Cause, Effect, And Commentary

This Wretchard effort is either the most profound and insightful post I have ever read - too profound for me to comprehend, in fact - or it is just a silly example of a sub-genre of blogger triumphalism.

This Chicago Boyz summary reassures me that it is just silly, as does this casual empiricism flogged at the bottom.  Back to Wretchard:

What destroyed Hillary Clinton's campaign? The obvious answer would be Barack Obama. But the destruction was accomplished through the agency of an Internet storm.

Please set aside Hillary's awkward re-emergence in New Hampshire; this post irked me long before the polls had closed there, during that glorious afternoon when her demise appeared to be imminent.

Those who remember the rapidity with which a story produced by 60 Minutes under the baton of Dan Rather was destroyed will know just how powerful an Internet storm can be. In that instance, four documents were presented by 60 Minutes on September 8, 2004 -- less than 2 months before the scheduled Presidential election -- alleging that President Bush, who was standing for re-election had "disobeyed orders while in the Guard, and had undue influence exerted on his behalf to improve his record".

Yes, a Free Republic commenter charged the documents were forged; Powerline and Charles Johnson trumpeted the charge and provided visual support, other bloggers joined in, the MSM (ABC News and the WaPo come to mind) joined the hunt, and Rather was exposed.

So how did an internet storm crater Hillary?  Uhh, here we go:

The events that overtook Hillary Clinton during the Iowa primaries were no less dramatic and exhibited many of the same characteristics. Anyone who was watching the memetic indicators closely could see something huge was happening. The News Futures Prediction Market tracked the trades that Hillary would win the 2008 Democratic nomination. She had been favored for months. Her stock actually rose throughout late 2007. And then, all of sudden the bottom fell out. Here's the chart of Hillary's prospects, which fell from 60 to 34% in a few short days.

And we are shown a chart where Hillary's fortunes collapse.  OK, but why did they collapse, and I apologize if this question is getting tedious?

How did an apparently impregnable position collapse so quickly? How did the trend develop? How did the idea of a Clinton weakness, which was perceived by relatively few people suddenly propagate across the Internet and become the conventional wisdom? Another view of the critical Jan 2-8 period can be found on a Technorati graph as shown below. Technorati tracks the appearance of phrases in the blogosphere which can be roughly correlated with the appearance of certain ideas. The frequency with which the words "Clinton" and "loser" appeared in blog posts is shown in the graph below.  From January 3 onward they peaked drastically; it shows the whisper beginning to spread. Hillary was a loser. But it is the speed with which an Internet storm can propagate which makes it so deadly. The storm can catch those who are accustomed to the statelier pace of broadcast media completely unaware.

But what is the causal mechanism!?!?  Is that an unreasonable question?  A causal mechanism in the Rather example is pretty easy to describe - bloggers and Freepers uncovered forgeries and redirected the debate.  Did bloggers and internet chatter actually *do* anything from Jan 2 to Jan 8 other than talk about Hillary as a loser? 

C'mon - Hillary had a surprising loss in Iowa and everyone talked about her newfound vulnerability.  Was the notion that a once-beaten Hillary was less inevitable a novel insight limited to bloggers?  Please - here is the NY Times post-Iowa analysis, repeated by every political pundit alive:

The two winners burst the aura of strength and confidence that Mrs. Clinton and Mr. Romney had tried to cultivate for months, and left both parties suddenly without a clear path to their nominating conventions, let alone November.

Mrs. Clinton’s loss was especially glaring. Her central strategy for much of 2007 was to appear as the inevitable nominee, but Iowans shredded that notion. She tried in recent weeks to convince voters that another Clinton administration could be an agent of change, but Iowans clearly did not buy it.

Obvi.

Well, we get no more from Wretchard.  His theory, as I understand it, is that if bloggers talk about something which also happens, then the bloggers made it happen.  The dog barks and the caravan passes by.

Let me suggest two thought experiments - perhaps dedicated Wretchardians will gather the data to test the theory.

1.  The Tampa Bay Buccaneers lost at home to the NY Giants in NFL playoff action last weekend.  So, let's graph a chart of the expected probability of the Bucs winning the Super Bowl (said contract collapsed to zero when the Bucs lost) and compare that to internet buzz on the phrase "Giants quarterback Eli Manning, poised winner".

My Bold Prediction - the collapse of the Bucs tracks (inversely) the buzz on the phrase extolling the Giants QB.  Possible conclusion - the Bucs were done in by a perfect internet storm.  Does anyone believe that?

