Election Gambling History

While it is sometimes claimed that political betting markets are a recent invention, they clearly are not.  Rather it is the absence of such markets during the mid- and late-20th century which is the exception.

Rhode and Strumpf illustrate their point:

Quotes of betting odds on papal succession appear as early as 1503 when such wagering was already considered "an old practice." … Aversion to such activities eventually led Pope Gregory XIV, in March 1591 to ban on pain of excommunication all betting on the outcome of papal elections, the length of the papal reign, or the creation of cardinals. …


"As far back as the reign of William the Third [~1700], foreigners had observed that, on matters great and small, the only sure test of English opinions was the state of the odds." A common phrase was "Bet or be silent." Wagering was generally legal under British common law, so long as it did not to lead to immorality or impolity. Bets about the outcome of events in war, over the death of political leaders, over court cases, or between voters over election results were illegal on these grounds.  In the Victorian and Edwardian periods, the British government increasingly attempted to limit gambling, especially among the working classes. …

Regarding the political scene in New York in the 1790s, Taylor, "The Art of Hook & Snivey," p. 1386 writes "the newspaper office became a kind of brokerage house for wagers. There a gentleman could leave a note or bond indicating what he would bet on a candidate; there a rival gentleman could agree to take up that note or bond or leave one of their own. ….

In the aftermath of the 1844 contest, the [US] Whigs protested that a combination of gamblers favoring Polk had committed voting fraud using the winnings from election bets to defray their expenses. New York Governor Silas Wright complained vigorously in his 1845 message to the state legislature of "the extensive and rapidly increasing practice of betting upon elections, and the interested and selfish, and corrupting tendencies which it exerts upon the election itself." Wright urged the legislature to make election betting a criminal offense. The evangelical reform movements associated the "Second Great Awakening" also preached long and hard against election betting.

This history seems discouraging.  Yes election betting has often been legal, but until election markets can move beyond mere horse-race forecasts to demonstrate larger social value (as with presidential decision markets), they will remain marginal and vulnerable to backlashes.

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  • Carl Shulman

    If decision markets reveal that the plans of the party in power are counterproductive they will demonstrate social value and backlash simultaneously.

  • Doug

    I guess betting on whether a vampire bite is going to be effective would be out, then? I suppose the scene at the end of Indiana Jones and the Last Crusade could be considered a bet leading to immortality.

  • http://profile.typekey.com/barrkel/ Barry Kelly

    Maybe I’m missing something, but I didn’t notice a lack of betting shops in the latter part of the 20th century. Are you mistaking US history for world history?

  • http://hanson.gmu.edu Robin Hanson

    Carl, sure powers could want to lash out at markets that don’t favor their views, but the more embedded in society are such markets the less they’d be able to oust them. Stock markets now often say things those in power don’t want to hear, but no one considers banning them.

  • http://ynglingasaga.wordpress.com Rolf Andreassen

    “Wagering was generally legal under British common law, so long as it did not to lead to immortality or impolity.”

    I must say I’m rather impressed with the power of this wagering. If this is what betting markets can do, clearly we should set some up forthwith! I don’t understand why its advocates are not making this argument.

  • http://occludedsun.wordpress.com Caledonian

    Stock markets now often say things those in power don’t want to hear, but no one considers banning them.

    Untrue — I’ve heard plenty of people talk about banning them.

    It’s the people who believe (rightly or wrongly) that stock markets constitute an exploitable resource that they can make money with who don’t talk about banning them. People who do not share that belief, in my experience, often consider such banning to be desirable. They’re just not likely to be in a position to do so.

  • Stuart Armstrong

    And the big question… how accurate were those old betting markets?

  • http://hanson.gmu.edu Robin Hanson

    Rolf, sorry, fixed the typo.

  • scott clark

    I’ve also heard a few people talk of dismantling the NYSE. A public high school biology teacher as the leader of that chorus of banning advocates, if I remember correctly. I proceeded to defuse their position, my success remains in doubt.

    Also, by banning shortselling, and forcing changes in the firms capital structures, is the government not, in effect, dismantling the machinery of the financial markets in order that the markets spit out the message that most people would prefer? Not an outright ban, but moving in that direction.

  • http://ynglingasaga.wordpress.com Rolf Andreassen

    “Rolf, sorry, fixed the typo. ”

    Aw. It was much more entertaining the old way. 🙁

  • mjgeddes

    Best betting market I’ve found so far is the ‘Betfair’ betting exchange (UK-based), which offers perfectly fair (100% return to punter) odds, but takes a 2%-5% commision from net profits. Lots of punters and high liquidity, lots of betting on all sports and seem to be evolving into the de facto leading global prediction market:

    Betfair

    Got some tips for readers:

    Melbourne Cup (Nov 4th)- greatest horse race in the world: great odds on the Irish horses ‘Septimus’, and ‘Profound Beauty’, top European stayers – get on!

    Caulfield Cup (18th Oct) and Cox Plate (25th Oct)

    ‘Littorio’ at great odds for the Caulfied, but don’t count out the Aussie champ ‘Weekend Hussler’ in the Cox.

    Unfortunately Robin, Internet betting seems to be illegal in the US in most states, which is probably what is hampering the growth of prediction markets there.

    New Zealand on the other hand, just set up a new prediction market, in which a paper of yours was quoted:

    iPredict

    and in Europe and Australia you can’t walk down a city street without passing at least a few bet shops. Betting’s a way of life in Australia, and the whole nation stops for the running of the Melbourne Cup.

    As champions of capitalism, the States does seem to have some strange regulations at times…

  • John Maxwell

    Gamblers do extreme things to modify an outcome if they’ve got a lot of money at stake. So why not just put a cap on the amount of money people are allowed to bet? That would also prevent rich lunatics from exerting too much sway.

  • http://www.pandasthumb.org RBH

    “Bet or be silent.”

    When I was growing up that was phrased as “Put yer money where yer mouth is!”

  • Daniel Burfoot

    “Bet or be silent” is an awesome rationalist edict. If you’re not confident enough in your predictions to wager on them, they’re worthless.

    There are lots of people inventing all kinds of wacky theories to invent the crisis. But the people we should be asking about what caused the crisis are John Paulson, George Soros, and James Simon: the managers who made billions by predicting the crash. They are the ones who understand.

  • mjgeddes

    John,

    Proper betting exchanges (like ‘Betfair’) allow you to either ‘Back’ (bet for) or ‘Lay’ (bet against) an outcome. So in theory there should be equal numbers of fraudsters for and against an outcome, and they cancel each other out.

    Also, where fraud is at work, there is often meta-betting on the fraud : sure a result may be fixed, but punters don’t know which way, and they then bet on that 😉

  • http://www.hubdub.com Nigel Eccles

    The big problem here is that punters generally don’t care about ‘socially useful’ markets. They want short term markets about things they care about like sports or elections. If socially useful markets are going to work then there is going have to be a new way compensating knowledgeable punters.