AI transcript
0:00:04 [MUSIC PLAYING]
0:00:07 In our previous episode, we had a wide-ranging conversation
0:00:10 about presidential history and presidential power
0:00:13 with the University of Chicago legal scholar, Eric Posner.
0:00:16 The founders could not possibly have imagined
0:00:19 that the president would become as powerful as he has.
0:00:22 And we wondered, is the US presidency
0:00:25 turning into something like a dictatorship?
0:00:26 Yes, I think that is happening.
0:00:30 Although, you know, dictatorship is such a freighted term.
0:00:32 But that conversation with Posner
0:00:34 was recorded in 2016, a couple months
0:00:37 before Donald Trump was elected president.
0:00:39 Trump is, of course, now running again
0:00:41 against Vice President Kamala Harris.
0:00:43 So today on Freakin’omics Radio,
0:00:45 we go back to Eric Posner to talk about what’s
0:00:47 happened over the past eight years
0:00:49 and what the future may bring.
0:00:51 I think it’s actually pretty hard to be a dictator.
0:00:53 You have to be kind of smart.
0:00:55 You have to be tough.
0:00:57 You have to be brave.
0:01:00 Also, have you lost faith in election polls?
0:01:04 If so, how would you feel about an election betting market?
0:01:07 A market doesn’t delay information.
0:01:09 A market doesn’t spin numbers.
0:01:11 A market just gives you numbers.
0:01:15 This is our election special, not what you are likely
0:01:16 to hear elsewhere.
0:01:17 And it starts now.
0:01:21 [MUSIC PLAYING]
0:01:31 This is Freakin’omics Radio, the podcast
0:01:34 that explores the hidden side of everything
0:01:36 with your host, Stephen Dubner.
0:01:39 [MUSIC PLAYING]
0:01:47 The University of Chicago law professor
0:01:49 Eric Posner has written more than a dozen books
0:01:52 on topics ranging from antitrust regulation
0:01:55 to human rights to the US Constitution.
0:01:58 As I mentioned earlier, we interviewed him eight years ago,
0:02:01 eight long years ago, about the evolution
0:02:03 of presidential power.
0:02:06 I listened to the interview this morning,
0:02:10 and I will say that I have changed my views about the presidency
0:02:14 to some extent because I do think Trump was a shock
0:02:17 and not the sort of person I expected
0:02:19 to become a president at the time
0:02:22 that I did a lot of my earlier writing on presidential powers,
0:02:26 which tended to be more optimistic about the powerful
0:02:27 presidency.
0:02:30 What surprised you about your assessment of Trump
0:02:32 and the presidency back then?
0:02:35 I think I was a little glib about the rise
0:02:37 of presidential power.
0:02:40 You could think that the risk of a too strong president
0:02:43 is dictatorship, but another risk of a too strong president
0:02:46 is just really bad governance and chaos,
0:02:49 and I don’t think I was expecting that.
0:02:51 So if I didn’t know anything about you
0:02:56 and I heard your quick musings here on presidential power,
0:02:58 I might think, oh, well, Posner sounds
0:03:02 like he is aligned with the Democrats pretty strongly.
0:03:06 Persuade me that that’s not the case, or if it is the case,
0:03:09 persuade me that your research and writing
0:03:11 is as objective as it can be for legal scholar.
0:03:13 – Trump is really sui generis.
0:03:16 When we talked about him eight years ago,
0:03:18 it was during the campaign, and I think–
0:03:20 – And we should remind people that it was during a campaign
0:03:21 in which he was not expected to win
0:03:23 by the vast majority of people.
0:03:26 – Right, so we talked about him in a kind of casual way,
0:03:29 and I didn’t expect him to win the presidency.
0:03:32 I do think he was a bad president.
0:03:35 Trump had certain goals, most of which he didn’t achieve,
0:03:38 and then Biden has been a very different president.
0:03:41 He had a number of goals which he achieved
0:03:44 by using the instruments of power at his disposal.
0:03:49 So I think in that sense, he’s been very competent.
0:03:51 Biden’s particular policy choices,
0:03:53 I don’t have as strong views about
0:03:57 whether the Inflation Reduction Act was a good idea
0:03:59 or the stimulus bill was.
0:04:01 As I said to you eight years ago
0:04:03 when you asked me about Obamacare,
0:04:07 these are complex areas, and I hesitate
0:04:10 to come down hard in favor of one perspective
0:04:11 or the other.
0:04:14 – The last time we spoke, you said
0:04:16 that the US presidency had been turned
0:04:18 into something of a dictatorship,
0:04:19 although you didn’t like that word.
0:04:23 You said presidential primacy was more to your liking.
0:04:26 So I’d like to hear your current views.
0:04:28 – There are two ways to look at this,
0:04:31 one just in terms of the empirical reality
0:04:34 of the president’s role in our political system
0:04:36 and the others, whether it’s good or bad.
0:04:37 Let me start with the first.
0:04:39 I’m gonna avoid the term dictator.
0:04:40 People think of Hitler.
0:04:42 I don’t think that’s a helpful lens
0:04:46 to look at Donald Trump or any American president.
0:04:49 I hardly need to say that Trump tested
0:04:51 the limits of presidential power.
0:04:54 What’s ironic is that Trump for all of his bluster,
0:04:57 he wasn’t able to use these tools very well
0:04:59 and accomplished very little.
0:05:01 A lot of it was just his temperament.
0:05:05 If you read memoirs written by his former aides,
0:05:09 this is a guy who couldn’t focus, was easily flattered
0:05:12 and swayed, couldn’t control his subordinates.
0:05:15 So it’s not surprising that he wasn’t able
0:05:19 to maintain a strong and consistent vision.
0:05:21 When he had a Republican House and Senate,
0:05:24 he was able to obtain a tax cut.
0:05:26 That seems to have been about the extent
0:05:28 of his accomplishments.
0:05:31 During the pandemic, he didn’t really do a whole lot,
0:05:35 but I think it’s fair to say that by authorizing operation
0:05:38 warp speed, which resulted in the vaccine,
0:05:40 he accomplished something of value.
0:05:42 But if you take something else,
0:05:46 one of his policies was to reduce illegal immigration
0:05:47 into the United States.
0:05:50 And his main instrument for doing that was to build a wall
0:05:51 along the border.
0:05:54 I think a more competent president
0:05:56 could have taken stronger actions.
0:05:57 Probably–
0:06:00 – Something perhaps less concrete, something–
0:06:01 – So to speak.
0:06:02 – Something that a construction executive
0:06:03 might not have come up with.
0:06:05 In other words, a policy, in fact.
0:06:08 – As I understand it, the reason why Trump
0:06:11 hit upon the wall as his major goal
0:06:13 was that it just came to mind
0:06:15 and it worked well with the crowds.
0:06:17 And so he repeated it and eventually,
0:06:19 he probably felt he had to do it,
0:06:21 whether it made sense or not.
0:06:23 But nobody ever thought it was a good way
0:06:25 to stop illegal immigration.
0:06:28 Illegal immigration is one of these incredibly complicated
0:06:31 problems that one can address in a variety of ways.
0:06:34 And I don’t think he had the patience and discipline
0:06:38 to figure that stuff out and put it into effect.
0:06:41 I think he had power that he could have used
0:06:44 to accomplish more that he wanted to achieve,
0:06:47 but simply lacked not just the temperament,
0:06:48 but experience.
0:06:49 He was new to the government.
0:06:51 He didn’t know how it works.
0:06:55 And certainly he faced a lot of resistance in the bureaucracy.
0:06:58 Biden has been a more successful president
0:07:01 in terms of achieving his policy goals,
0:07:05 but has been less reliant on the inherent powers
0:07:07 of the presidency to accomplish them.
0:07:11 – And is that because Biden had more of a connection
0:07:14 and facility with the existing infrastructure in DC?
0:07:16 – I think that’s part of the answer.
0:07:19 A lot of this has to do with Trump’s character
0:07:20 and temperament and–
0:07:22 – Meaning Biden is a little bit more,
0:07:25 let’s say respectful of norms than Trump?
0:07:27 – Well, Biden, even in his advanced age,
0:07:29 has a longer attention span.
0:07:32 More self-discipline shows greater loyalty
0:07:37 to his subordinates, appoints higher quality people.
0:07:39 He’s been a much more careful,
0:07:42 and I suppose more conventional type of president,
0:07:43 and that has helped him.
0:07:46 – Toward the end of Donald Trump’s first term,
0:07:49 maybe only term, but for now, first term,
0:07:52 you published a book called “The Demagogue’s Playbook,
0:07:54 “The Battle for American Democracy
0:07:56 “from the Founders to Trump.”
0:07:57 So let’s talk about that a bit.
0:07:59 Can we start by defining some terms?
0:08:02 How do you define a demagogue, first of all?
0:08:05 – A demagogue is a politician
0:08:10 who tries to obtain and keep power
0:08:13 by dividing the population,
0:08:15 usually by choosing an enemy.
0:08:18 The enemy could be foreigners,
0:08:20 it could be a minority group in the country,
0:08:23 or it could be, in the case of a left-wing demagogue,
0:08:26 the rich or the people with property.
0:08:27 – When you look around the world today,
0:08:30 who are some of your favorite practicing demagogues?
0:08:32 – Like everything else, it’s a spectrum.
0:08:34 Trump was a true demagogue.
0:08:37 Bolsonaro was a demagogue.
0:08:38 – Orban?
0:08:39 – Orban is a demagogue.
0:08:40 – Putin?
0:08:44 – I think applying the term to an autocrat is a little odd.
0:08:48 I tend to think of demagoguery as a problem for democracies.
0:08:51 – And what are the circumstances within a democracy
0:08:54 that tend to produce an appetite for
0:08:57 and or an opportunity for a demagogue?
0:08:59 – It’s a Greek word and it was a term used
0:09:00 by the ancient Greeks,
0:09:04 typically by people who were suspicious of democracy.
0:09:06 A lot of these Greek city-states had democracies
0:09:10 or basic political systems that resemble democracies.
0:09:13 It was very common for a person,
0:09:16 usually a person from the upper class.
0:09:18 And this person would like power,
0:09:23 but he’s not really part of the elites who are in power
0:09:25 and he doesn’t have any means
0:09:28 for getting the elites on his side.
0:09:32 So what the demagogue does is he appeals to the people
0:09:36 and he appeals to the people by basically making up stuff,
0:09:39 often lying, propounding conspiracy theories
0:09:42 just like today, riling people up
0:09:44 and trying to persuade them
0:09:49 that the people in power are conspiring to harm the people.
0:09:51 Now, when does this arise?
0:09:52 I think it can always arise,
0:09:55 but it’s more likely to arise when people are miserable.
0:09:58 So it could be during an economic downturn
0:10:02 or it could be during a war or some kind of natural disaster.
0:10:06 But once it gets started, it can just occur in cycles.
0:10:09 And this is really what the Greeks were worried about
0:10:11 was that you might have a demagogue
0:10:14 who successfully comes to power, becomes an autocrat
0:10:15 and controls the people.
0:10:19 And then somebody else tries to get power back
0:10:23 by becoming a demagogue and getting the people on his side.
0:10:24 And this leads to civil war.
0:10:26 Civil war is a terrible thing.
0:10:29 And this is why a lot of Greek thinkers
0:10:30 were quite skeptical of democracy.
0:10:34 They thought it tended to collapse in this way.
0:10:37 And the founders were very concerned about demagoguery.
0:10:40 They knew all about ancient Greece and ancient Rome.
0:10:44 And so the constitution was designed in large part
0:10:46 to limit the power of the people
0:10:49 so that demagogues wouldn’t be able to achieve power.
0:10:51 In early demagogue was Andrew Jackson
0:10:54 who actually introduced the party system.
0:10:59 But the party system after Jackson became somewhat hierarchical
0:11:02 in the sense that each party was controlled
0:11:04 by professional politicians.
0:11:08 What Jackson really did was transfer power
0:11:11 from the national elites to local elites.
0:11:14 But the local elites were hierarchical superiors
0:11:15 to ordinary people.
0:11:18 And so they made sure that the type of people
0:11:20 who were candidates for elections
0:11:22 were professional politicians
0:11:24 or at least a respectable former general
0:11:26 or something like that.
0:11:29 In the 20th century, though,
0:11:31 this way that the parties were organized
0:11:35 increasingly was in tension with people’s sense
0:11:38 of what a democracy requires.
