How Betting Lines Work — Super Bowl Example

Betting LinesIf you are like me, you are not watching the Super Bowl. If you are like me, you are only vaguely aware of it. I had to be reminded yesterday at 4:00 that it was even happening. And it was only today that I learned that it is taking place here in the Bay Area. It’s not that I don’t follow the news. But when talk turns to sports — most especially football — I just tune out. But I thought it might be interesting to talk a bit about how betting lines work.

This all started because I was talking to Will and he told me that 70% of the action was supposedly on the Panthers. I already knew that the line was Panthers -6. That’s a points line and it means that if you bet on the Panthers, they need to win by more than 6 points. That also means that if you bet on the Broncos, you get 6 extra points. So if they lose by only 5 points, you would win your bet. But when Will told me about all the action on the Panthers, I asked what the line was originally. He told me: Panthers -6. That didn’t make any sense.

When betting lines first come out, they are based upon the work of sports nerds: analysts who crunch numbers to determine how the teams will perform against each other. It will probably not surprise you, given my colorful life, that I used to be one of those guys. (I didn’t do it for sports books, of course; I wrote commercial software that did these kinds of calculations for sports bettors.) So that’s fine. But betting lines don’t stay where they start. They move based upon how the betting is going.

The thing that non-betting people don’t understand (and I assume that describes most Frankly Curious readers) is that the sports books are not at all interested in who wins. When you bet, there is a vigorish or “vig.” That means you bet a dollar, but if you win, you are paid something less, like 90¢. That would be a 10% vig. That’s all the books care about. So they want to have as much money bet on one team as is bet on the other. That’s what the betting lines are all about. Then the books pay the winners with the losers’ money, and keep the vig. It’s a simple and beautiful system.

Why Betting Lines Move

The initial lines that the sports nerds come up with are not always right. But even if they are, it isn’t a question of how the teams stack up; it is a question of how the bettors think they stack up. So if there is too much money bet on one team, the sports book will move the line in the opposite direction. This is why I asked Will what the starting line was. If 70% of the action was on the Panthers, then the line should have gone up — to Panthers -6.5 or higher still — whatever it took to equalize the amounts bet.

Given that the betting lines didn’t move except maybe at some small books, I have to assume that the 70% number has to do with the number of bets. The books don’t care about that. They aren’t going to change the betting lines over that. What must be happening is that the little bettors are going strong for the Panthers and that the bigger bettors are going for the Broncos. (This doesn’t mean they think the Broncos will win, of course; just that they won’t lose by more than 6.) But if I were a betting man (And I’m not!) I would go with the Broncos, just because I have more confidence in people who are putting big money on the game.

Of course, I don’t know that this is what’s going on. Maybe the big money is on the Panthers, it is just that there is a lot of medium money on Broncos. As I understand it, there are a lot of middle class white folk who don’t like that uppity colored quarterback. And with that, I have gotten as close to the Super Bowl as I care to get.

Update (7 February 2016 3:36 pm)

I just got email from Will that the line actually did start at Panthers -3. So there has been excessive money bet on the Panthers to move the line to -6. I’m not going to change any of the above, because it is all still valid for discussion’s sake. The fact that the line did move, however, greatly complicates how the books have to manage their bets. This is why they hire really smart people, hoping to get it right to start.

Update (7 February 2016 3:43 pm)

That makes my “middle class white racist” theory invalid.

Hale Stewart Should Stop Writing About Economics

Hale StewartAs most of you know, I have a PhD in physics. And I know a lot of stuff about arcane topics. But I did not major in economics. I didn’t even minor in economics. I just took one stupid course! I really enjoyed it. The subject was fascinating and I had a great teacher. Still, I write about economics. But I probably shouldn’t. After all, according to Hale Stewart, “Econ isn’t something you can teach yourself.”

If this is the case, why should anyone read about economics from writers like, oh, I don’t know, Hale Stewart? I mean, if econ isn’t something you can teach yourself, what is the point? If a stack of good books on the subject isn’t going to help you, how are some articles at Business Insider written by lawyer?

It amazes me how elites can be so cavalier about what’s going on with less educated workers. But it is hardly new. The argument that Stewart is implicitly making is the skills gap: these people just don’t have the skills for the modern economy!

