thinks the Liberal vote is undervalued. He bought 300 shares for about $100.
There are lots of useful resources to inform your electoral speculation. While media headlines still often refer to the results of individual national polls, the cognoscenti spend most of their time looking at so-called poll aggregator websites.
Pioneered by Nate Silver in the United States, this approach combines all publicly available polls and layers on some sophisticated statistical modeling. Each aggregator uses a slightly different methodology, but most account for the historic biases in particular polling companies and how changes in the national averages for each political party filter into different provinces and ridings.
All of this minimizes the damage a rogue poll can do.
The more prominent poll aggregators are Calculated Politics, 338Canada by physics professor Philippe Fournier and Poll Tracker by Eric Grenier at the CBC.
As of Wednesday morning, Calculated Politics had the Liberals and Conservatives tied at 34.9 per cent of the national vote, with the NDP at 12 per cent and the Greens at 9.4 percent.
However, because of how the vote splits among ridings, their model predicts the Liberals will win more seats in our first-past-the-post system. The mid-point of their estimate for the Liberals is 173 seats, down from their 2016 results but still enough for a majority.
Calculated Politics also provides a range of likely outcomes, not just a single headline estimate. For the Liberals, they estimate it is 90 per cent likely that their seat results will range from 137 to 184. This implies that the Liberals have a greater than 50 per cent chance of winning a majority.
Meanwhile, for the Conservatives, their mid-point estimate is 131 seats, ranging from 112 up to 158.
The website 338 Canada has slightly different figures, but also finds that a Liberal majority is more than 50 percent likely. Meanwhile, they put the odds of a Conservative majority at 12 per cent and a Conservative minority at 18 percent.
Of course, these sophisticated models are only as good as the polling data going into them. As people ditch their landlines and stop answering cold calls from pollsters, it is getting steadily harder to deliver a quality poll. Nonetheless, the poll aggregators are the best source of intelligence you’ve got if you’re not inside one of the party’s war rooms.
Elections are important, and I encourage you to vote. And put at least as much effort into an election pool as you do for your hockey pool. I’ll keep you posted on how Constance and Louie do.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.