What Odds Would You Give?

Before we get into the meat of today’s tirade, allow me a brief exposition on odds and odds-making as practiced by the professionals. It's remarkable how many people fail to understand the subject.

Let's say a friend offers to bet against you on a sporting event -- perhaps a baseball game -- at odds of 2 to 1. He's not certifying that his team's shot at winning is twice as good as yours; he's merely specifying the payoffs for the two possible outcomes. He's putting $2 of his money up against $1 of yours. If your team wins, you'll profit by $2, whereas if his team wins, he'll only profit by $1.

Giving odds in this fashion is an incentive to bet a certain way. The odds-giver is expressing an opinion about the probable outcome. He could be correct; he could be incorrect. Either way, the game must be played -- and no matter how it comes out, there's no way to determine whether the odds-giver's assessment was accurate, whether before or after the event.

Professional odds-givers -- e.g., Las Vegas touts for sports betting -- continuously monitor the money flowing into bets on a future event. If the odds start at 1 to 1 but money is accumulating twice as swiftly on the Yankees as on the Red Sox, the tout will alter the odds in the Yankees' favor, perhaps as high as 2 to 1. If that causes money flowing to a Red Sox victory to overbalance that on the Yankees, the tout will reduce those odds in an attempt to find the balance point. The balance point is especially precious to a "house" that actually takes bets and pays the winners thereof; it never wants to be far away from it.

For a bettor to take the short end of the odds doesn't mean he thinks his team will win. He's just as likely to be "following the money." Indeed, one of the most sought after conditions in gambling is the opportunity to bet on both sides of a contest at a guaranteed profit. This is called a "straddle," and it's a condition as greatly feared by the odds-makers as it is prized by knowledgeable bettors.

A straddle comes about through fluctuations in the odds being given on an event. For example, in the case above, imagine that the odds in the above example swing from 2 to 1 on the Yankees to 1.5 to 1 on the Red Sox, perhaps because a Yanks' star has fallen to injury, causing the majority of bettors to lose confidence in them. If Smith has already staked $1 on the Red Sox at the earlier odds favoring the Yanks, he can now stake $1 on the Yanks at the new odds favoring the Sox. If the Yanks win, Smith loses the earlier dollar, but wins $1.50 at the later odds; if the Sox win, he loses the later dollar, but wins $2 at the earlier odds. He's guaranteed a profit of at least $0.50.

Opportunities for a straddle are uncommon. They're particularly rare when the critical event is an election.

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Elections in the United States are seldom runaways for either side. There've been a few -- for example, LBJ's landslide over Goldwater, and Reagan's two massive victories -- but they're not common, except for elections in which a lone candidate faces no opposition. The usual margin in the popular vote is two to four percent. Thus, those who bet on the outcome of an election face close to even-money odds in the great majority of cases. Conversely, were high odds to be available, it would indicate that the prognosticators think one of the candidates to be very nearly a "sure thing," likely to win by an unusually large margin. Seldom is a lot of money made on "sure things:" the bettor would have to accept the short end of the odds, and then pray that the touts are wildly wrong, which isn't often the case.

This makes the recall election taking place today in Wisconsin rather unusual, to say the least.

The polls give the incumbent governor, conservative Republican Scott Walker, an edge of from three to nine percent. Three percent is a typical, and typically small margin. Nine percent would be a large one. The average of these various polls has been given as about a five percent margin for Walker, though the method of averaging has not been disclosed.

A five percent edge in the balloting sounds like a substantial margin. It certainly would be, if this were a national rather than a state election. But the opportunities for gaining a state-level victory through deceit, fraud, and intimidation are far greater than for a presidential contest. Bettors should know that, which makes the flood of money being wagered on a Walker victory somewhat counter-intuitive.

At this time, the odds-makers are putting the probability of a Walker victory at over 90%, entirely on the strength of the betting to this point. They see him as very nearly a "sure thing," despite ongoing union agitation and the possibility of massive vote fraud in Wisconsin's urban areas. Despite the slender return on those odds, bettors have lined up for Walker in huge numbers through yesterday evening.

Who knows something we don't?

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Naturally, commentators in every medium are drawing connections between the Wisconsin recall election and the prospects for November. It's far from invalid to see Governor Walker's staunch stand for fiscal responsibility as a national rallying point; quite a lot of his financial support has come from out of state. But the power of public-sector unions, against whom the most publicized Walker reforms were drawn, is not uniform nationwide; Wisconsin is one of the states where they've been strongest. We should look in other directions.

If Walker survives the balloting, it will be above all a demonstration that ordinary voters are willing to face down the special interests to stand by a man whose policies they approve. Those special interests -- mainly the aforementioned public-sector unions and their out-of-state affiliates and backers -- have done everything but a rain dance in their drive to impede the Walker program and, having failed in that effort, to punish the governor and his supporters in Wisconsin's legislature. Wisconsin is one of the American cradles to left-liberal "progressivism" -- Robert LaFollette came from there -- and so those interests have received substantial support from other residents. They've simply been outnumbered by the governor's supporters.

Will a Walker victory embolden private citizens in other states to do the same as Walker and the Wisconsin legislature have done? Will the governors of other badly deficit-ridden states, such as California and New York, take a new tack should Wisconsin's Republicans prevail? Will the outcome foreshadow that of the November elections in any significant degree?

What odds would you give?