Missing markets

Dr Eric Crampton
Insights Newsletter
13 October, 2023

If punters at Australia’s Betfair are right, there’s an eighty-nine percent chance any government formed after Saturday’s election will have a National Party Prime Minister.

But the things Betfair can’t tell us makes me miss our missing election stock market.

From 2008 through 2015, Victoria University hosted the world’s best election stock market, iPredict.

The National-led government finally strangled iPredict in red tape. But it was glorious while it lasted.

iPredict’s traders bought and sold contracts that paid out if different events happened. One contract might pay $1 if the election resulted in a Labour Party Prime Minister; another might pay $1 if New Zealand First re-entered Parliament.

Prices on these markets are probabilities. Rather than relying on pundits’ reckons about what might happen, we could look at the collective wisdom of traders with real money on the line.

The markets were accurate. If a contract traded at $0.80, it would pay out at $1 about 80% of the time.

And because the market was local, new contracts could be launched whenever worthwhile.

If iPredict were still around, we could have contracts on how long it might take to form a government after the election or whether it might go to a second election instead. It would at least help with summer vacation planning.

If a government forms, whose would be the real coalition of chaos? We could have had markets on whether the next government would last until 2024, 2025, or 2026 – depending on whether National or Labour led it.

And who really has the biggest fiscal hole? Trading on the size of government deficits for the next few years, with one set of contracts paying out in the event of a Labour-led government, and another for a National-led government, would tell us more than any party’s secret spreadsheets.

Traders could have been betting on whether National’s ruling Winston in or out would affect New Zealand First’s chances of re-entering Parliament.

The markets might have warned Luxon that saying Winston’s name causes him to appear.

Instead, Kiwi election punters are stuck with foreign-based markets that only tell us whether a National-led or Labour-led government is more likely.

And because Labour promises to ban offshore gambling and National promises to tax it, we might not even have that next time around.

The only sure bet is that I’ll be pouring one out for iPredict on election night.

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