That’s not quite right
Did passing healthcare reform help or hurt the chances of Republicans taking over the House? Nate Silver over at FiveThirtyEight looks at the relationship between the two Intrade contracts:
The chart below tracks the daily close of the ‘Obamacare’ contract at Intrade — which has been live since January 21st — and compares it against the contract representing a GOP takeover of the House. The correlation is positive (and statistically significant) but the magnitude of the effect is small: Intrade infers that Republicans would have had a 40 percent chance of taking over the House had the Democrats not passed Obamacare, but about a 47 percent chance now that they have.
I agree that you can say the correlation is positive. But you can’t conclude from this data that the magnitude is small. We’re humble here at SometimesRight. But, Nate, that’s not quite right.
Prediction markets aggregate knowledge at a particular time. And the key piece of knowledge to track here is sort of a hidden third variable–call it “potency of healthcare as an election winning issue for House Republicans” or “healthcare potency” for short. You’d be interested in measuring the slope of this line–that would tell you whether the magnitude is small or large. Of course, there isn’t an Intrade contract for healthcare potency, so you’re left to guess like everyone else.
But as long as we’re guessing, we can likely infer that both of these contracts would be positively correlated to healthcare potency. The Democrats effort to pass healthcare reform certainly kept the issue in the public eye. And House Republicans are more likely to go with a “repeal” campaign on health care reform, adding to the potency of healthcare to their overall election chances.
But how much more potent is the issue between January and today? Because when Scott Brown won Massachusetts, it was already obvious that the issue would be potent. The question is this: given our knowledge today, what is the relative additional contribution to healthcare potency–given the economy, jobs, Afghanistan, Iran, and the many other potentially potent election issues–to Republican’s chances of taking the House?
The fact that you could see any relationship at all between these two contracts implies that the movement in healthcare potency is fairly large, not small. That’s counter to Nate’s wisdom for Democrats: “if you told the Democrats that the price of passing their health care bill was to go from having a 40 percent chance of losing the House for two years to a 47 percent chance, do you think they would have done it?”