0:11:39 I think this was happening in part
0:11:42 because in the national government,
0:11:43 the bureaucracy was growing
0:11:47 and you had this distant seeming administrative state
0:11:50 that was controlled by these parties
0:11:53 that ordinary people couldn’t really influence
0:11:56 except maybe once every few years or so.
0:11:58 One of the solutions to this problem
0:12:00 was to introduce primaries
0:12:05 where ordinary people would have a more direct impact
0:12:07 on the choice of the leader of their party
0:12:09 who would then be pitted against the leader
0:12:12 of the other party in the presidential election.
0:12:15 I do think American democracy is different
0:12:18 from what the founders thought they were creating.
0:12:21 The founders, they didn’t use the term democracy.
0:12:24 They thought of democracy as chaotic and horrible.
0:12:26 And if they could look into the future,
0:12:28 they might’ve said, yeah, Trump, that’s democracy
0:12:30 and we don’t want that to happen.
0:12:33 – Let me run past you another characterization of Trump
0:12:35 from your book, “The Demagogues Playbook.”
0:12:37 We need to see Trump, you write,
0:12:39 as a political monstrosity
0:12:41 who should be repudiated by the body politic
0:12:45 so that politicians who eye the presidency in the future
0:12:49 will be deterred from using Trump’s ascendance as a model.
0:12:53 Now, it does appear that roughly half of U.S. voters
0:12:55 don’t see him as a political monstrosity.
0:12:58 So what’s your explanation for that?
0:12:59 – I think he’s a monstrosity
0:13:02 in a kind of constitutional sense.
0:13:03 The founders are quite explicit
0:13:07 that the checks and balances weren’t going to be sufficient
0:13:10 unless virtuous people became office holders.
0:13:12 They were quite worried about this,
0:13:14 virtuous and competent people.
0:13:17 And in that sense, they were real elitists.
0:13:20 Whatever you think of the various presidents we’ve had,
0:13:22 some of them were truly bad,
0:13:24 but most of them were basically competent people
0:13:28 who became president because they rose through the ranks
0:13:30 and earned the trust of people and so on and so forth.
0:13:34 Trump is a monstrosity compared to that baseline.
0:13:36 He persuaded a lot of people
0:13:39 that the mysterious, powerful elites in government
0:13:42 and elsewhere are arrayed against him.
0:13:45 In some ways, he’s acted like previous demagogues
0:13:48 all the way back to ancient Greece,
0:13:51 but like the old demagogues, he wasn’t good at governance.
0:13:54 And it’s a shame that people support him,
0:13:57 but this is always what happens in this setting.
0:13:59 They support him, they say, okay, he lies
0:14:01 and he’s awful in many ways,
0:14:04 but at least he’s not as bad as the people on the other side.
0:14:07 – Republicans do seem to dislike Kamala Harris
0:14:10 about as much as the Democrats dislike Donald Trump.
0:14:13 And a big part of the argument
0:14:16 is that her ascendance to the presidential ticket
0:14:17 was undemocratic.
0:14:19 She didn’t win any of the primaries.
0:14:21 So what is your view of that
0:14:24 in light of constitutional history especially?
0:14:26 Does that make you uncomfortable?
0:14:29 – No, I think the small D democratic primaries
0:14:32 have perhaps not worked out the way one hoped.
0:14:33 – What do you mean by that?
0:14:37 – Well, because the primary system led to people like Trump,
0:14:41 whereas before primaries were so heavily relied on,
0:14:43 it was much more likely that you would get
0:14:45 a seasoned professional politician
0:14:49 or an accomplished general like Eisenhower.
0:14:51 So I think the primary system
0:14:54 probably is to the advantage of demagogues.
0:14:59 Look, our system is not a pure democracy, no system is.
0:15:03 There are lots of ways in which people’s votes are constrained.
0:15:05 We have the whole electoral college system.
0:15:08 People are inattentive to politics most of the time.
0:15:12 So elected officials have a lot of authority.
0:15:16 The way that Kamala Harris obtained the Democratic candidacy
0:15:20 is pretty small beings relative to all the rest of the stuff.
0:15:22 – After the break,
0:15:25 what would a second Trump term look like?
0:15:26 I’m Stephen Dovner.
0:15:27 This is Free Economics Radio.
0:15:29 We will be right back.
0:15:31 (upbeat music)
0:15:40 – The legal scholar Eric Posner argues
0:15:42 that Donald Trump didn’t accomplish much
0:15:44 during his first term as president.
0:15:46 Does he see Trump accomplishing more
0:15:47 if he were to win a second term?
0:15:50 – I don’t think he’s going to productively
0:15:53 navigate the system if he has a second term.
0:15:54 I really don’t.
0:15:57 I think the people around him,
0:15:59 they’re trying as hard as they can
0:16:02 to prepare a body of people he can appoint
0:16:04 who will enforce his vision.
0:16:07 So you know about project 2025,
0:16:09 produced by the Heritage Foundation.
0:16:13 There’s this 900 page manual that’s supposed to guide Trump
0:16:17 so that he achieves what these guys think his objectives are.
0:16:19 – Even though this project is supported by
0:16:23 and drawn up by many former Trump allies and colleagues,
0:16:26 he has claimed to know nothing of it
0:16:27 and to not support it at all.
0:16:29 Do you know anything further about that?
0:16:32 – He said he never read it and I really believe that.
0:16:34 I mean, Trump is not a big reader,
0:16:36 but really no one could read this document.
0:16:37 I’ve read parts of it.
0:16:40 It’s just, it’s boring and it goes
0:16:42 into all kinds of munition.
0:16:43 It has this weird paranoid tone.
0:16:45 It’s just an awful document.
0:16:48 Not really because it’s trying to establish
0:16:49 a Trumpian dictatorship.
0:16:53 It actually is in many ways conventional Republican thinking
0:16:55 going back decades in some ways
0:16:58 that reflects Trump’s particular concerns
0:17:01 about illegal immigration and tariffs and so forth.
0:17:03 But remember, Trump doesn’t like the idea
0:17:05 that other people are telling him what to do.
0:17:08 And now I suspect he’ll feel constrained
0:17:12 not to rely on project 2025 if he’s elected
0:17:14 because that’ll make him look weak
0:17:16 and like he’s being manipulated.
0:17:18 Anyway, it’s just a dumb document.
0:17:20 So he’ll just start from scratch.
0:17:24 – Let’s imagine for a minute that Trump is elected again.
0:17:26 Let’s take three major areas.
0:17:30 Let’s talk about the judiciary, federal agencies,
0:17:33 and let’s talk about dealings with foreign counterparts.
0:17:36 Can you walk me through your expectations in those areas?
0:17:39 – Okay, with the proviso that Trump
0:17:41 is an inherently unpredictable person.
0:17:42 – Sure.
0:17:43 – Let’s start with the judiciary.
0:17:46 So you might think one of his biggest accomplishments
0:17:50 was appointing judges who are on the right
0:17:53 and the Supreme Court got rid of Roe versus Wade and so forth.
0:17:55 But Trump doesn’t like these judges
0:17:57 because his appointees on the Supreme Court
0:18:01 ruled against him in his January 6 lawsuits.
0:18:03 This seems to be how Trump thinks.
0:18:04 So what went wrong?
0:18:08 What went wrong was that these judges were affiliated
0:18:10 with the federal society.
0:18:13 So maybe he shouldn’t appoint people
0:18:15 who are affiliated with the federal society.
0:18:18 And then the question is, well, who does he appoint?
0:18:20 Legal conservatives realized a long time ago
0:18:21 that if they wanted to be judges,
0:18:24 they should affiliate themselves with the federal society.
0:18:27 So that means there’s a very shallow talent pool
0:18:29 outside of the federal society.
0:18:31 And Trump might end up appointing
0:18:33 a bunch of incompetent judges
0:18:36 who may or may not be able to achieve his goals.
0:18:39 – Okay, how about federal agencies?
0:18:40 – This was a huge problem for Trump
0:18:42 and this was extremely predictable.
0:18:45 He becomes president in 2017.
0:18:47 There’s this huge bureaucracy.
0:18:50 These people are supposed to do what he wants them to do.
0:18:52 He issues orders, nobody pays attention to them
0:18:55 or they slow walk his projects.
0:18:57 So what do you do about this?
0:19:00 Well, you make sure that the bureaucracy
0:19:03 is somehow replaced with Trumpian loyalists.
0:19:07 Again, there’s this problem of the shallow talent pool.
0:19:08 There’s also the problem
0:19:10 of getting rid of civil servants.
0:19:13 So there is this theory that Trump’s supporters
0:19:15 have advanced that he can, you know,
0:19:18 reclassify a lot of these people and fire them.
0:19:21 He actually tried to do this at the end of his first term.
0:19:22 It didn’t work.
0:19:24 So I don’t think he’s gonna be able
0:19:28 to convert the bureaucracy into a usable
0:19:32 and loyal bureaucracy in his next term.
0:19:34 – And then foreign counterparts.
0:19:35 – Foreign counterparts.
0:19:38 – Many of whom have expressed almost publicly.
0:19:41 I mean, it’s leaked that they really saw him as a joker.
0:19:42 Some of them he forgives and forgets.
0:19:43 Some of them he doesn’t.
0:19:46 So how do you see that playing out?
0:19:48 – I think he’ll treat them the way he treated them
0:19:50 during his first term.
0:19:53 If you read the memoirs and the journalistic histories,
0:19:57 it sounds like maybe he had rapport with some of them,
0:19:59 but that he was easily manipulated.
0:20:04 He’s a vain person who was swayed by charming foreigners.
0:20:07 He might be a little bit more sophisticated now than he was,
0:20:09 but he seems to be so impulsive
0:20:12 and so hard to control by his aides
0:20:14 and so unwilling to let them guide him,
0:20:16 even though they’re the people who really know
0:20:17 what’s going on.
0:20:20 I just imagine it’ll be another chaotic term.
0:20:22 – And how much does that matter?
0:20:24 You and I first spoke years and years ago
0:20:26 for an episode called something like,
0:20:29 “How much does the president actually matter?”
0:20:31 The underlying argument was that most Americans
0:20:35 tend to attribute too much weight to the US presidency.
0:20:38 In the case of foreign affairs, however,
0:20:40 there are some unilateral powers
0:20:44 and the figurehead status alone is pretty significant.
0:20:46 So if Trump were to be reelected
0:20:50 and were to not, let’s say, put the best face forward,
0:20:51 how much do you think it matters?
0:20:53 – I think it matters a lot.
0:20:56 And maybe to clarify a bit what’s at stake,
0:20:58 I agree with you that a lot of ordinary people
0:21:00 think the president has more power than he does,
0:21:02 that if there’s inflation or an economic downturn
0:21:06 or a war in the Middle East, it’s the president’s fault.
0:21:07 And often there’s just nothing
0:21:09 that presidents can do about that.
0:21:11 But I think a lot of, for example,
0:21:15 commentators, professors, journalists,
0:21:18 think the president has less power than he really does.
0:21:21 He has all of these ways of influencing policy
0:21:24 through the bureaucracy that are often invisible.
0:21:26 Now with respect to foreign affairs,
0:21:29 I think if there’s a real crisis,
0:21:31 it could be a big problem.
0:21:34 The foreign policy machine is very big
0:21:37 and kind of hard to control.
0:21:40 But Trump really did have this effect
0:21:42 in the sense that he moved the country
0:21:45 more toward isolationism.
0:21:48 Now, interestingly, Biden has to some extent
0:21:51 followed Trump’s lead, which makes you think
0:21:55 that Trump was in fact reflecting something fundamental
0:21:57 about how the public was thinking.
0:22:00 – With China, especially Biden following the lead, right?
0:22:01 – Yes, with China especially.
0:22:05 Maybe Trump was ahead of the foreign policy establishment.
0:22:06 I don’t know.
0:22:09 (gentle music)
0:22:11 It’s easy to forget that not so long ago,
0:22:13 there was a question of whether Donald Trump
0:22:16 would even be allowed to run for a second term.
0:22:17 Multiple lawsuits were filed
0:22:19 trying to keep Trump off the ballot,
0:22:22 arguing that his support of the January 6th riot
0:22:26 at the Capitol constituted an illegal insurrection.
0:22:28 The U.S. Supreme Court ultimately ruled
0:22:29 in a unanimous decision
0:22:32 that Trump could not be removed from state ballots.
