Bloomberg the electable

Bloomberg the electable
© Getty Images

The Democrats are picking their presidential candidate. The primaries and nominating convention are meant to surface that candidate who best represents Democratic ideals and voters. But what is the chance that the nominated candidate will win the electoral college? The answer is captured in the notion of electability, that is, the probability that, if nominated, a candidate will win the presidential election.

Prediction markets offer a clear answer to this question: Former New York City Mayor Michael BloombergMichael BloombergPress: Even Jeff Bezos should pay income taxes What the Democrats should be doing to reach true bipartisanship 5 former Treasury secretaries back Biden's plan to increase tax enforcement on wealthy MORE is the most electable Democrat. Indeed, as of this writing, the largest political market – Betfair, with more than $25 million in play – suggests that if nominated, Bloomberg is the only viable Democrat whose electability crosses 50 percent.

Why believe this when recent polls of hypothetical head-to-head match-ups suggest that more voters would prefer not just Bloomberg but any of former Vice President Joe BidenJoe BidenMellman: Trump voters cling to 2020 tale FDA authorizes another batch of J&J vaccine Cotton warns of China collecting athletes' DNA at 2022 Olympics MORE, former South Bend, Ind., Mayor Pete ButtigiegPete ButtigiegHigh-speed rail getting last minute push in Congress Buttigieg: Bipartisan deal on infrastructure 'strongly preferred' OVERNIGHT ENERGY: Biden ends infrastructure talks with key Republican | Colonial Pipeline CEO grilled over ransomware attack | Texas gov signs bills to improve power grid after winter storm MORE, Sens. Amy KlobucharAmy KlobucharHillicon Valley: Big Tech critic Lina Khan named chair of the FTC | Lawmakers urge Biden to be tough on cyber during summit with Putin | TSA working on additional security regulations following Colonial Pipeline hack Big Tech critic Lina Khan named chair of the FTC Senate confirms Lina Khan to the FTC MORE (D-Minn.), Bernie SandersBernie SandersProgressives rave over Harrison's start at DNC Zombie Tax punishes farmers to fill DC coffers Progressives threaten to block bipartisan infrastructure proposal MORE (I-Vt.) or Elizabeth WarrenElizabeth WarrenProgressives rave over Harrison's start at DNC On The Money: Schumer to trigger reconciliation process on Wednesday | Four states emerge as test case for cutting off jobless benefits Big Tech critic Lina Khan named chair of the FTC MORE (D-Mass.) to President TrumpDonald TrumpKushner lands book deal, slated for release in 2022 Biden moves to undo Trump trade legacy with EU deal Progressives rave over Harrison's start at DNC MORE? Polls produce snapshots of current voter sentiment by asking, if the election were held today, for whom would you vote? Such polls are horse races that ignore the actual rules of presidential elections, which are won or lost in the electoral college. By contrast, political markets trade contracts that pay off based on actual election results, forcing traders to contemplate future events and reason backwards while taking the rules of the electoral college into account.


While prediction markets are not perfect, a high-volume market such as Betfair provides a credible vehicle for expressing the “wisdom of crowds.” In such a market, the price of an all-or-nothing security that pays off if an event such as "Sanders wins the election" occurs is an estimate for the underlying likelihood of that event.

Deducing a security price from Betfair requires a small intermediate calculation. Consider again the event “Sanders wins the election.” Betfair presently reports decimal odds of 5.9 and 6 for this outcome, depending upon whether a trader chooses to “back” (believes Sanders will win) or “lay” (believes Sanders will not win). Averaging the reciprocals of the “back” and “lay” odds yields the estimated price. 

Continuing our example, Sanders’s market-based estimate of winning the election is given by (1/5.9 + 1/6) / 2 or about 17 percent. It is thus a simple matter to obtain estimated prices – probabilities – for various candidates winning the nomination or winning the presidency from Betfair.

Having determined the market prices for winning the election and the nomination as described above, computing a candidate’s electability is a simple matter: Divide the security price for a candidate winning the presidency by the security price for this same candidate winning the nomination. The result estimates the probability that if nominated, that candidate will win the election — the electability.

Among Democratic contenders priced at a 1 percent or better chance of winning the nomination, currently Betfair judges Sanders to have the best chance of winning the nomination (41 percent) and the presidency (17 percent). But his 41 percent electability (17/41) is much lower than Bloomberg’s 53 percent (16/30). Repeating this calculation for the other viable candidates reveals electabilities of 41 percent (Biden), 32 percent (Buttigieg) and 35 percent (Klobuchar), respectively.


Markets are volatile, of course, and political markets are no exception. But for the past several weeks, Bloomberg’s electability has consistently registered above 50 percent, and he is the only candidate who has done so.

The market has spoken: If the Democrats want their candidate to actually win the election, they should nominate Bloomberg the electable.

Edward H. Kaplan is the William N. and Marie A. Beach Professor of Operations Research at the Yale University School of Management. He is an expert in probability and statistics who has published academic research on prediction markets and presidential elections.