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The latest poll shows the race tightening:

Challenger Ned Lamont … held a lead of 51 percent to 45 percent over Lieberman among likely Democratic voters. The sampling error margin was plus or minus 3.5 percentage points.

The race has tightened in recent days, with Lamont’s lead cut from 13 points.

The prediction markets tell a very different story.  Here are the most recent prices for the Tradesports contract that pays $10 if Lieberman wins the primary, $0 if he loses.  First, the past month’s data:

And here are today’s prices:

Lieberman has been losing ground steadily for the past month, though he appears to be taking a slight uptick this morning.  Right now the market gives him only around a 32% chance of victory in the primary. 

Things are looking bleak, but this isn’t the whole story.  Lieberman says that if defeated in the primary, he’ll run as an independent.  Let’s have a look at another Tradesports contract, one that pays out if a someone other than a Republican or Democrat wins the November senate election.  Essentially, this measures the probability that Lieberman will win as an independent since there are no other strong independent or third party candidates.  Here’s the graph of lifetime closing prices:

Right now, this contract is trading for $3.01, putting the probability at about 30% that Lieberman will win as an independent.

Let’s use some basic probability to see whats going on here.  First a little notation. Let:

• Joe = the event that Lieberman wins the Democratic Primary
• Ned = the event that Lamont wins the Democratic Primary
• Other = the event that someone else wins the Democratic Primary
• I = the event that neither a Democrat nor a Republican wins in November
• Stays = the event that Lieberman stays in office

By the law of total probability, we have:

     P(I) = P(I|Joe)P(Joe) + P(I|Ned)P(Ned) + P(I|Other)P(Other)

Of course, there are no real Democratic challengers besides Lamont, so we make the simplifying assumption that P(Other) is approximately zero:

     P(I) = P(I|Joe)P(Joe) + P(I|Ned)P(Ned)

Adding in the most recent price for that second Tradesports contract gives:

     0.3 = P(I|Joe)P(Joe) + P(I|Ned)P(Ned)

Clearly P(I|Joe) is near zero.  If Lieberman wins the Democratic nomination there is less than a snowball’s chance in hell that he will lose the November election.  Since we assumed no other Democratic challengers, P(Ned)=1-P(Joe).  Adding in the price of the first contract:

     0.3 = P(I|Ned)P(Ned) = P(I|Ned)[1-P(Joe)] = P(I|Ned)(0.68)

Hence, P(I|Ned) is approximately equal to 0.44.  One more application of the Law of Total Probability will give us Lieberman’s overall chance of staying in the Senate based on the recent Tradesports prices. Assuming that P(Stays|Joe) is about 1, we have:

     P(Stays) = P(Stays|Joe)P(Joe) + P(Stays|Ned)P(Ned)

                   = P(Joe) + P(Stays|Ned)P(Ned)

As mentioned above, P(I) is essentially the probability that Lieberman wins as an independent, which is an equivalent event to (Stays|Ned).  In conclusion:

     P(Stays) = 0.32 + (0.44)(0.68) = 0.62

The market is betting that Lieberman remains in office.

I noticed some subtle differences between the New York Times and ABC News in their respective reporting on today’s protests in Iraq.

One version:

Waving Lebanese flags and posters of Hezbollah’s leader, Hassan Nasrallah, the protesters chanted, “No, no, no, Israel, no, no, no, America,’’ challenged Americans to fight them in their neighborhoods, and called on Hezbollah to strike at Tel Aviv.

…

Today’s demonstration was peaceful. On rooftops and in the crowd, men and boys waved guns in the air without firing shots. Mr. Sadr had warned in a speech on Thursday against violence, calling on his followers to “wear your shrouds and stand up to support your struggling and patient brothers in Lebanon and Iraq.’’ Some members of the crowd today did exactly that, dressing in white burial shrouds.

And another:

Hundreds of thousands of Shiites chanting “Death to Israel” and “Death to America” marched through the streets of Baghdad’s biggest Shiite district Friday in a show of support for Hezbollah militants battling Israeli troops in Lebanon.

…

Demonstrators, wearing white burial shrouds symbolizing their willingness to die for Hezbollah, waved the group’s yellow banner and chanted slogans in support of its leader, Sheik Hassan Nasrallah, who has attained a cult status in the Arab world for his defiance of Israel.

