Gambling, understood as the wagering of money (or, indeed anything of value) on an event whose outcome is uncertain, is an activity with deep roots in human history. Memorably, the Bible’s account of the crucifixion features a description of soldiers gambling for Jesus’ clothes (John 19:23). While a wide range of aspects of gambling are potentially of interest to social scientists, my research in this area builds on the basic intuition that odds offered on gambling markets inform us about participants’ perception of the likelihood of possible outcomes for a given event.
While traditional forms of gambling like dice, casting lots, or roulette are games of chance in which the likelihood of a given outcome is simply a matter of statistical probability, most gambling markets focus on events where some outcomes are known to be more likely than others – for example a game of football between two teams with well-established strengths and weaknesses. In such markets, odds are offered by bookmakers (or ‘layers’ in the case of gambling exchanges) on the various possible outcomes. ‘Long’ odds, which offer a high return, tend to be offered on (perceived) unlikely outcomes, while ‘short’ odds, which only offer a very small return, indicate that an outcome is considered likely. Furthermore, odds on offer vary over time as new information becomes available.
My work leverages the fact that most contemporary online bookmaking and gambling market websites offer odds on political outcomes. I have recently submitted a funding application to the Arts and Humanities Research Council (AHRC) in the UK (the ‘What are the Odds?’ project) that will gather and analyse gambling market data concerning elections and referendums, the key means by which citizens influence policy in representative democracies. Because these odds are published online, it is possible to gather them automatically, and to compile records of how the markets fluctuate over time. However, gathering and organising such data is not straightforward, especially given the number of sites offering political betting markets – each site has a specific format and features, all of which must be taken into account. Thus, ‘What are the Odds?’ is a collaboration between political scientists and computer scientists, and a key technical goal is to create an open source Information Gathering Tool (IGT), designed to allow both the research team and other researchers to generate datasets capturing minute-by-minute shifts in online political gambling markets.
From an academic viewpoint, online markets provide unique data about the shifts that take place during election campaigns. Such shifts are currently measured via polling data – however, polls are highly expensive, tend to be conducted at irregular intervals, and polling houses differ in sampling and weighting methodologies. Online gambling markets provide free, minute-by-minute snapshots of outcome likelihoods during a campaign that are all generated by the same mechanism. Also, while public opinion information tends to focus on national-level outcomes, online gambling markets are often available for individual candidates within their respective constituencies – making them a rich new resource for campaign scholars.
Bearing in mind the wide range of interests of readers of this blog, it’s important to point out that the benefits of analysing online gambling markets for social scientists extend beyond the study of campaigns and elections. Contemporary online betting markets cover a wide-ranging set of politically and socially-relevant events, from the collapse of governments, to the predicted leaders of political parties, to more ‘security’ specific issues such as the likely country of residence of the U.S. whistle-blower Edward Snowden by January 2014. Even ‘novelty’ markets on outcomes like the winner of the next Eurovision song contest cover events that appear trivial at the surface level but which have nonetheless been examined by social scientists.
Certainly, such markets are not perfect predictors of the future – one of my main findings in looking at constituency-level markets is that a biased perception of likelihood in instances in which an outcome is uncertain – known as the ‘favourite-longshot bias’ - is observable. In simple terms people under-estimate the likelihood that favourites will win, while they over-estimate the chances of rank outsiders. Nonetheless, online gambling markets provide information that is: 1) generated by individuals who back their opinions with cash, 2) available for an ever-growing number of political and social topics, and, 3) most importantly, free for any researcher who develops the skills to harvest it!