0:22:35 There have been many other lawsuits filed against Trump,
0:22:37 Manhattan District Attorney Alvin Bragg
0:22:39 won a conviction against Trump
0:22:41 on charges of falsifying business records
0:22:45 in order to conceal hush money payments to a porn star.
0:22:47 There are also outstanding federal charges
0:22:49 related to election interference
0:22:52 and Trump’s mishandling of classified documents.
0:22:54 I asked Eric Posner what he thinks
0:22:58 about these attempts to stymie Trump legally.
0:23:00 – There’s always been this worry
0:23:03 that one way that a democracy will collapse
0:23:07 is that the people in power will use the legal system
0:23:10 to harass their political opponents.
0:23:12 There’s a lot of reason to think that’s a real danger.
0:23:16 There’s a ton of historical examples of that.
0:23:18 In the United States,
0:23:22 there’s been relatively little of that kind of behavior.
0:23:24 I think that’s been a good thing.
0:23:27 It’s definitely better for the people in power
0:23:31 to try to avoid using the legal system against their opponents.
0:23:35 Even if their opponents are maybe breaking the law a little bit.
0:23:37 Now, if their opponents start murdering people
0:23:39 by all means, the police should arrest them,
0:23:40 they should be tried.
0:23:42 The Justice Department has always had this view
0:23:46 that you’re not going to try to prosecute political opponents,
0:23:50 especially at sensitive times like during a campaign,
0:23:52 unless you absolutely have to.
0:23:55 So among the various indictments of Trump,
0:23:58 I do think the New York indictment,
0:24:02 the Alvin Bragg indictment, was definitely the weakest.
0:24:06 This was basically a very minor kind of fraud
0:24:09 that Trump committed in New York.
0:24:11 And because it was connected to a federal election,
0:24:12 that was the loophole, yes?
0:24:14 Well, it wasn’t even clear.
0:24:15 It was connected to the federal election.
0:24:19 They also said it was connected to violation of the tax laws.
0:24:22 They also said it was connected to state election laws.
0:24:24 And a lot of that stuff wasn’t really resolved
0:24:26 because the jury doesn’t have to tell us
0:24:28 the basis of its decision.
0:24:31 I just think that all of these attempts
0:24:34 to prosecute Trump have backfired terribly.
0:24:35 There’s an interesting lesson here,
0:24:37 which is that there’s a tendency,
0:24:41 especially among people like me, law professors,
0:24:44 to think that the reason why American democracy
0:24:45 has lasted as long as it has,
0:24:47 is that every time we have a president,
0:24:51 that president respects democratic norms.
0:24:53 I think the causation might be a little backwards.
0:24:55 Presidents respect these norms
0:24:58 because if they don’t, it backfires.
0:24:59 People don’t like it
0:25:02 when the government prosecutes its political opponents.
0:25:06 And the government may be hurt because of public opinion,
0:25:09 or I think what we’ve really seen is it’s hurt
0:25:13 because judges are skeptical, they’re nervous,
0:25:15 and there’s a lot more scrutiny of these trials.
0:25:19 I think probably the lesson that’s going to be drawn from this
0:25:20 was that it’s not smart,
0:25:24 let alone consistent with whatever your political theory is
0:25:26 to go after your political opponents
0:25:28 using your legal powers.
0:25:29 – Is it even less smart knowing
0:25:30 that all the way at the top of the chain,
0:25:33 you’ve got a US Supreme Court whose key voters
0:25:36 have been appointed by the person you’re prosecuting?
0:25:39 – I wouldn’t put it in quite that narrow sense.
0:25:41 I think the Supreme Court,
0:25:45 maybe more than any other body in our political system,
0:25:49 is concerned about this kind of political retaliation.
0:25:52 And I think they’re concerned for self-interested reasons,
0:25:54 but not in the way that you mean.
0:25:58 When the judiciary is involved in these types of trials
0:26:02 that are politically tinged, the judiciary is damaged,
0:26:05 just as much as the political actors
0:26:08 who are responsible for the prosecution
0:26:09 on one side or the other.
0:26:11 The lower court judges and the appellate court judges,
0:26:14 they’re all understandably nervous.
0:26:16 They want to be extremely careful.
0:26:19 And the Supreme Court above all wants to make sure
0:26:22 that these prosecutions don’t happen
0:26:24 unless they absolutely have to.
0:26:26 I mean, the judges who ordered the execution
0:26:29 of trials the first were hunted down
0:26:32 and executed after the restoration.
0:26:33 – So in your view, Eric,
0:26:37 as a legal and constitutional scholar,
0:26:40 should Trump have been forbidden by the courts
0:26:42 from running again?
0:26:44 – No, as bad as Trump has been,
0:26:48 it would be worse if the judiciary were to intervene
0:26:52 and remove from the ballot the leader of one of the parties
0:26:55 based on this theory of the Constitution
0:26:59 that it has some narrow legal attractiveness,
0:27:01 but is just a totally unrealistic thing
0:27:03 to expect the courts to do.
0:27:05 I think the Supreme Court was wise
0:27:06 in not disqualifying Trump.
0:27:10 – In July of 2024,
0:27:13 the Supreme Court ruled in a six to three decision
0:27:15 that former presidents have absolute immunity
0:27:19 for actions related to the core powers of their office
0:27:21 and that there is at least a presumption of immunity
0:27:22 for official acts.
0:27:25 Here’s what the three dissenting justices,
0:27:27 the Democratic appointees had to say.
0:27:29 The relationship between the president
0:27:32 and the people he serves has shifted irrevocably.
0:27:34 In every use of official power,
0:27:37 the president is now a king above the law.
0:27:39 I asked Eric Posner what he thought
0:27:43 about the immunity decision and that dissenting view.
0:27:46 The immunity decision was not as outrageous as people say.
0:27:49 Lots of government officials have immunity
0:27:51 and this idea of the president having immunity
0:27:53 with respect to his core powers,
0:27:56 I don’t think that comes as much of a surprise,
0:27:58 but it may have a political effect.
0:28:01 It might encourage Trump to do bad things.
0:28:03 And the paradox is the judiciary,
0:28:06 the Republican majority on the Supreme Court
0:28:08 is kind of making the government weaker,
0:28:11 but the president stronger within the government.
0:28:14 – In December of 2023,
0:28:17 when Trump was set to run against Joe Biden,
0:28:21 this was several months before Biden ended up dropping out,
0:28:22 you published a piece called,
0:28:24 “A Trump Dictatorship Won’t Happen.”
0:28:26 I guess this was presupposing
0:28:28 that Trump might win a second election.
0:28:30 You wrote that, “Although Donald Trump
0:28:32 “is many things, most of them bad,
0:28:34 “he was not a fascist when he was president
0:28:37 “and he would not become a dictator if elected again.”
0:28:40 Okay, walk me through that, why not?
0:28:41 – He won’t become a dictator.
0:28:42 I think there are a number of reasons.
0:28:45 First of all, I think it’s actually
0:28:46 pretty hard to be a dictator.
0:28:50 You have to be kind of smart, true at least.
0:28:53 You have to be tough, you have to be brave.
0:28:56 – You’re saying Trump is none of those, even brave, yeah?
0:28:57 – From what I know about him,
0:29:01 it’s just hard to imagine him having this ambition
0:29:02 to be a dictator.
0:29:06 I know he wants power and he wants to hold on to power,
0:29:09 but I think he does it in an ad hoc way
0:29:12 rather than in the kind of shrewd, planned way
0:29:15 that real dictators do to obtain power.
0:29:17 And then the other thing is just that I do think
0:29:21 that the other institutions, the press, Congress,
0:29:23 the courts, they’re not gonna let him be a dictator.
0:29:26 – You write further, “The power of constitutional
0:29:29 “and bureaucratic hurdles combined with a dearth
0:29:31 “of sympathetic right-wing radicals
0:29:34 “ensure that anarchy is more likely than tyranny.”
0:29:36 You’re chuckling at anarchy,
0:29:38 but I mean, anarchy’s not very good either, is it?
0:29:39 – No, definitely.
0:29:42 Look, that was not a defense of Trump’s candidacy,
0:29:43 but people have been complaining
0:29:46 that the president is gonna become a dictator,
0:29:47 and they mean in the Hitler sense,
0:29:50 not in the sense of having the ability
0:29:53 to order certain types of environmental regulations.
0:29:55 They’ve been saying that for so long,
0:29:58 they’ve been accusing so many presidents of this,
0:30:00 or presidential candidates,
0:30:02 and I just think it’s become a substitute
0:30:07 for a more careful diagnosis of the problems that we face.
0:30:09 I think the real problem with Trump
0:30:12 is that he makes bad decisions and he’s corrupt,
0:30:14 and he appoints corrupt people,
0:30:17 and he doesn’t know how to manage people,
0:30:19 and so, yes, anarchy might result
0:30:23 because the presidency is such an important role,
0:30:25 but dictatorship is the other end of the spectrum.
0:30:29 It’s extreme order, and we don’t recall extreme order
0:30:32 from Trump’s term, it was the opposite.
0:30:35 – I know some people feel that we are approaching
0:30:37 the end of democracy in the US.
0:30:40 My sense is that you feel we’re perhaps
0:30:44 approaching the end of American-style democracy.
0:30:45 Is that accurate?
0:30:47 – No, I don’t think we’re approaching
0:30:49 an end to any kind of democracy.
0:30:53 I think things will just sputter on as they have.
0:30:55 I mean, what’s really unique about Trump
0:31:00 was just how uninterested he was in understanding policy,
0:31:02 leading the country in a competent way,
0:31:04 or maybe he was unable,
0:31:06 and the fact that people elected him anyway.
0:31:10 That I just don’t know how to fit into my understanding.
0:31:13 – So if we were looking back on this period of time
0:31:16 from 20 or 50 years hence,
0:31:19 you think this would look more like a rocky patch
0:31:21 than the beginning of the end?
0:31:23 – If you talk about, let’s say, the last eight to 10 years,
0:31:25 I’d say it looks like a combination
0:31:29 of maybe the 1930s and the 1960s,
0:31:32 and not as bad as the 1930s,
0:31:34 or as chaotic as the 1960s.
0:31:37 – So why is there the sense that it’s so much worse?
0:31:39 – People always think the political system
0:31:41 is about to collapse.
0:31:44 Look, we have to think about maybe Trump’s successors.
0:31:47 If Vance or Holly or Ted Cruz or Ruby
0:31:50 or any of those guys eventually become president,
0:31:51 they’re not gonna be like Trump.
0:31:53 Whether we like their goals or not,
0:31:57 they’re just going to look like other presidents,
0:32:01 Bush or Reagan or Hoover or Calvin Coolidge, whoever.
0:32:04 I just don’t think that they look at Trump
0:32:06 and say to themselves, I want to be like this guy.
0:32:09 They say to themselves, I want to be loved
0:32:10 and I want to be president,
0:32:12 but I don’t want to be like this guy.
0:32:15 Trump has not provided a recipe for other people to follow.
0:32:17 And then Biden over the last four years,
0:32:20 in many ways, he’s a bit of a throwback.
0:32:23 Most of what he’s done has been through legislation.
0:32:25 He’s done a few aggressive things,
0:32:27 like the student debt cancellation,
0:32:30 which was struck down by the Supreme Court.
0:32:32 But he seems quite continuous with Obama
0:32:35 and for that matter, Reagan and both Bushes.
0:32:38 I mean, just a modern kind of president
0:32:41 who uses both legislation and executive power
0:32:43 to accomplish his goals
0:32:46 and then loses power at the midterm
0:32:48 because people get annoyed with him.
0:32:50 Biden could very well have lost the election
0:32:52 if he hadn’t agreed to step down.
0:32:54 So it seems like a return to normalcy,
0:32:56 except of course that Trump could be reelected.
0:32:59 And if he is, I think we’ll have another four years
0:33:02 that are a lot like Trump’s previous term,
0:33:05 but are not going to spell the end of democracy.
0:33:07 If all of our presidents are like him,
0:33:10 I think eventually we’d be in big trouble.
0:33:13 But a huge institution like the US government,
0:33:15 if you read about the history of the Ottoman Empire
0:33:17 or the Roman Empire, for that matter,
0:33:21 they had a lot of really terrible leaders for a long time.
0:33:24 And they would last a few more centuries.
0:33:26 I think it takes more than a bad president
0:33:28 to destroy an empire.
0:33:31 Coming up.
0:33:34 Will Donald Trump be elected again?
0:33:37 We look for some answers in the betting markets.
