Historical Presidential Betting Markets

Abstract

Wagering on political outcomes has a long history in the United States. As Henry David Thoreau (1848Thoreau ( [1967, p. 36) noted: "All voting is a sort of gaming, . . . and betting naturally accompanies it." This paper analyzes the large and often well-organized markets for betting on presidential elections that operated between 1868 and 1940. Over $165 million (in 2002 dollars) was wagered in one election, and betting activity at times dominated transactions in the stock exchanges on Wall Street.Drawing on an investigation of several thousand newspaper articles, we develop and analyze data on betting volumes and prices to address four main points. First, we show that the market did a remarkable job forecasting elections in an era before scientific polling. In only one case did the candidate clearly favored in the betting a month before Election Day lose, and even state-specific forecasts were quite accurate. This performance compares favorably with that of the Iowa Electronic Market (currently the only legal venue for election betting in the United States). Second, the market was fairly efficient, despite the limited information of participants and attempts to manipulate the odds by political parties and newspapers. Third, we argue political betting markets disappeared largely because of the rise of scientific polls and the increasing availability of other forms of gambling. Finally, we discuss lessons this experience provides for the present. (2004) provide a fuller analysis and a discussion of the data sources. This research has benefited from a recent innovation, the ability to search and access (via Proquest) machine-readable editions of historical newspapers including the New York Times, Wall Street Journal and Washington Post. Roughly one-half of our citations were found using old-fashioned microfilm and one-half using the new

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