…

“I am wearing the shroud and I am ready to meet martyrdom,” said Mohammed Khalaf, 35, owner of a clothes shop in the southern city of Amarah.

Food for thought.

Protectionists never cease to amuse me.  Take this article on the European Commission’s attempt make permanent their “emergency” import duties on foreign shoes for example:

The temporary system was introduced following allegations that shoes were being “dumped” - or sold for less than it cost to make them - by manufacturers eager to gain a share of the EU’s markets.

Oh the humanity!  Cheap shoes will surely mean the end of Europe! 

The Commission said at the time it had clear evidence that both China and Vietnam were unfairly subsidising their shoe industries.

Just like the EU unfairly subsidizes their farmers?  Oh, I suppose they forgot about that. 

Why are the most advanced nations on earth so economically backward?

It’s refreshing to find reasoned an cogent analysis of politically-charged issues.  On Chicago’s new minimum wage law, you can’t do much better than Gary Becker and Richard Posner.  Becker here, and Posner’s response here.

The New York Times has nothing constructive to add to the debate, just the usual platitudes.  Why do social reformers insist upon using ineffective and likely counterproductive tools such as the minimum wage and rent control?  Here’s an idea: just give the poor money.  Or better yet, give them an education.

A much better piece argues that theory should weigh more heavily than empirics, at least sometimes.

This is the most absurd immigration reform proposal that I have ever heard.  The proposal:

If we are really serious about turning back the tide of illegal immigration, we should start by raising the minimum wage from $5.15 per hour to something closer to $8. 

The Reasoning:

But if we want to reduce illegal immigration, it makes sense to reduce the abundance of extremely low-paying jobs that fuels it. If we raise the minimum wage, it’s possible some low-end jobs may be lost; but more Americans would also be willing to work in such jobs, thereby denying them to people who aren’t supposed to be here in the first place.

Now the debunking.  No matter what you assume about unemployment and compliance, raising the minimum wage to $8/hour will have perverse effects.

First, assume that no jobs will be lost and that all employers will happily comply.  In this case it will become more attractive for Mexicans to illegally enter the States.  There will be as many low-skilled jobs as before, but with a higher salary.  Low-paying jobs do not fuel illegal immigration; low-skilled jobs do.

Of course, in reality some employers will not obey the minimum wage law.  Whom will they hire on the black market for labor?  Illegal immigrants of course.  Raising the minimum wage serves to expand the black market for labor.

Now what about unemployement?  Such a large minimum wage increase will absolutely decrease the number of low-skilled jobs available.  Who will be hurt by this?  Not just illegal immigrants–who are probably more willing to sell their labor on the black market anyway–but American citizens as well.

In order for this plan to work, it must eliminate the low-skilled jobs that attract illegal immigrants.  Raising the minimum wage may well accomplish this.  I suppose Michael Dukakis considers mass unemployment of the working poor to be collateral damage. 

It seems that every day now the media uncover new evidence of corruption by our elected officials, making a new study  by economists Peter Leeson and Russel Sobel especially timely.  Their explanation: corruption can be blamed on the weather. Before you start screaming “spurious regression!” I should clarify; the researchers don’t assert that bad weather causes corruption, rather that it makes corruption easier. Who would have thought? An economist, that’s who.   

A recent Gallup Poll suggests that Republicans may have some trouble hanging on the the majority this fall. Only 31% of those surveyed plan to vote for a Republican candidate in the coming elections versus 51% who plan to vote for a Democratic candidate

Sure, but what do the markets think? The online betting market Tradesports.com offers two contracts related to the 2006 elections, each paying $10 if the Republicans maintain control of the House or Senate respectively. The trading price is an indication of the probability traders ascribe to a Republican victory; if you were sure the Republicans would win, you’d be willing to pay up to $10 for such a contract.  Here are the latest results.  The upper graph gives House contract contract prices, the lower graph Senate contract prices.

Clearly traders are split over whether the Republicans will control the House, but putting their money on GOP dominance in the Senate.  Who’s right?  The experts at Gallup or unbridled capitalism?  It’s up the the voters to decide. 

I have no great love for the entrenched two-party system we have here in the U.S., finding little to recommend either the Democrats or the Republicans at the present time.  Still our system does have at least one advantage: with only two parties it’s harder to end up with an elected official who is completely insane.  We’ve certainly had our share of lunacy, but nothing that even approaches that of Respect Party MP George Galloway.  And just when you thought he couldn’t get any worse…