0:33:38 I’m Stephen Dubner.
0:33:39 This is Freakonomics Radio.
0:33:40 We’ll be right back.
0:33:54 So who is going to win the upcoming presidential election?
0:33:56 Kamala Harris or Donald Trump?
0:33:57 As we have all come to realize,
0:34:00 political polling is an imperfect science.
0:34:03 It often overpromises and underdelivers,
0:34:05 which leaves a lot of people frustrated.
0:34:08 So is there perhaps a better tool
0:34:10 to predict election outcomes?
0:34:13 Whenever you can find elections, you can find betting.
0:34:15 That is Coleman Strumpf.
0:34:19 I’m an economics professor at Wake Forest University.
0:34:22 Strumpf does research on topics like illegal file sharing
0:34:25 and tax evasion, as well as what economists
0:34:27 call prediction markets, which are essentially
0:34:31 betting markets, like betting on elections.
0:34:33 The work that I’ve done on this subject
0:34:37 is with a tremendous economic historian named Paul Rody.
0:34:40 And I was very interested in the modern version
0:34:41 of these markets.
0:34:43 This would be about 1999.
0:34:46 I said, look, there are this new thing that came around
0:34:49 with the internet, and it’s the wave of the future.
0:34:53 And Paul said, no, I was just reading the Brooklyn Eagle
0:34:55 in 1896.
0:34:57 And there was a very large market
0:35:00 of people betting on elections in New York City
0:35:05 that led to a four, five, six-year odyssey of learning
0:35:08 about these markets and their history.
0:35:12 It turns out the history goes back well before 1896.
0:35:15 In the 16th century, you can find people betting on
0:35:17 who gets elected as a pope.
0:35:20 Now, the Catholic Church was not exactly
0:35:21 a very big fan of this.
0:35:24 If you bet on cardinal selections of popes,
0:35:26 you could get excommunicated.
0:35:28 In the United States, you can find not so organized,
0:35:32 but versions of betting going back to George Washington.
0:35:36 These markets existed basically in any city
0:35:37 in the United States.
0:35:40 The biggest markets existed in New York
0:35:43 outside the stock exchange, almost all the attention
0:35:45 focused on who would get elected to president,
0:35:48 governor, even mayor of New York.
0:35:52 And these markets were really popular.
0:35:56 In this period, there were no scientific polls.
0:35:58 You did not have a New York Times, Seattle poll.
0:36:01 These things grew and grew in popularity.
0:36:05 Then starting in the 1930s, they started to disappear.
0:36:07 The newspapers were never comfortable
0:36:09 talking about these markets.
0:36:13 It was both morally and legally in a gray zone.
0:36:16 – In 1935, the statistician George Gallup
0:36:18 founded the American Institute of Public Opinion,
0:36:20 which a couple of decades later,
0:36:23 morphed into the Gallup polling organization.
0:36:25 By using modern survey sampling techniques,
0:36:28 Gallup made it safe for media outlets
0:36:31 to rely on polling data instead of gamblers.
0:36:34 The betting markets went underground.
0:36:36 But in the US, they started coming back
0:36:39 in the late 1980s, thanks to the internet.
0:36:42 Things were now a bit less carefree than in the old days.
0:36:46 If you want to run one of these markets
0:36:48 and have people invest real money in it,
0:36:49 it’s considered a futures market.
0:36:51 And in the United States,
0:36:53 the Commodities Futures Trading Commission
0:36:56 has jurisdiction over these markets.
0:36:58 – But the CFTC’s guidance on these markets,
0:37:03 according to Coleman Strumpf, is extremely opaque and unclear.
0:37:08 The CFTC has actually never formally recognized
0:37:10 any political prediction market,
0:37:12 but they’ve allowed two of these markets,
0:37:16 the Iowa Electronic Market and a site called Predictit,
0:37:19 which is located in New York and Washington DC.
0:37:22 They’ve allowed them to run these markets
0:37:24 under what’s called a no action letter,
0:37:26 which is essentially saying,
0:37:28 we’re not going to prosecute you for betting
0:37:29 or in participating on the site,
0:37:32 but it’s not a fully recognized exchange.
0:37:35 – Okay, let’s begin with the Iowa Electronic Market.
0:37:37 – This was started in 1988.
0:37:39 It’s run out of the business school
0:37:41 at the University of Iowa.
0:37:45 And it was always intended as a academic exercise.
0:37:47 The people who run the site were mainly interested
0:37:50 in testing theories about how markets work.
0:37:52 It was very small scale.
0:37:54 So there’s, I think a limit of $500
0:37:57 that you can put in every market that they have.
0:38:00 And then partly because the stakes were so small,
0:38:03 and for reasons I can’t fully understand,
0:38:05 people’s attention moved elsewhere.
0:38:07 – Elsewhere included the UK,
0:38:09 where gambling was more mainstream generally.
0:38:11 Sports gambling sites like Betfair
0:38:15 carried bets for elections in the UK and the US.
0:38:17 And then came a market called Intrade.
0:38:19 – Intrade was an Irish site.
0:38:22 They did not really go down the route
0:38:25 of trying to get approval from US regulators.
0:38:27 Despite the fact that almost everybody
0:38:29 on the site was American.
0:38:31 This was the biggest show in town
0:38:34 from around 2004 to 2012.
0:38:38 The CFDC was very, very upset with them.
0:38:41 The CEO of Intrade basically couldn’t come to the United States
0:38:43 for fear of getting arrested.
0:38:48 Intrade collapsed around 2013 for old fashioned reasons,
0:38:52 misconduct by the people running the company.
0:38:56 After Intrade disappeared, Predictit came online.
0:38:58 That started to really catch fire
0:39:01 between 2016 and 2020.
0:39:03 – Predictit came out of
0:39:06 Victoria University of Wellington in New Zealand.
0:39:08 In order to operate in the US,
0:39:10 it accepted limitations that would satisfy
0:39:12 the American regulators.
0:39:17 – Predictit as part of the CFDC no action letter
0:39:19 had to say, we’re gonna have limited stakes.
0:39:24 So you could invest up to $850 in one of these markets.
0:39:27 If you’re a financial person,
0:39:29 that’s not even pocket change.
0:39:32 – But even that limit didn’t satisfy the CFTC,
0:39:36 which in 2022 withdrew its no action letter
0:39:38 and tried to ban Predictit.
0:39:40 That standoff has been in court ever since.
0:39:42 But new players continue to emerge,
0:39:46 despite or maybe because of the CFTC’s
0:39:48 opaque and uncertain guidelines.
0:39:50 Two of the most prominent markets right now
0:39:53 are Colchee and Polymarket.
0:39:56 – Polymarket is a crypto based site.
0:39:59 They are set up at least in principle
0:40:03 to not allow any American batters on their site.
0:40:06 But if you quickly Google Polymarket,
0:40:08 you’ll find many people explaining
0:40:11 that there are ways to send money to the site.
0:40:14 So Polymarket has had its day in the sun
0:40:16 in the last several months.
0:40:18 They’re the biggest of any of these markets.
0:40:21 Their biggest market, which is on who gets elected president
0:40:24 has taken about a billion dollars a bet.
0:40:26 – A billion dollars, at least in a cryptocurrency
0:40:30 called USD coin, which is pegged to the US dollar.
0:40:32 And then there’s a market named Colchee,
0:40:35 which is an Arabic word meaning everything.
0:40:39 – Colchee is a site that allows people to bet on events,
0:40:42 weather outcomes, movies, things like that.
0:40:45 The one thing that they really want to have markets on
0:40:46 are elections.
0:40:51 So they starting about two years back went to the CFTC
0:40:54 and said, look, we are relatively experienced
0:40:56 running these event contracts.
0:40:57 We’re regulated by you guys.
0:40:59 We want to run an election market.
0:41:04 The CFTC basically ignored their request and let it sit
0:41:08 and Colchee then turned around and sued the CFTC
0:41:10 and said, we need a decision.
0:41:11 This was sitting in the courts.
0:41:13 And then a few weeks back,
0:41:16 the judge made her initial decision
0:41:17 and ruled in Colchee’s favor.
0:41:20 This happened on a Thursday at noon
0:41:22 by one or two o’clock in the afternoon,
0:41:24 Colchee had set these markets up.
0:41:27 And these were markets on which party
0:41:28 would control Congress.
0:41:31 They had a lot of money flowing into this.
0:41:34 By the next day, the CFTC appealed
0:41:37 and we’re kind of in this gray zone again.
0:41:40 – But that gray zone has shifted even since we spoke
0:41:42 with Coleman Strumpf.
0:41:45 A panel of three judges for the DC Circuit Court of Appeals
0:41:48 voted unanimously to lift the ban
0:41:50 while the CFTC’s appeal is ongoing
0:41:54 and Colchee reopened their election markets.
0:41:56 So what is Colchee’s pitch?
0:41:59 – Their biggest pitch is saying,
0:42:02 look, we’re gonna have very deep liquid markets,
0:42:05 which is just financial jargon for allowing people
0:42:07 to put a lot of money into these markets.
0:42:11 The reason why this could potentially be a good thing
0:42:14 is there are lots of people
0:42:16 who have what we call political risk
0:42:18 or political uncertainty.
0:42:23 Imagine you’re a investor in green energy companies.
0:42:26 Well, based on which party wins the presidency,
0:42:30 your financial future is gonna be very different.
0:42:31 Maybe you really wanted something
0:42:35 that was associated with the Democrats winning the election.
0:42:37 You would actually bet on the Republicans
0:42:39 to win in this market.
0:42:41 This is what a financial person would call hedging.
0:42:43 – You can imagine that some people
0:42:45 might not appreciate the idea
0:42:49 of using electoral outcomes for financial hedging
0:42:50 or they might not appreciate the idea
0:42:53 of betting on elections period.
0:42:54 One such person is Jeff Merkley,
0:42:56 a Democratic Senator from Oregon.
0:43:00 He recently introduced the Ban Gambling on Elections Act.
0:43:02 Here’s what Merkley said in a statement.
0:43:04 “When big bets are cast on elections
0:43:07 and dark money can smear candidates,
0:43:09 you have the perfect combination of factors
0:43:12 that can undermine trust in our democracy.”
0:43:14 The CFTC has the same concern.
0:43:17 – Their concern is that this would lead
0:43:21 to both manipulation of the markets
0:43:24 and challenges to election integrity.
0:43:26 In terms of manipulation of a market,
0:43:29 what they’re concerned about is that somebody
0:43:32 tries to move prices in the market
0:43:35 for reasons that aren’t related to fundamental information.
0:43:38 They’re just trying to trick a bunch of people
0:43:41 into, for example, saying that Vice President Harris
0:43:44 is much stronger candidate than we think she is
0:43:46 and to financially profit from it.
0:43:47 So that’s the first thing.
0:43:52 The second thing that is probably the more fundamental concern
0:43:56 is that if we have these markets, the CFTC claims,
0:43:58 people will now have incentives
0:44:02 to either try to change election outcomes
0:44:06 or a related point is that if people watch these markets,
0:44:09 just regular folks who aren’t even participating
0:44:11 in these markets and they see that there’s something
0:44:15 going on in these markets, it might change how they vote.
0:44:19 The head of the CFTC put all this up into a succinct phrase
0:44:22 as he doesn’t want to become an election cop.
0:44:25 – You could, of course, argue that election polls
0:44:27 can also influence how people vote.
0:44:31 In any case, here’s how strump sees the CFTC’s position.
0:44:35 – The CFTC does not have it in their powers
0:44:36 to get rid of these markets.
0:44:39 If the CFTC tomorrow said, look,
0:44:42 we will not allow Cauchy to have a market,
0:44:44 we’re gonna shut down predicted, okay?
0:44:46 Does that mean election betting disappears tomorrow?
0:44:47 Absolutely not.
0:44:51 Exactly the same way that prior to 2018,
0:44:53 if you went to almost any city in the United States
0:44:55 and you wanted to make a sports bet,
0:44:56 even if it wasn’t legal,
0:44:58 you wouldn’t have too much trouble
0:45:00 finding somebody to take your bet.
0:45:03 The analogy that I think most people would understand
0:45:04 would be prohibition.
0:45:06 Even if you totally oppose alcohol,
0:45:09 you’re a T-totaler, you have religious reasons, whatever,
0:45:12 having it legal and regulated as a country,
0:45:14 we’ve decided is a much better approach
0:45:16 from a social perspective.
