Comparing Nate Silver and Ladbrokes

From time to time I like to look at the odds that inTrade, the big political gambling/prediction site, is giving various Republicans to win the nomination. But I think I actually prefer the odds at Ladbrokes, a major British betting site. They don't just have numbers on the nomination and general election: they've also got things like Iowa caucus odds. And, by a happy coincidence, FiveThirtyEight just released their first Iowa prediction, where the bottom line is percent chance to win. So what happens if we compare them? Well, for any given odds you can calculate an implicit percent chance to win, so if we do that with the Ladbrokes odds and compare them to 538's numbers we find that... Ladbrokes likes every single candidate more than Nate does. This, of course, is because the bookies like to give you shorter odds than you deserve, so that they make money in the end. Their implicit probabilities of winning Iowa add up to 124.8% between the eight candidates. But if we divide out by this number, and scale it down to a total of 100%, we find a fairly strong correlation between the two methodologies. Nate gives Newt a 49.6% chance of winning, compared to 28.2% for Ron Paul, 10.6% for Romney, 5.2% for Rick Perry, 4.1% for Bachmann, 1.6% for Santorum, and 0.7% for Huntsman. Ladbrokes, by contrast, gives Newt 46.4%, Paul 26.7%, Romney 11.4%, Perry 5.2%, Bachmann 4.7%, Santorum 3.2%, Huntsman 1.2%, and Gary Johnson 0.4% (he's not in the 538 forecast, I think). The big takeaway is that Nate likes the front-runners, Gingrich and Ron Paul, a lot better than Ladbrokes, giving them a combined 77.8% chance to win against 73.1% at Ladbrokes. Conversely, Ladbrokes is slightly overselling the odds of a Romney, Perry, or Bachmann win, and vastly overselling Santorum and Huntsman (giving them 5% combined instead of 2.3%; that's more than double!). Do not bet on Rick Santorum to win Iowa on Ladbrokes; they're giving you awful odds.

Of course, you shouldn't actually bet on Newt or Ron Paul either, because Nate only likes them better than Ladbrokes' oddsmakers once you scale down to a sum of 100%. Overall, though, it's a pretty impressive alignment: the correlation between Nate's odds and the Ladbrokes odds is around 99.9%. (This is impressive for Ladbrokes, by the way, since we assume Nate knows what he's talking about in advance.)