Interviewing the cabbie makes sense when covering an election. He is on the street, sensitive to cross-currents. Checking out betting odds in the local satta market is another media ritual that makes some sense when covering elections. Some studies indicate prediction markets are useful forecasting tools.
But these are both highly biased samples. The cabbie is from a specific socio-economic strata. In many places, for complex reasons, the cabbie also tends to be an outsider.
This is true in New York, Kolkata, Karachi and Mumbai, for example.
The satta market is an inefficient prediction market for many reasons. Given the Indian electoral system, the racecourse totaliser (tote) would be a near-ideal model for election betting. Elections are first past the post (FPTP) and also feature multiple candidates at the constituency level, just like in races. There are multiple parties in aggregate. One difference: "placing" second doesn't count in an election.
A tote offers tickets in Rs 10, or multiples thereof, making it affordable for everyone. A range of bets are offered. The turf authority running the tote takes the commission and taxes payable off the top. The remainder of the betting pool is divided by the number of winning tickets to calculate the payout.
A range of bets would be available in a possible election tote, including winners (in constituencies and aggregated) and also spreads, predicting the range of seats a party may win. Many other bets can also be set up, such as spreads on win-margins, the number of convicted criminals who will win, etc.
Unlike in a tote, bookmakers, including satta bookies, set odds. A bookie keeps a running count of cash-in and potential maximum payout. He will reset the odds to minimise payout. (The spread in the bookies' favour is "vigorish"). This distorts the market.
Importantly, in all systems, a single large bet skews the odds. Say, 100,000 punters bet one ticket at Rs 10 each on a given political candidate, A. That is Rs 10 lakh on A. Now, one very rich punter fancies candidate B, and bets Rs 20 lakh on B. The odds swing, making B a hot favourite. This makes financial sense. But in an election, which candidate do you think is more likely to win - the one favoured by 100,000 punters, or the one backed by that Kuber-incarnate?
The satta market is illegal. Operations are secretive and exclusive. A walk-in without introduction will not get the time of day, let alone be allowed to bet. Minimum stakes are high. Bets under Rs 5,000 are not worth it for a bookie, who must pay law enforcement, employ runners, security staff, accountants, and deploy hundreds of cellphones with thousands of SIMs.
The satta bookie sets odds manually to keep vigorish high. Satta also offers limited markets, with few spreads and wins. All this stacks bias upon bias. Only punters with deep pockets who know the game can bet on an election. Satta is near-useless as a prediction tool. It is also a revenue generator only for crooked civil servants, rather than the exchequer.
This is a great pity. Legalisation of election betting would allow satta to be superseded, or complemented, by totes with low-priced tickets reflecting public opinion better. The Election Commission could run a tote with every election. Access to that data would help psephologists and politicians to review and tweak their models.
In moral terms, a tote on elections would be no different from running a lottery. It would also be totally in line with majoritarian sentiments, given the religious enthusiasm with which the vast majority of Indians gamble. It is a great pity that a supposedly majoritarian and business-friendly party cannot display the minimal imagination to legalise this potentially huge market.
Twitter: @devangshudatta