0:45:19 A truism of economics is when there is
0:45:21 a tremendous demand for an activity,
0:45:23 supply will arise to meet it.
0:45:26 And when it is a supply that’s arising
0:45:31 in an unregulated, wild west environment, bad things happen.
0:45:33 – This is one reason strump thinks it might be wise
0:45:36 to have legal, regulated election markets.
0:45:38 There is another reason too,
0:45:40 even for all the regular people
0:45:41 who would never place a bet.
0:45:44 For regular people, the amount of information
0:45:47 you can get out of these markets is vast.
0:45:48 It’s the best.
0:45:50 – Consider one research paper strump wrote
0:45:53 with the economic historian Paul Rodey.
0:45:56 It’s called historical presidential betting markets
0:45:59 and it contains this tantalizing conclusion.
0:46:02 We show that the market did a remarkable job
0:46:05 forecasting elections in an era before scientific polling.
0:46:08 In only one case did the candidate clearly favored
0:46:11 in the betting a month before election day lose.
0:46:15 And even state specific forecasts were quite accurate.
0:46:18 Strump also argues that betting markets
0:46:20 can give us a better view of reality
0:46:22 than most media coverage.
0:46:24 – I’ll give an example which is in North Carolina
0:46:27 where I’m located right now, but it’s a national story.
0:46:30 We have a very contentious governor’s race
0:46:31 going on in the state.
0:46:34 And in the recent period,
0:46:37 the Republican candidate for governor,
0:46:39 there was a big news story in CNN that said
0:46:43 that the candidate had written some very offensive things
0:46:46 on a not very nice website.
0:46:47 If we don’t have these markets,
0:46:50 I have to rely on news media to think about,
0:46:52 is this a big story?
0:46:54 Even if you’re not in North Carolina,
0:46:56 you’d say, wow, this is going to really hurt
0:46:59 a Republican candidate in North Carolina.
0:47:02 And that probably will have a spillover effect
0:47:05 on whether Donald Trump will win North Carolina
0:47:06 in the electoral college
0:47:08 and this could change who gets elected president.
0:47:11 So this is a gigantic story.
0:47:13 Okay, that’s what the New York Times says.
0:47:16 – Okay, and what do the betting markets say?
0:47:18 – A bunch of people who put hard money down collectively
0:47:21 said both those two things are incorrect.
0:47:24 First, it turned out this candidate
0:47:26 had very little chance of getting elected governor
0:47:28 before all this stuff came out.
0:47:30 The second thing is Trump’s election chances
0:47:33 in these markets barely moved.
0:47:36 So I could understand as a citizen,
0:47:39 what’s the effect of this big news story?
0:47:43 I could go to a new site and have their spin on things,
0:47:45 which sometimes is right and sometimes is wrong.
0:47:46 Or I could go to one of these markets
0:47:47 that cuts right to the chase
0:47:51 and tells me the information that I’d like to know.
0:47:54 – But what about the traditional election polls
0:47:55 we’ve been relying on for decades?
0:47:58 Don’t they provide this information?
0:48:00 Nate Silver, for instance, has gained fame
0:48:03 by aggregating a variety of polls,
0:48:06 waiting them according to a variety of criteria,
0:48:09 and then creating a probabilistic forecast.
0:48:12 So what can these markets do that Silver can’t?
0:48:14 – One of the things that he cannot do
0:48:18 is he can’t generate a real-time forecast.
0:48:20 Like, okay, there’s a news story
0:48:23 that comes out at one in the morning.
0:48:25 Nate’s gonna have to go collect a bunch of poll numbers
0:48:27 that usually takes a day for a poll to happen
0:48:29 and then run through his statistical model.
0:48:33 And if this is a Monday, he’ll tell me Wednesday.
0:48:34 And that’s sometimes not so bad,
0:48:37 but these markets tell me Monday.
0:48:39 One minute after the event happens,
0:48:42 I can understand what’s exactly going on.
0:48:44 The other thing to point out is that
0:48:46 if you go look on these sites,
0:48:49 we can have markets on anything under the sun.
0:48:51 Nate Silver is one person.
0:48:54 He can give us forecasts on the big stuff
0:48:56 who gets elected president,
0:49:00 who wins Pennsylvania in the electoral college,
0:49:02 but suppose I’m interested in what’s going on
0:49:04 with the mayor in New York City.
0:49:05 – In case you haven’t heard,
0:49:07 New York City Mayor Eric Adams
0:49:08 is under federal indictment
0:49:11 for a bunch of fraud and bribery charges.
0:49:13 – I don’t think Nate has a model for that.
0:49:14 And if he has a model for that,
0:49:17 he doesn’t have one for every city you could ever think of.
0:49:18 He doesn’t scale very well.
0:49:21 He can do one thing, he can do 10 things.
0:49:23 Maybe he can do a hundred things,
0:49:25 but there’s thousands of these prediction markets
0:49:28 on anything you’d ever be interested in.
0:49:30 – As it turns out, Nate Silver recently joined
0:49:33 the advisory board of Polymarket,
0:49:35 the biggest prediction market out there.
0:49:38 So what happens if sites like Polymarket
0:49:40 and Colchee grow and grow,
0:49:41 and if you really can make a bet
0:49:44 on anything you would ever be interested in,
0:49:46 like Coleman Strumpf says,
0:49:48 wouldn’t that create even stronger incentives
0:49:51 for political bribery and fraud?
0:49:55 – My claim is that those incentives all exist right now.
0:49:57 I don’t, like the alarmist views of things
0:49:59 that the CFTC would say.
0:50:03 I don’t see a basis for this in history,
0:50:06 in our modern experience, in anything.
0:50:09 As somebody who studied centuries of data
0:50:12 from these markets, I can’t give you one piece of evidence.
0:50:14 We’ve had a lot of very contentious things
0:50:16 in our political system in the last 10 years.
0:50:19 That had nothing to do with political prediction markets.
0:50:24 I think the burden is on the people who make this claim,
0:50:26 to give an example, to give hard evidence
0:50:29 that this thing is gonna happen,
0:50:31 we just don’t see examples of this.
0:50:32 – So Strumpf isn’t alarmed,
0:50:35 but he does think there is one industry that ought to be.
0:50:38 – I’m pretty interested in politics,
0:50:40 but what I’m definitely not interested in
0:50:43 is watching cable shows of people opining
0:50:45 about what’s going on.
0:50:49 CNN, Fox News is not in any broad sense different from ESPN.
0:50:52 They want you to watch their show.
0:50:56 So if they know something, they could tell you that,
0:50:59 or they could string it out and tell you in 30 minutes,
0:51:01 that’s the benign part.
0:51:03 The last benign part is you might even think
0:51:07 that they’re going to spin actual data or information
0:51:11 in a way that’s consistent with their worldview.
0:51:14 A market doesn’t delay information,
0:51:16 a market doesn’t spin numbers,
0:51:18 a market just gives you numbers.
0:51:20 That’s a better way of learning information.
0:51:23 The people who are probably most threatened
0:51:26 by these markets are the media sites,
0:51:30 because the media sites right now are intermediary
0:51:31 to learning about polls,
0:51:33 to learning about candidates,
0:51:35 what they think about things.
0:51:38 Newspapers and TV shows do great analysis,
0:51:41 but if at the end of the day I just want numbers,
0:51:43 these markets cut through that
0:51:46 and give me a direct line into what’s going on.
0:51:47 That’s what I want.
0:51:49 That’s what a lot of people want.
0:51:51 I think the big question is,
0:51:54 will people understand what these markets are saying
0:51:56 if they become more prominent?
0:51:59 I would say first that you probably need
0:52:03 some level of education explaining what these markets are,
0:52:05 but let’s just turn that same spotlight
0:52:06 in the other direction.
0:52:08 I actually would argue
0:52:10 that most people don’t understand
0:52:11 what polls are telling us.
0:52:16 If I look at a poll and it says right now
0:52:20 that the expected national voting numbers
0:52:23 are say 50/50, well, what does that mean?
0:52:26 It doesn’t tell us very much
0:52:28 about who’s going to get elected president,
0:52:32 because A, that’s based on the state-by-state contest,
0:52:35 and B, it’s just a guess of the total vote.
0:52:36 We’re pretty sure that the Democrats
0:52:39 are going to get more votes than the Republicans,
0:52:41 but the Republicans could still win the electoral college.
0:52:44 Now, if you asked a typical reader of a poll,
0:52:46 what do you take away from this number?
0:52:50 You’d say, oh, this poll means that everything’s tied right now,
0:52:52 and I don’t think that’s the actual lesson.
0:52:56 So what do the betting markets say
0:52:59 about the election between Trump and Harris?
0:53:00 According to Polymarket,
0:53:04 the race is essentially a dead heat,
0:53:06 and the betting volume is rising fast,
0:53:08 including some betting that could be
0:53:12 the kind of manipulation that the CFTC is worried about.
0:53:14 Because this is such a contentious election,
0:53:17 I expect to see many billions of dollars
0:53:19 bet on these markets.
0:53:22 Feel free to keep an eye on the Polymarket betting
0:53:24 as the election approaches.
0:53:25 Also, feel free to let us know
0:53:28 what you thought of this episode.
0:53:31 Our email is radio@freakonomics.com.
0:53:34 Thanks to Coleman Strumpf and Eric Posner
0:53:36 for a pair of excellent conversations,
0:53:38 and thanks to you, as always, for listening.
0:53:41 Coming up next time on the show,
0:53:43 if somebody came up to me today and said,
0:53:45 we’ll make a deal with you,
0:53:49 you can replace all alcohol use with cannabis use,
0:53:51 I would immediately agree to that deal.
0:53:53 Here is a startling fact.
0:53:55 There are now more people in the U.S.
0:53:58 who use cannabis every day
0:54:00 than those who use alcohol every day.
0:54:03 You’re talking about needing a whole army
0:54:06 to study the effects of cannabis
0:54:08 from these new products
0:54:10 that we still do not know anything about.
0:54:13 And how are the economics working?
0:54:15 The entirety of the cannabis market
0:54:19 is filled with an amazing number of contradictions.
0:54:22 And we will engage in some political predictions.
0:54:23 A president, Harris,
0:54:26 is going to sign a federal legalization bill.
0:54:28 A special series on the state of cannabis
0:54:31 that starts next time on the show.
0:54:32 Until then, take care of yourself.
0:54:35 And if you can, someone else too.
0:54:38 Freakonomics Radio is produced by Stitcher and Renbud Radio.
0:54:41 You can find our entire archive on any podcast app,
0:54:43 also at Freakonomics.com,
0:54:45 where we publish transcripts and show notes.
0:54:48 This episode was produced by Theo Jacobs.
0:54:49 Our staff also includes
0:54:52 Alina Coleman, Augusta Chapman, Dalvin Abouwajie,
0:54:54 Eleanor Osborne, Ellen Frankman, Elsa Hernandez,
0:54:56 Gabriel Roth, Greg Rippin,
0:54:58 Jasmine Klinger, Jeremy Johnston, John Schnars,
0:55:00 Lyric Bowditch, Morgan Levy,
0:55:02 Neil Carruth, Rebecca Lee Douglas,
0:55:04 Sarah Lilly, and Zach Lipinski.
0:55:06 Our theme song is “Mr. Fortune” by the Hitchhikers.
0:55:09 Our composer is Luis Guerra.
0:55:14 I have a long-standing interest in presidential power,
0:55:16 but I’m also interested in antitrust law.
0:55:18 For both of those subjects,
0:55:20 you’re living in boom times, are you not?
0:55:21 Couldn’t be better.
0:55:28 The Freakonomics Radio Network,
0:55:30 the hidden side of everything.
0:55:34 Stitcher.
0:55:36 you
0:55:38 you
0:00:07 In our previous episode, we had a wide-ranging conversation
0:00:10 about presidential history and presidential power
0:00:13 with the University of Chicago legal scholar, Eric Posner.
0:00:16 The founders could not possibly have imagined
0:00:19 that the president would become as powerful as he has.
0:00:22 And we wondered, is the US presidency
0:00:25 turning into something like a dictatorship?
0:00:26 Yes, I think that is happening.
0:00:30 Although, you know, dictatorship is such a freighted term.
0:00:32 But that conversation with Posner
0:00:34 was recorded in 2016, a couple months
0:00:37 before Donald Trump was elected president.
0:00:39 Trump is, of course, now running again
0:00:41 against Vice President Kamala Harris.
