Commentary: Just how good are the odds-makers?
This article first appeared in the St. Louis Beacon, Jan. 7, 2010 - Mathematician John Allen Paulos has written of a phenomenon he terms “the Jeane Dixon effect.” This refers to the tendency of the intellect to remember accurate predictions while forgetting about less prescient ones.
Readers of a certain age may recall that Jeane Dixon was the astrologer/psychic who rose to national prominence by “predicting” the assassination of John F. Kennedy. Specifically, in 1956 Ms. Dixon forecast that the 1960 presidential election would be “dominated by labor and won by a Democrat” who would subsequently be “assassinated or die in office though not necessarily in his first term.”
At first blush, one is inclined to credit Dixon with uncanny insight. Upon further review, however, she may have been merely playing the odds. When she made her famous prediction, the last American president to be elected in a year ending in zero who had not died while in office was James Monroe (1820).
William Henry Harrison (1840) died months into his first term of pneumonia he contracted while giving a lengthy inaugural address in inclement weather. Lincoln (1860), Garfield (1880) and McKinley (1900) were all assassinated. Harding (1920) expired in his first term; FDR (1940) in his fourth. The presidents did not necessarily die during their “zero-year” term, but all expired before leaving office.
JFK (1960), of course, would extend the tragic legacy. Reagan (1980) was wounded in an assassination attempt, but survived. It fell to G.W. Bush (2000) — never much of a history buff — to finally break the streak.
The “lucky guess” explanation of Dixon’s apparent prescience gains further creditability when one examines some of her less well-remembered predictions. She also forecast that World War III would begin in 1958 over the disputed Chinese coastal islands of Quemoy and Matsu, that the cure for cancer would be found in 1967, that the Soviets would beat the U.S. to the moon and that peace on Earth would rein from the year 2000 onward.
In fact, before it bore fruit, she contradicted her most famous prognostication by predicting in 1960 that Nixon would defeat Kennedy, possibly indicating that she did not fully appreciate the “Richard J. Daly effect” on the Cook County vote count.
Yet, despite these wild inaccuracies, patent contradictions, and the likely explanation that she was merely betting on an historical oddity, she gained international celebrity by “foreseeing” JFK’s demise. Reportedly, she was one of the astrologers that Nancy Reagan consulted to advise her husband during his tenure in office (insert your own joke here).
I thought of Dixon while watching a football game last month. The Rams were playing the Bears in Chicago and the home team was a nine-point favorite. In the event, the Bears won by eight, 17-9. After the game, a friend remarked, “Man, those guys are good.”
The “guys” he referred to were not the victorious Bears — virtually everybody can beat the Rams — but the Las Vegas odds-makers who had forecast the winning margin within one point. His familiar comment made me wonder just how much of the odd-makers’ perceived expertise was attributable to the Dixon effect.
In fairness to the bookies, it must be noted that the margins they quote are not meant to be predictions of the actual outcomes of the games. Rather, the point differential in a given game — called the ‘line” or the “spread” — is set to split the action between the competing teams.
If Team A is a 7-point favorite, Team B enters the game up 7 – 0 for the purposes of the bet. (Should Team A win by exactly 7 points, the game is a “push” and the bet is void.) The bettor is free to choose either side of the wager, but he pays for the privilege. A winning $100 bet pays just that, but lose the same wager and you owe the book $110.
That 10 percent difference between money paid out and cash collected — known as the “juice” or “vigorish” — is how the bookie makes his living. If he can get half his customers to bet on one team and the other half on its opponent, all he has to do is sit back and let the losers pay the winners while he skims the juice. It’s like a license to print money.
For this reason, lines are often adjusted as the week between games goes on. If too many people are betting the favorite, the spread will rise, making that bet less attractive. If the action is trending toward the underdog, the line will fall.
Though the bookmakers are really predicting betting behavior and not the actual outcome of the event, the betting public generally perceives their lines as reliable indicators of the closeness of pending contests. It is that proposition that I sought to test.
To do so, I compared the lines quoted in the Thursday edition of “America’s Line” with final scores of weeks #14, 15 and 16 of the NFL schedule — a 48-game sample of the just concluded 17-week season.
The pre-game favorite won outright 31 times (65 percent). However, only 20 teams (42 percent) both won the game and covered the point spread. 27 (56 percent) either lost the game or failed to win by enough points; 1 game (2 percent) was a push.
The lines on 26 games (54 percent) were within 10 points of the final margin of victory. Of those, 21 games (44 percent) were within 7 points of the final result while 10 (21 percent) fell within 3 points of the actual outcome — the “these guys are good” games. Yet, in another 10 games, the quoted lines were off by 20 or more points. The bookies were thus “bad” as often as they were “good” and in most cases were merely mediocre.
I don’t want to promote sports betting, which is illegal in most places including Missouri, nor do I wish to disparage the odds-makers who often have friends in the mob. Rather, I’d just point out that we routinely rely on predictions from experts to make decisions in all facets of public and private life. Before blindly accepting these prognostications, it’s not a bad idea to temper our confidence by considering the Dixon effect…
M.W. Guzy is a retired St. Louis cop who currently works for the city Sheriff's Department. His column appears weekly in the Beacon.