This is all a response to an article at The Bonddad Blog, where Hale Stewart recently wrote, Ed Morrissey Should Really Stop Writing About Economics. According to him, having some kind of formal education is very important. (For the record, my self-study of physics before I became a formal student was probably the best part of my education. But that’s just physics, not a real subject like economics!)

Don’t get me wrong, I’m with Hale Stewart: Ed Morrissey really should stop writing about economics. But Stewart’s argument is elitist nonsense. I would have let it go if it hadn’t been for the second part of his article.

Hale Stewart Should Stop Writing About Labor Force Participation

Stewart complained that Morrissey is constantly talking about labor force participation. This is a very interesting issue. You see, since about 2000, the fraction of people in the labor force (employed or seeking employment) has dropped — precipitously. And that has many people concerned. Stewart does a good job of going over the demographic factors that explain most of this: retiring baby boomers and fewer students working. But that still leaves us with a problem.

If we look at prime age workers (people between the ages of 25 to 54), these demographic factors don’t apply. And Hale Stewart grudgingly admits, “There is a percentage of people ages 24-54 (the prime working age) that have left the labor force.” That’s actually a highly deceptive statement. It implies that there is 1% or one percentage point. Instead, if we look at civilian employment, it is well over two percentage points since the financial crisis, and well over three since the high tech boom of the late 1990s.

But not to worry! Hale Stewart wipes that all a way with a wave of his callous and elitist hand:

Most of them are people with a high school or less educational level who used to work in blue collar industries who have been left behind due to globalization and automation.

Oh, well! Why didn’t he just say that to start with! There’s a reason these people are unemployed, so we can just abandon these people. But there’s one little problem with this theory. Globalization didn’t suddenly get worse after the financial crisis. There are very real reasons for not being impressed with the current economy, as discussed by Kevin Cashman, Prime-Age Workers Left the Labor Force During the Recession And the Recovery.

It amazes me how elites like Hale Stewart can be so cavalier about what’s going on with less educated workers. But it is hardly new. The argument that Stewart is implicitly making is the skills gap: these people just don’t have the skills for the modern economy! That’s an easy argument to make when you don’t hang out with those blue collar workers who are having a rough time of it.

I would prefer that Ed Morrissey go away too. He’s a hack, as I discussed in, Conservatives Will Never Get Over Obamacare. But his problem is not that he didn’t minor in economics. And on the labor force participation rate, he’s right. The big problem with him is that if there were a Republican in the White House, he wouldn’t be making this argument. Instead, he’d be making Hale Stewart’s argument: low skilled workers are out of a job; so what?!

Anniversary Post: Pluto Gets Closer Than Neptune

PlutoOn this day, and for the first time since they were discovered, Pluto slipped inside the orbit of Neptune. It stayed closer to the sun until 11 February 1999. But you might wonder, given that Pluto is such a puny object compared to Neptune (or even the Earth), why the larger planet hasn’t “cleared” it (basically: crashed into it). Well, there are a few reasons for that.

Right now, it would be impossible for Pluto to crash into Neptune because the dwarf planet orbits in a plane that is at quite an angle from that of the other planets — including Neptune. And when it is at the same axial distance to the sun as Neptune, it is way off the plane. And I do mean way off the plane: along the axis of the solar system, it gets as far as 8 times the distance from the Earth to the Sun (AU).

Pluto OrbitBut that wouldn’t save Pluto forever. Orbits precess (this explains part of the Earth’s ice age cycle). So there have been and will be times again when it will be on the plane at the right time. But again, Pluto is not in danger. Obviously, if it were in danger, Neptune would have long ago swallowed it up and we never would have had to have this argument about whether Pluto is a planet or not.

The two planets are in a 2-to-3 orbital resonance. This means that for every two times Neptune goes around the sun, Pluto goes around it three times. And they end up right back where they started. This sounds amazing, but there are lots of examples of this kind of thing in our solar system. Thus, they will not run into each other, because their precessions are locked together.

But Pluto Is Doomed Anyway!

Pluto is so small and so far away from the sun that it is chaotic. I mean that in a strict mathematical sense. Models of its future are highly constrained because very minor perturbations can have huge nonlinear effects on its orbit. But thus far, it really is the little planet that could. It has defied the odds and maintained its independence — to a large extent due to its having a powerful friend in Neptune. But it’s okay that Pluto is doom because so is everything. And it is going to last a whole lot longer than humanity.