0:00:43 So today on Freakin’omics Radio,
0:00:45 we go back to Eric Posner to talk about what’s
0:00:47 happened over the past eight years
0:00:49 and what the future may bring.
0:00:51 I think it’s actually pretty hard to be a dictator.
0:00:53 You have to be kind of smart.
0:00:55 You have to be tough.
0:00:57 You have to be brave.
0:01:00 Also, have you lost faith in election polls?
0:01:04 If so, how would you feel about an election betting market?
0:01:07 A market doesn’t delay information.
0:01:09 A market doesn’t spin numbers.
0:01:11 A market just gives you numbers.
0:01:15 This is our election special, not what you are likely
0:01:16 to hear elsewhere.
0:01:17 And it starts now.
0:01:21 [MUSIC PLAYING]
0:01:31 This is Freakin’omics Radio, the podcast
0:01:34 that explores the hidden side of everything
0:01:36 with your host, Stephen Dubner.
0:01:39 [MUSIC PLAYING]
0:01:47 The University of Chicago law professor
0:01:49 Eric Posner has written more than a dozen books
0:01:52 on topics ranging from antitrust regulation
0:01:55 to human rights to the US Constitution.
0:01:58 As I mentioned earlier, we interviewed him eight years ago,
0:02:01 eight long years ago, about the evolution
0:02:03 of presidential power.
0:02:06 I listened to the interview this morning,
0:02:10 and I will say that I have changed my views about the presidency
0:02:14 to some extent because I do think Trump was a shock
0:02:17 and not the sort of person I expected
0:02:19 to become a president at the time
0:02:22 that I did a lot of my earlier writing on presidential powers,
0:02:26 which tended to be more optimistic about the powerful
0:02:27 presidency.
0:02:30 What surprised you about your assessment of Trump
0:02:32 and the presidency back then?
0:02:35 I think I was a little glib about the rise
0:02:37 of presidential power.
0:02:40 You could think that the risk of a too strong president
0:02:43 is dictatorship, but another risk of a too strong president
0:02:46 is just really bad governance and chaos,
0:02:49 and I don’t think I was expecting that.
0:02:51 So if I didn’t know anything about you
0:02:56 and I heard your quick musings here on presidential power,
0:02:58 I might think, oh, well, Posner sounds
0:03:02 like he is aligned with the Democrats pretty strongly.
0:03:06 Persuade me that that’s not the case, or if it is the case,
0:03:09 persuade me that your research and writing
0:03:11 is as objective as it can be for legal scholar.
0:03:13 – Trump is really sui generis.
0:03:16 When we talked about him eight years ago,
0:03:18 it was during the campaign, and I think–
0:03:20 – And we should remind people that it was during a campaign
0:03:21 in which he was not expected to win
0:03:23 by the vast majority of people.
0:03:26 – Right, so we talked about him in a kind of casual way,
0:03:29 and I didn’t expect him to win the presidency.
0:03:32 I do think he was a bad president.
0:03:35 Trump had certain goals, most of which he didn’t achieve,
0:03:38 and then Biden has been a very different president.
0:03:41 He had a number of goals which he achieved
0:03:44 by using the instruments of power at his disposal.
0:03:49 So I think in that sense, he’s been very competent.
0:03:51 Biden’s particular policy choices,
0:03:53 I don’t have as strong views about
0:03:57 whether the Inflation Reduction Act was a good idea
0:03:59 or the stimulus bill was.
0:04:01 As I said to you eight years ago
0:04:03 when you asked me about Obamacare,
0:04:07 these are complex areas, and I hesitate
0:04:10 to come down hard in favor of one perspective
0:04:11 or the other.
0:04:14 – The last time we spoke, you said
0:04:16 that the US presidency had been turned
0:04:18 into something of a dictatorship,
0:04:19 although you didn’t like that word.
0:04:23 You said presidential primacy was more to your liking.
0:04:26 So I’d like to hear your current views.
0:04:28 – There are two ways to look at this,
0:04:31 one just in terms of the empirical reality
0:04:34 of the president’s role in our political system
0:04:36 and the others, whether it’s good or bad.
0:04:37 Let me start with the first.
0:04:39 I’m gonna avoid the term dictator.
0:04:40 People think of Hitler.
0:04:42 I don’t think that’s a helpful lens
0:04:46 to look at Donald Trump or any American president.
0:04:49 I hardly need to say that Trump tested
0:04:51 the limits of presidential power.
0:04:54 What’s ironic is that Trump for all of his bluster,
0:04:57 he wasn’t able to use these tools very well
0:04:59 and accomplished very little.
0:05:01 A lot of it was just his temperament.
0:05:05 If you read memoirs written by his former aides,
0:05:09 this is a guy who couldn’t focus, was easily flattered
0:05:12 and swayed, couldn’t control his subordinates.
0:05:15 So it’s not surprising that he wasn’t able
0:05:19 to maintain a strong and consistent vision.
0:05:21 When he had a Republican House and Senate,
0:05:24 he was able to obtain a tax cut.
0:05:26 That seems to have been about the extent
0:05:28 of his accomplishments.
0:05:31 During the pandemic, he didn’t really do a whole lot,
0:05:35 but I think it’s fair to say that by authorizing operation
0:05:38 warp speed, which resulted in the vaccine,
0:05:40 he accomplished something of value.
0:05:42 But if you take something else,
0:05:46 one of his policies was to reduce illegal immigration
0:05:47 into the United States.
0:05:50 And his main instrument for doing that was to build a wall
0:05:51 along the border.
0:05:54 I think a more competent president
0:05:56 could have taken stronger actions.
0:05:57 Probably–
0:06:00 – Something perhaps less concrete, something–
0:06:01 – So to speak.
0:06:02 – Something that a construction executive
0:06:03 might not have come up with.
0:06:05 In other words, a policy, in fact.
0:06:08 – As I understand it, the reason why Trump
0:06:11 hit upon the wall as his major goal
0:06:13 was that it just came to mind
0:06:15 and it worked well with the crowds.
0:06:17 And so he repeated it and eventually,
0:06:19 he probably felt he had to do it,
0:06:21 whether it made sense or not.
0:06:23 But nobody ever thought it was a good way
0:06:25 to stop illegal immigration.
0:06:28 Illegal immigration is one of these incredibly complicated
0:06:31 problems that one can address in a variety of ways.
0:06:34 And I don’t think he had the patience and discipline
0:06:38 to figure that stuff out and put it into effect.
0:06:41 I think he had power that he could have used
0:06:44 to accomplish more that he wanted to achieve,
0:06:47 but simply lacked not just the temperament,
0:06:48 but experience.
0:06:49 He was new to the government.
0:06:51 He didn’t know how it works.
0:06:55 And certainly he faced a lot of resistance in the bureaucracy.
0:06:58 Biden has been a more successful president
0:07:01 in terms of achieving his policy goals,
0:07:05 but has been less reliant on the inherent powers
0:07:07 of the presidency to accomplish them.
0:07:11 – And is that because Biden had more of a connection
0:07:14 and facility with the existing infrastructure in DC?
0:07:16 – I think that’s part of the answer.
0:07:19 A lot of this has to do with Trump’s character
0:07:20 and temperament and–
0:07:22 – Meaning Biden is a little bit more,
0:07:25 let’s say respectful of norms than Trump?
0:07:27 – Well, Biden, even in his advanced age,
0:07:29 has a longer attention span.
0:07:32 More self-discipline shows greater loyalty
0:07:37 to his subordinates, appoints higher quality people.
0:07:39 He’s been a much more careful,
0:07:42 and I suppose more conventional type of president,
0:07:43 and that has helped him.
0:07:46 – Toward the end of Donald Trump’s first term,
0:07:49 maybe only term, but for now, first term,
0:07:52 you published a book called “The Demagogue’s Playbook,
0:07:54 “The Battle for American Democracy
0:07:56 “from the Founders to Trump.”
0:07:57 So let’s talk about that a bit.
0:07:59 Can we start by defining some terms?
0:08:02 How do you define a demagogue, first of all?
0:08:05 – A demagogue is a politician
0:08:10 who tries to obtain and keep power
0:08:13 by dividing the population,
0:08:15 usually by choosing an enemy.
0:08:18 The enemy could be foreigners,
0:08:20 it could be a minority group in the country,
0:08:23 or it could be, in the case of a left-wing demagogue,
0:08:26 the rich or the people with property.
0:08:27 – When you look around the world today,
0:08:30 who are some of your favorite practicing demagogues?
0:08:32 – Like everything else, it’s a spectrum.
0:08:34 Trump was a true demagogue.
0:08:37 Bolsonaro was a demagogue.
0:08:38 – Orban?
0:08:39 – Orban is a demagogue.
0:08:40 – Putin?
0:08:44 – I think applying the term to an autocrat is a little odd.
0:08:48 I tend to think of demagoguery as a problem for democracies.
0:08:51 – And what are the circumstances within a democracy
0:08:54 that tend to produce an appetite for
0:08:57 and or an opportunity for a demagogue?
0:08:59 – It’s a Greek word and it was a term used
0:09:00 by the ancient Greeks,
0:09:04 typically by people who were suspicious of democracy.
0:09:06 A lot of these Greek city-states had democracies
0:09:10 or basic political systems that resemble democracies.
0:09:13 It was very common for a person,
0:09:16 usually a person from the upper class.
0:09:18 And this person would like power,
0:09:23 but he’s not really part of the elites who are in power
0:09:25 and he doesn’t have any means
0:09:28 for getting the elites on his side.
0:09:32 So what the demagogue does is he appeals to the people
0:09:36 and he appeals to the people by basically making up stuff,
0:09:39 often lying, propounding conspiracy theories
0:09:42 just like today, riling people up
0:09:44 and trying to persuade them
0:09:49 that the people in power are conspiring to harm the people.
0:09:51 Now, when does this arise?
0:09:52 I think it can always arise,
0:09:55 but it’s more likely to arise when people are miserable.
0:09:58 So it could be during an economic downturn
0:10:02 or it could be during a war or some kind of natural disaster.
0:10:06 But once it gets started, it can just occur in cycles.
0:10:09 And this is really what the Greeks were worried about
0:10:11 was that you might have a demagogue
0:10:14 who successfully comes to power, becomes an autocrat
0:10:15 and controls the people.
0:10:19 And then somebody else tries to get power back
0:10:23 by becoming a demagogue and getting the people on his side.
0:10:24 And this leads to civil war.
0:10:26 Civil war is a terrible thing.
0:10:29 And this is why a lot of Greek thinkers
0:10:30 were quite skeptical of democracy.
0:10:34 They thought it tended to collapse in this way.
0:10:37 And the founders were very concerned about demagoguery.
0:10:40 They knew all about ancient Greece and ancient Rome.
0:10:44 And so the constitution was designed in large part
0:10:46 to limit the power of the people
0:10:49 so that demagogues wouldn’t be able to achieve power.
0:10:51 In early demagogue was Andrew Jackson
0:10:54 who actually introduced the party system.
0:10:59 But the party system after Jackson became somewhat hierarchical
0:11:02 in the sense that each party was controlled
0:11:04 by professional politicians.
0:11:08 What Jackson really did was transfer power
0:11:11 from the national elites to local elites.
0:11:14 But the local elites were hierarchical superiors
0:11:15 to ordinary people.
0:11:18 And so they made sure that the type of people
0:11:20 who were candidates for elections
0:11:22 were professional politicians
0:11:24 or at least a respectable former general
0:11:26 or something like that.
0:11:29 In the 20th century, though,
0:11:31 this way that the parties were organized
0:11:35 increasingly was in tension with people’s sense
0:11:38 of what a democracy requires.
0:11:39 I think this was happening in part
0:11:42 because in the national government,
0:11:43 the bureaucracy was growing
0:11:47 and you had this distant seeming administrative state
0:11:50 that was controlled by these parties
0:11:53 that ordinary people couldn’t really influence
0:11:56 except maybe once every few years or so.
0:11:58 One of the solutions to this problem
0:12:00 was to introduce primaries
0:12:05 where ordinary people would have a more direct impact
0:12:07 on the choice of the leader of their party
0:12:09 who would then be pitted against the leader
0:12:12 of the other party in the presidential election.
0:12:15 I do think American democracy is different
0:12:18 from what the founders thought they were creating.
0:12:21 The founders, they didn’t use the term democracy.
0:12:24 They thought of democracy as chaotic and horrible.
0:12:26 And if they could look into the future,
0:12:28 they might’ve said, yeah, Trump, that’s democracy
0:12:30 and we don’t want that to happen.