2.  Track the water level in downtown New Orleans against internet buzz on the phrase "Katrina" from mid-August to mid-September 2005.  My guess is that we will see a strong correlation between the internet buzz and the flooding in New Orleans.  Help me - was the Big Easy flooded by a perfect internet storm?  Or (just a guess) did reality flood New Orleans while the internet commented on that reality?

So what happened with Hillary when her campaign nearly died?  Did internet chatter kill it, despite the lack of any obvious mechanism?  Here is an alternative theory neither mentioned nor rebutted by Wretchard - Iowa voters rejected Hillary; the MSM, as typified by the Times, amplified that defeat, thereby driving down Hillary's poll numbers nationwide, and especially New Hampshire.  Hillary's new, lower polls led to her plunge in the predictions markets.

A possible test - did the predictions markets plunge *before* the weekend polls gave Obama a big lead in New Hampshire? (Rasmussen on Sunday, USA Today Monday, IIRC).  Or did the markets respond to the polls?

Sorting out cause, effect, and chatter would be a worthwhile exercise, even if it does not stop me from yelling at my television.  Unsupported blanket assertions that "the destruction [of the Hillary campaign] was accomplished through the agency of an Internet storm" are irritating.

REDIRECTED FIRE:  From the Chicago Boyz:

The Internet may have, in just a few days, destroyed the Clintons as a political force.

Based on what evidence, other than the obvious fact that the internet talked a lot about Hillary's demise?  And would Hillary have been less dead if the internet did not exist and it was only every poll and every MSM outlet that was burying her?

Personally, I think a more interesting position would be to argue that the era of the internet bloggers as a political force is over, or at least greatly diminished.  The Netroots love Edwards (with Obama second); the MSM love Obama.  Who emerged to challenge Hillary?

Oh, well - now tell me who resurrected Hillary?  Wasn't the MSM; wasn't the Nutroots.

And on the right, McCain has been anathema among bloggers for his immigration stance (and McCain-Feingold, and torture, and tax cuts, but not the surge) - how is he doing?

Bah.  I was irked by the Belmont post even before Hillary leapt out of the grave.

CASUAL EMPIRICISM:  I love this intrusion of reality offered by Daniel Gross of Slate:

So, I've been watching the action in one of the political futures markets this evening, Intrade. And the action in this prediction market has reinforced my opinion that these are less futures markets than immediate-past markets.

The price movement tends to respond to conventional wisdom and polling data; it doesn't lead them. Throughout the day and into the early evening, while polls were still open, Democratic investors, mimicking the post-Iowa c.w. and polls, believed Obama was highly likely to be the Democratic nominee. The Obama contract was trading in the lows 70s, meaning investors believed he had a 70 percent chance of being the nominee, while Hillary Clinton contracts were in the 20s.

But between 7 p.m. and 8 p.m., as the Concord Monitor began to post early returns showing Hillary Clinton in the lead, the contracts started to move quickly. By 8:30 p.m., with about 14 percent of the returns in and Clinton up by a 40-35 margin in New Hampshire, Obama contracts had fallen to 56 (meaning investors believed Obama has only a 56 percent chance of winning the nomination) while Clinton's rose to 46. By 9:30 p.m., with Hillary ahead 39-36 with 37 percent of the results in, the spread between the two had narrowed further. Obama was trading at about 51 and Clinton at about 47.5.

These markets are *responding* to new information.  Yes, the price discovery mechanism does provide a bit of new information itself, but these markets aren't going to destroy anything on their own initiative.

Discussion and links to some academics here.

Comments

[Lesley]

"Hillary leapt out of the grave."

There's a name for that.

Nosferatu.

[Jor]

I was surprised that Obama jumped to 70 after Iowa, I was thinking I could double my money pre-iowa with an obama win, but he did more than that (well not anymore). Although, I think Hillary has somewhat of a lead now, I'd probably put her more at 51 to 45 or something like that, with 4% other. Like the media and blogs, intrade markets seem to OVER-react to every new piece of information -- there has gotta be a way to exploit this for $$.

[sammy small]

Blogs are just following the lead of the MSM in spending way too much time overanalyzing the meaning of "is". Iowa is a huge hype, not because it actually is, but because the MSM says it is. The blogs trying way too hard to be relevant, in real time like the MSM, trying to predict trends and outcomes, and will continue to stumble as long as they do. Wake me up when its over. I think I'll go on over to Fox and try to find out the latest on Natalie Holloway.

[glasater]

TM--I made a small and perhaps ineffective argument that the folks counting the votes in Iowa were ordinary people keeping an honest tabulation with many eyes watching.
In NH something funny happened--if you get my drift.

