It's Super Tuesday, and if the polls and prediction markets aren't completely off base, Donald J. Trump is heading for a significant and perhaps insurmountable delegate lead in the contest for the Republican nomination. According to PredictIt, he is heavily favored to win all states except Texas, in which Cruz continues to have an edge. His likelihood of winning exceeds 90% in Virginia, Georgia, Oklahoma, Massachusetts, Vermont, Alabama, Tennessee and Alaska. He is also favored to win Arkansas and Minnesota, though there is somewhat less certainty about these.
The forecasts at FiveThirtyEight, based on polls and fundamentals, are a bit less skewed but tell a similar story.
The conventional wisdom seems to be that this is good news for the Democrats. For example:
Super Tuesday: Republicans widely expected to hand the White House over to Hillary Clinton today
— Downtown Josh Brown (@ReformedBroker) March 1, 2016
This seems very premature, and is quite inconsistent with prediction market prices. Currently Trump is given an 83% chance of securing the nomination and a 38% chance of winning it all:
His probability of winning conditional on being nominated is accordingly not far below one-half.
Are the markets completely wrong or are pundits and prognosticators missing something important?
It seems to me that a major political realignment is underway in America. The press has focused on prominent Republicans who could not support Trump under any circumstances, such as Senator Sasse of Nebraska. Some of these will sit out the election or look for a third option; some may consider crossing over. But there will also be crossover votes in the other direction:
Nearly 20,000 Bay State Democrats have fled the party this winter, with thousands doing so to join the Republican ranks, according to the state’s top elections official. Secretary of State William Galvin said more than 16,300 Democrats have shed their party affiliation and become independent voters since Jan. 1, while nearly 3,500 more shifted to the MassGOP ahead of tomorrow’s “Super Tuesday” presidential primary... The primary reason? Galvin said his “guess” is simple: “The Trump phenomenon,” a reference to GOP frontrunner Donald Trump, who polls show enjoying a massive lead over rivals Marco Rubio, Ted Cruz and others among Massachusetts Republican voters.
This phenomenon is unlikely to change the outcome in Massachusetts come November, but it could be enough to affect New Jersey, Pennsylvania or Ohio. In any case, the traditional lines between red and blue states are going to become increasingly blurred, with highly unpredictable net effects.
Perhaps the prediction markets are wrong on this point, skewed and shifted by Trump enthusiasts. I would certainly prefer it if that were the case. But I suspect that the prediction market crowd is on to something, and there is peril in ignoring it.
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Update (March 2). The results are in the books, with Trump winning seven of the predicted ten, losing Oklahoma and Alaska to Cruz and Minnesota to Rubio. Cruz won his home state as predicted. Since the markets systematically overestimated Trump's performance, the results should have lowered his odds in both the nominee and the presidential winner markets. And indeed this is what happened:
But here's the thing. Trump's odds of winning the presidency conditional on being nominated did not decline, consistent with the argument I made above. And since he remains the overwhelming favorite for the nomination, it's worth keeping this in mind.