0:12:33 – Let me run past you another characterization of Trump
0:12:35 from your book, “The Demagogues Playbook.”
0:12:37 We need to see Trump, you write,
0:12:39 as a political monstrosity
0:12:41 who should be repudiated by the body politic
0:12:45 so that politicians who eye the presidency in the future
0:12:49 will be deterred from using Trump’s ascendance as a model.
0:12:53 Now, it does appear that roughly half of U.S. voters
0:12:55 don’t see him as a political monstrosity.
0:12:58 So what’s your explanation for that?
0:12:59 – I think he’s a monstrosity
0:13:02 in a kind of constitutional sense.
0:13:03 The founders are quite explicit
0:13:07 that the checks and balances weren’t going to be sufficient
0:13:10 unless virtuous people became office holders.
0:13:12 They were quite worried about this,
0:13:14 virtuous and competent people.
0:13:17 And in that sense, they were real elitists.
0:13:20 Whatever you think of the various presidents we’ve had,
0:13:22 some of them were truly bad,
0:13:24 but most of them were basically competent people
0:13:28 who became president because they rose through the ranks
0:13:30 and earned the trust of people and so on and so forth.
0:13:34 Trump is a monstrosity compared to that baseline.
0:13:36 He persuaded a lot of people
0:13:39 that the mysterious, powerful elites in government
0:13:42 and elsewhere are arrayed against him.
0:13:45 In some ways, he’s acted like previous demagogues
0:13:48 all the way back to ancient Greece,
0:13:51 but like the old demagogues, he wasn’t good at governance.
0:13:54 And it’s a shame that people support him,
0:13:57 but this is always what happens in this setting.
0:13:59 They support him, they say, okay, he lies
0:14:01 and he’s awful in many ways,
0:14:04 but at least he’s not as bad as the people on the other side.
0:14:07 – Republicans do seem to dislike Kamala Harris
0:14:10 about as much as the Democrats dislike Donald Trump.
0:14:13 And a big part of the argument
0:14:16 is that her ascendance to the presidential ticket
0:14:17 was undemocratic.
0:14:19 She didn’t win any of the primaries.
0:14:21 So what is your view of that
0:14:24 in light of constitutional history especially?
0:14:26 Does that make you uncomfortable?
0:14:29 – No, I think the small D democratic primaries
0:14:32 have perhaps not worked out the way one hoped.
0:14:33 – What do you mean by that?
0:14:37 – Well, because the primary system led to people like Trump,
0:14:41 whereas before primaries were so heavily relied on,
0:14:43 it was much more likely that you would get
0:14:45 a seasoned professional politician
0:14:49 or an accomplished general like Eisenhower.
0:14:51 So I think the primary system
0:14:54 probably is to the advantage of demagogues.
0:14:59 Look, our system is not a pure democracy, no system is.
0:15:03 There are lots of ways in which people’s votes are constrained.
0:15:05 We have the whole electoral college system.
0:15:08 People are inattentive to politics most of the time.
0:15:12 So elected officials have a lot of authority.
0:15:16 The way that Kamala Harris obtained the Democratic candidacy
0:15:20 is pretty small beings relative to all the rest of the stuff.
0:15:22 – After the break,
0:15:25 what would a second Trump term look like?
0:15:26 I’m Stephen Dovner.
0:15:27 This is Free Economics Radio.
0:15:29 We will be right back.
0:15:31 (upbeat music)
0:15:40 – The legal scholar Eric Posner argues
0:15:42 that Donald Trump didn’t accomplish much
0:15:44 during his first term as president.
0:15:46 Does he see Trump accomplishing more
0:15:47 if he were to win a second term?
0:15:50 – I don’t think he’s going to productively
0:15:53 navigate the system if he has a second term.
0:15:54 I really don’t.
0:15:57 I think the people around him,
0:15:59 they’re trying as hard as they can
0:16:02 to prepare a body of people he can appoint
0:16:04 who will enforce his vision.
0:16:07 So you know about project 2025,
0:16:09 produced by the Heritage Foundation.
0:16:13 There’s this 900 page manual that’s supposed to guide Trump
0:16:17 so that he achieves what these guys think his objectives are.
0:16:19 – Even though this project is supported by
0:16:23 and drawn up by many former Trump allies and colleagues,
0:16:26 he has claimed to know nothing of it
0:16:27 and to not support it at all.
0:16:29 Do you know anything further about that?
0:16:32 – He said he never read it and I really believe that.
0:16:34 I mean, Trump is not a big reader,
0:16:36 but really no one could read this document.
0:16:37 I’ve read parts of it.
0:16:40 It’s just, it’s boring and it goes
0:16:42 into all kinds of munition.
0:16:43 It has this weird paranoid tone.
0:16:45 It’s just an awful document.
0:16:48 Not really because it’s trying to establish
0:16:49 a Trumpian dictatorship.
0:16:53 It actually is in many ways conventional Republican thinking
0:16:55 going back decades in some ways
0:16:58 that reflects Trump’s particular concerns
0:17:01 about illegal immigration and tariffs and so forth.
0:17:03 But remember, Trump doesn’t like the idea
0:17:05 that other people are telling him what to do.
0:17:08 And now I suspect he’ll feel constrained
0:17:12 not to rely on project 2025 if he’s elected
0:17:14 because that’ll make him look weak
0:17:16 and like he’s being manipulated.
0:17:18 Anyway, it’s just a dumb document.
0:17:20 So he’ll just start from scratch.
0:17:24 – Let’s imagine for a minute that Trump is elected again.
0:17:26 Let’s take three major areas.
0:17:30 Let’s talk about the judiciary, federal agencies,
0:17:33 and let’s talk about dealings with foreign counterparts.
0:17:36 Can you walk me through your expectations in those areas?
0:17:39 – Okay, with the proviso that Trump
0:17:41 is an inherently unpredictable person.
0:17:42 – Sure.
0:17:43 – Let’s start with the judiciary.
0:17:46 So you might think one of his biggest accomplishments
0:17:50 was appointing judges who are on the right
0:17:53 and the Supreme Court got rid of Roe versus Wade and so forth.
0:17:55 But Trump doesn’t like these judges
0:17:57 because his appointees on the Supreme Court
0:18:01 ruled against him in his January 6 lawsuits.
0:18:03 This seems to be how Trump thinks.
0:18:04 So what went wrong?
0:18:08 What went wrong was that these judges were affiliated
0:18:10 with the federal society.
0:18:13 So maybe he shouldn’t appoint people
0:18:15 who are affiliated with the federal society.
0:18:18 And then the question is, well, who does he appoint?
0:18:20 Legal conservatives realized a long time ago
0:18:21 that if they wanted to be judges,
0:18:24 they should affiliate themselves with the federal society.
0:18:27 So that means there’s a very shallow talent pool
0:18:29 outside of the federal society.
0:18:31 And Trump might end up appointing
0:18:33 a bunch of incompetent judges
0:18:36 who may or may not be able to achieve his goals.
0:18:39 – Okay, how about federal agencies?
0:18:40 – This was a huge problem for Trump
0:18:42 and this was extremely predictable.
0:18:45 He becomes president in 2017.
0:18:47 There’s this huge bureaucracy.
0:18:50 These people are supposed to do what he wants them to do.
0:18:52 He issues orders, nobody pays attention to them
0:18:55 or they slow walk his projects.
0:18:57 So what do you do about this?
0:19:00 Well, you make sure that the bureaucracy
0:19:03 is somehow replaced with Trumpian loyalists.
0:19:07 Again, there’s this problem of the shallow talent pool.
0:19:08 There’s also the problem
0:19:10 of getting rid of civil servants.
0:19:13 So there is this theory that Trump’s supporters
0:19:15 have advanced that he can, you know,
0:19:18 reclassify a lot of these people and fire them.
0:19:21 He actually tried to do this at the end of his first term.
0:19:22 It didn’t work.
0:19:24 So I don’t think he’s gonna be able
0:19:28 to convert the bureaucracy into a usable
0:19:32 and loyal bureaucracy in his next term.
0:19:34 – And then foreign counterparts.
0:19:35 – Foreign counterparts.
0:19:38 – Many of whom have expressed almost publicly.
0:19:41 I mean, it’s leaked that they really saw him as a joker.
0:19:42 Some of them he forgives and forgets.
0:19:43 Some of them he doesn’t.
0:19:46 So how do you see that playing out?
0:19:48 – I think he’ll treat them the way he treated them
0:19:50 during his first term.
0:19:53 If you read the memoirs and the journalistic histories,
0:19:57 it sounds like maybe he had rapport with some of them,
0:19:59 but that he was easily manipulated.
0:20:04 He’s a vain person who was swayed by charming foreigners.
0:20:07 He might be a little bit more sophisticated now than he was,
0:20:09 but he seems to be so impulsive
0:20:12 and so hard to control by his aides
0:20:14 and so unwilling to let them guide him,
0:20:16 even though they’re the people who really know
0:20:17 what’s going on.
0:20:20 I just imagine it’ll be another chaotic term.
0:20:22 – And how much does that matter?
0:20:24 You and I first spoke years and years ago
0:20:26 for an episode called something like,
0:20:29 “How much does the president actually matter?”
0:20:31 The underlying argument was that most Americans
0:20:35 tend to attribute too much weight to the US presidency.
0:20:38 In the case of foreign affairs, however,
0:20:40 there are some unilateral powers
0:20:44 and the figurehead status alone is pretty significant.
0:20:46 So if Trump were to be reelected
0:20:50 and were to not, let’s say, put the best face forward,
0:20:51 how much do you think it matters?
0:20:53 – I think it matters a lot.
0:20:56 And maybe to clarify a bit what’s at stake,
0:20:58 I agree with you that a lot of ordinary people
0:21:00 think the president has more power than he does,
0:21:02 that if there’s inflation or an economic downturn
0:21:06 or a war in the Middle East, it’s the president’s fault.
0:21:07 And often there’s just nothing
0:21:09 that presidents can do about that.
0:21:11 But I think a lot of, for example,
0:21:15 commentators, professors, journalists,
0:21:18 think the president has less power than he really does.
0:21:21 He has all of these ways of influencing policy
0:21:24 through the bureaucracy that are often invisible.
0:21:26 Now with respect to foreign affairs,
0:21:29 I think if there’s a real crisis,
0:21:31 it could be a big problem.
0:21:34 The foreign policy machine is very big
0:21:37 and kind of hard to control.
0:21:40 But Trump really did have this effect
0:21:42 in the sense that he moved the country
0:21:45 more toward isolationism.
0:21:48 Now, interestingly, Biden has to some extent
0:21:51 followed Trump’s lead, which makes you think
0:21:55 that Trump was in fact reflecting something fundamental
0:21:57 about how the public was thinking.
0:22:00 – With China, especially Biden following the lead, right?
0:22:01 – Yes, with China especially.
0:22:05 Maybe Trump was ahead of the foreign policy establishment.
0:22:06 I don’t know.
0:22:09 (gentle music)
0:22:11 It’s easy to forget that not so long ago,
0:22:13 there was a question of whether Donald Trump
0:22:16 would even be allowed to run for a second term.
0:22:17 Multiple lawsuits were filed
0:22:19 trying to keep Trump off the ballot,
0:22:22 arguing that his support of the January 6th riot
0:22:26 at the Capitol constituted an illegal insurrection.
0:22:28 The U.S. Supreme Court ultimately ruled
0:22:29 in a unanimous decision
0:22:32 that Trump could not be removed from state ballots.
0:22:35 There have been many other lawsuits filed against Trump,
0:22:37 Manhattan District Attorney Alvin Bragg
0:22:39 won a conviction against Trump
0:22:41 on charges of falsifying business records
0:22:45 in order to conceal hush money payments to a porn star.
0:22:47 There are also outstanding federal charges
0:22:49 related to election interference
0:22:52 and Trump’s mishandling of classified documents.
0:22:54 I asked Eric Posner what he thinks
0:22:58 about these attempts to stymie Trump legally.
0:23:00 – There’s always been this worry
0:23:03 that one way that a democracy will collapse
0:23:07 is that the people in power will use the legal system
0:23:10 to harass their political opponents.
0:23:12 There’s a lot of reason to think that’s a real danger.
0:23:16 There’s a ton of historical examples of that.
0:23:18 In the United States,
0:23:22 there’s been relatively little of that kind of behavior.