[Porchlight]

I think the pundits were too quick on the draw because the campaigns started so early and it was eons before anyone actually voted on anything. So once Iowa was over, there were finally Results to Examine! So of cours, they must Mean Something!

It's just Iowa, people. In days of old the same folks would have been more skeptical, I think. But in fairness, the compressed primary schedule this cycle has made it seem like everything will be decided very quickly.

[kim]

Dead Cat Bounce.
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[kim]

Eh, NH is northeastern liberals, Iowa is Huckabee liberals.
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[kim]

Iowans shuck and jive at cornhuskings; Hampsherites cull the dairy herd.
===================

[Paul Zrimsek]

Blog triumphalist suckered by MSM CW! I can't tell you how much I love this.

[gokkun]

TM = Hillary. Just when I'm about to write you off completely, you pull one out of the hat.

You really ought to bust these right wing grand "thinkers" more often.

[Rick Ballard]

"And on the right, McCain has been anathema among bloggers for his immigration stance (and McCain-Feingold, and torture, and tax cuts, but not the surge) - how is he doing?"

Fantastic. He's the real deal. You could tell from the forceful manner in which he delivered his victory speech that his age will be no drawback. His promise to adhere to the Powell doctrine in the application of military force is comforting to anyone who admires rigid doctrinaire approaches requiring that currently nonexisting forces be raised (without a draft), ill trained and ill equipped in order to respond too late.

I wonder if he'll bring back the battleship or mounted cavalry?

[Clyde]

With Hillary leaping out of the grave, what does that do to the Garlic Futures Market? I'm thinking bullish.

[JM Hanes]

I thought he truly looked and sounded old as dirt, Rick. He was great on global war, but the rest of his speech just struck me as preening on his own patriotism -- at exorbitant length. The paragon of honesty can't even discuss his own immigration bill forthrightly. The press love him because he'll talk to anybody, anytime, anywhere, but I'm not sure he actuall listens to anybody. Bush has always gotten a bad rap in that regard, where McCain, unfortunately, strikes me as the real deal.

[cathyf]

And the action in this prediction market has reinforced my opinion that these are less futures markets than immediate-past markets.

Which is just another way of stating the Efficient Market Hypothesis.

To further TM's point about Wretchard's confusing of cause and effect, there is the question of what the election market data really says about the market. As someone who spent the biggest stock market crash in history (21 standard deviations down, bubba...) providing quant and tech support to futures and futures options traders, I can tell you that exchange data during "events" melts down, too. Prices are stale, the computers can't keep up and timestamp the trades late, and people don't understand how the rules work in a fast moving market and so they end up finding themselves having executed trades at prices that are vastly different from the prices that they thought they were going to execute at.

I read a really interesting paper in about 89 or 90 which examined the conventional wisdom that the S&P500 futures price (which trades on the merc in Chicago) "led" the spot index calculated from actual prices of the 500 stocks as they traded on the NYSE on the day of the 1987 crash. The paper went through and very carefully examined all of the tick-by-tick data for all 500 stocks, and the first thing that they saw was that the reported prices for about 400 of the 500 stocks were simply bogus. There were no trade prices, because there were few buyers and since there were no buyers the short sellers (who can only sell on the uptick) weren't allowed to trade when they wanted to. So these were bid and offer prices that by eyeball were clearly stale. So the guys who wrote this paper went through and calculated the "spot" index differently: if I understood correctly (and I may be misremembering the details -- it's been almost 2 decades!) they took the data for the few stocks that were trading vigorously, and then they used historical correlations to generate prices for the stocks whose markets had broken down, and then used that mixture of real prices and generated prices to calculate a spot index. And, sure enough, things were still pretty noisy and chaotic, but the whole "tail wagging the dog" thing went away. When you limited the calculation of the "spot index" to using data that you believed wasn't bogus, it was falling just as fast as the futures markets.

The political futures markets are pretty dubious as markets. They trade mighty thin, trading on insider information is not illegal, so they are not really markets. (For example, if Hillary had been greedy enough, she could have sold Hillary contracts out the wazoo back when they were at 80, and then pulled out of the race -- take the money and run, baby!) It's hard enough to collect meaningful data on real markets during fast-market conditions -- why should I believe the data coming out of this made-up pseudo-market?

[Rick Ballard]

"I thought he truly looked and sounded old as dirt"

I think I'd go for basalt. Dirt is a relatively new product - maybe pre-organic would suit better?

[glasater]

Here is a somewhat related article on Small Band of Economists Trumpet Sports Betting for Insights.