0:23:24 I think that’s been a good thing.
0:23:27 It’s definitely better for the people in power
0:23:31 to try to avoid using the legal system against their opponents.
0:23:35 Even if their opponents are maybe breaking the law a little bit.
0:23:37 Now, if their opponents start murdering people
0:23:39 by all means, the police should arrest them,
0:23:40 they should be tried.
0:23:42 The Justice Department has always had this view
0:23:46 that you’re not going to try to prosecute political opponents,
0:23:50 especially at sensitive times like during a campaign,
0:23:52 unless you absolutely have to.
0:23:55 So among the various indictments of Trump,
0:23:58 I do think the New York indictment,
0:24:02 the Alvin Bragg indictment, was definitely the weakest.
0:24:06 This was basically a very minor kind of fraud
0:24:09 that Trump committed in New York.
0:24:11 And because it was connected to a federal election,
0:24:12 that was the loophole, yes?
0:24:14 Well, it wasn’t even clear.
0:24:15 It was connected to the federal election.
0:24:19 They also said it was connected to violation of the tax laws.
0:24:22 They also said it was connected to state election laws.
0:24:24 And a lot of that stuff wasn’t really resolved
0:24:26 because the jury doesn’t have to tell us
0:24:28 the basis of its decision.
0:24:31 I just think that all of these attempts
0:24:34 to prosecute Trump have backfired terribly.
0:24:35 There’s an interesting lesson here,
0:24:37 which is that there’s a tendency,
0:24:41 especially among people like me, law professors,
0:24:44 to think that the reason why American democracy
0:24:45 has lasted as long as it has,
0:24:47 is that every time we have a president,
0:24:51 that president respects democratic norms.
0:24:53 I think the causation might be a little backwards.
0:24:55 Presidents respect these norms
0:24:58 because if they don’t, it backfires.
0:24:59 People don’t like it
0:25:02 when the government prosecutes its political opponents.
0:25:06 And the government may be hurt because of public opinion,
0:25:09 or I think what we’ve really seen is it’s hurt
0:25:13 because judges are skeptical, they’re nervous,
0:25:15 and there’s a lot more scrutiny of these trials.
0:25:19 I think probably the lesson that’s going to be drawn from this
0:25:20 was that it’s not smart,
0:25:24 let alone consistent with whatever your political theory is
0:25:26 to go after your political opponents
0:25:28 using your legal powers.
0:25:29 – Is it even less smart knowing
0:25:30 that all the way at the top of the chain,
0:25:33 you’ve got a US Supreme Court whose key voters
0:25:36 have been appointed by the person you’re prosecuting?
0:25:39 – I wouldn’t put it in quite that narrow sense.
0:25:41 I think the Supreme Court,
0:25:45 maybe more than any other body in our political system,
0:25:49 is concerned about this kind of political retaliation.
0:25:52 And I think they’re concerned for self-interested reasons,
0:25:54 but not in the way that you mean.
0:25:58 When the judiciary is involved in these types of trials
0:26:02 that are politically tinged, the judiciary is damaged,
0:26:05 just as much as the political actors
0:26:08 who are responsible for the prosecution
0:26:09 on one side or the other.
0:26:11 The lower court judges and the appellate court judges,
0:26:14 they’re all understandably nervous.
0:26:16 They want to be extremely careful.
0:26:19 And the Supreme Court above all wants to make sure
0:26:22 that these prosecutions don’t happen
0:26:24 unless they absolutely have to.
0:26:26 I mean, the judges who ordered the execution
0:26:29 of trials the first were hunted down
0:26:32 and executed after the restoration.
0:26:33 – So in your view, Eric,
0:26:37 as a legal and constitutional scholar,
0:26:40 should Trump have been forbidden by the courts
0:26:42 from running again?
0:26:44 – No, as bad as Trump has been,
0:26:48 it would be worse if the judiciary were to intervene
0:26:52 and remove from the ballot the leader of one of the parties
0:26:55 based on this theory of the Constitution
0:26:59 that it has some narrow legal attractiveness,
0:27:01 but is just a totally unrealistic thing
0:27:03 to expect the courts to do.
0:27:05 I think the Supreme Court was wise
0:27:06 in not disqualifying Trump.
0:27:10 – In July of 2024,
0:27:13 the Supreme Court ruled in a six to three decision
0:27:15 that former presidents have absolute immunity
0:27:19 for actions related to the core powers of their office
0:27:21 and that there is at least a presumption of immunity
0:27:22 for official acts.
0:27:25 Here’s what the three dissenting justices,
0:27:27 the Democratic appointees had to say.
0:27:29 The relationship between the president
0:27:32 and the people he serves has shifted irrevocably.
0:27:34 In every use of official power,
0:27:37 the president is now a king above the law.
0:27:39 I asked Eric Posner what he thought
0:27:43 about the immunity decision and that dissenting view.
0:27:46 The immunity decision was not as outrageous as people say.
0:27:49 Lots of government officials have immunity
0:27:51 and this idea of the president having immunity
0:27:53 with respect to his core powers,
0:27:56 I don’t think that comes as much of a surprise,
0:27:58 but it may have a political effect.
0:28:01 It might encourage Trump to do bad things.
0:28:03 And the paradox is the judiciary,
0:28:06 the Republican majority on the Supreme Court
0:28:08 is kind of making the government weaker,
0:28:11 but the president stronger within the government.
0:28:14 – In December of 2023,
0:28:17 when Trump was set to run against Joe Biden,
0:28:21 this was several months before Biden ended up dropping out,
0:28:22 you published a piece called,
0:28:24 “A Trump Dictatorship Won’t Happen.”
0:28:26 I guess this was presupposing
0:28:28 that Trump might win a second election.
0:28:30 You wrote that, “Although Donald Trump
0:28:32 “is many things, most of them bad,
0:28:34 “he was not a fascist when he was president
0:28:37 “and he would not become a dictator if elected again.”
0:28:40 Okay, walk me through that, why not?
0:28:41 – He won’t become a dictator.
0:28:42 I think there are a number of reasons.
0:28:45 First of all, I think it’s actually
0:28:46 pretty hard to be a dictator.
0:28:50 You have to be kind of smart, true at least.
0:28:53 You have to be tough, you have to be brave.
0:28:56 – You’re saying Trump is none of those, even brave, yeah?
0:28:57 – From what I know about him,
0:29:01 it’s just hard to imagine him having this ambition
0:29:02 to be a dictator.
0:29:06 I know he wants power and he wants to hold on to power,
0:29:09 but I think he does it in an ad hoc way
0:29:12 rather than in the kind of shrewd, planned way
0:29:15 that real dictators do to obtain power.
0:29:17 And then the other thing is just that I do think
0:29:21 that the other institutions, the press, Congress,
0:29:23 the courts, they’re not gonna let him be a dictator.
0:29:26 – You write further, “The power of constitutional
0:29:29 “and bureaucratic hurdles combined with a dearth
0:29:31 “of sympathetic right-wing radicals
0:29:34 “ensure that anarchy is more likely than tyranny.”
0:29:36 You’re chuckling at anarchy,
0:29:38 but I mean, anarchy’s not very good either, is it?
0:29:39 – No, definitely.
0:29:42 Look, that was not a defense of Trump’s candidacy,
0:29:43 but people have been complaining
0:29:46 that the president is gonna become a dictator,
0:29:47 and they mean in the Hitler sense,
0:29:50 not in the sense of having the ability
0:29:53 to order certain types of environmental regulations.
0:29:55 They’ve been saying that for so long,
0:29:58 they’ve been accusing so many presidents of this,
0:30:00 or presidential candidates,
0:30:02 and I just think it’s become a substitute
0:30:07 for a more careful diagnosis of the problems that we face.
0:30:09 I think the real problem with Trump
0:30:12 is that he makes bad decisions and he’s corrupt,
0:30:14 and he appoints corrupt people,
0:30:17 and he doesn’t know how to manage people,
0:30:19 and so, yes, anarchy might result
0:30:23 because the presidency is such an important role,
0:30:25 but dictatorship is the other end of the spectrum.
0:30:29 It’s extreme order, and we don’t recall extreme order
0:30:32 from Trump’s term, it was the opposite.
0:30:35 – I know some people feel that we are approaching
0:30:37 the end of democracy in the US.
0:30:40 My sense is that you feel we’re perhaps
0:30:44 approaching the end of American-style democracy.
0:30:45 Is that accurate?
0:30:47 – No, I don’t think we’re approaching
0:30:49 an end to any kind of democracy.
0:30:53 I think things will just sputter on as they have.
0:30:55 I mean, what’s really unique about Trump
0:31:00 was just how uninterested he was in understanding policy,
0:31:02 leading the country in a competent way,
0:31:04 or maybe he was unable,
0:31:06 and the fact that people elected him anyway.
0:31:10 That I just don’t know how to fit into my understanding.
0:31:13 – So if we were looking back on this period of time
0:31:16 from 20 or 50 years hence,
0:31:19 you think this would look more like a rocky patch
0:31:21 than the beginning of the end?
0:31:23 – If you talk about, let’s say, the last eight to 10 years,
0:31:25 I’d say it looks like a combination
0:31:29 of maybe the 1930s and the 1960s,
0:31:32 and not as bad as the 1930s,
0:31:34 or as chaotic as the 1960s.
0:31:37 – So why is there the sense that it’s so much worse?
0:31:39 – People always think the political system
0:31:41 is about to collapse.
0:31:44 Look, we have to think about maybe Trump’s successors.
0:31:47 If Vance or Holly or Ted Cruz or Ruby
0:31:50 or any of those guys eventually become president,
0:31:51 they’re not gonna be like Trump.
0:31:53 Whether we like their goals or not,
0:31:57 they’re just going to look like other presidents,
0:32:01 Bush or Reagan or Hoover or Calvin Coolidge, whoever.
0:32:04 I just don’t think that they look at Trump
0:32:06 and say to themselves, I want to be like this guy.
0:32:09 They say to themselves, I want to be loved
0:32:10 and I want to be president,
0:32:12 but I don’t want to be like this guy.
0:32:15 Trump has not provided a recipe for other people to follow.
0:32:17 And then Biden over the last four years,
0:32:20 in many ways, he’s a bit of a throwback.
0:32:23 Most of what he’s done has been through legislation.
0:32:25 He’s done a few aggressive things,
0:32:27 like the student debt cancellation,
0:32:30 which was struck down by the Supreme Court.
0:32:32 But he seems quite continuous with Obama
0:32:35 and for that matter, Reagan and both Bushes.
0:32:38 I mean, just a modern kind of president
0:32:41 who uses both legislation and executive power
0:32:43 to accomplish his goals
0:32:46 and then loses power at the midterm
0:32:48 because people get annoyed with him.
0:32:50 Biden could very well have lost the election
0:32:52 if he hadn’t agreed to step down.
0:32:54 So it seems like a return to normalcy,
0:32:56 except of course that Trump could be reelected.
0:32:59 And if he is, I think we’ll have another four years
0:33:02 that are a lot like Trump’s previous term,
0:33:05 but are not going to spell the end of democracy.
0:33:07 If all of our presidents are like him,
0:33:10 I think eventually we’d be in big trouble.
0:33:13 But a huge institution like the US government,
0:33:15 if you read about the history of the Ottoman Empire
0:33:17 or the Roman Empire, for that matter,
0:33:21 they had a lot of really terrible leaders for a long time.
0:33:24 And they would last a few more centuries.
0:33:26 I think it takes more than a bad president
0:33:28 to destroy an empire.
0:33:31 Coming up.
0:33:34 Will Donald Trump be elected again?
0:33:37 We look for some answers in the betting markets.
0:33:38 I’m Stephen Dubner.
0:33:39 This is Freakonomics Radio.
0:33:40 We’ll be right back.
0:33:54 So who is going to win the upcoming presidential election?
0:33:56 Kamala Harris or Donald Trump?
0:33:57 As we have all come to realize,
0:34:00 political polling is an imperfect science.
0:34:03 It often overpromises and underdelivers,
0:34:05 which leaves a lot of people frustrated.
0:34:08 So is there perhaps a better tool
0:34:10 to predict election outcomes?
0:34:13 Whenever you can find elections, you can find betting.
0:34:15 That is Coleman Strumpf.
0:34:19 I’m an economics professor at Wake Forest University.
0:34:22 Strumpf does research on topics like illegal file sharing
0:34:25 and tax evasion, as well as what economists
0:34:27 call prediction markets, which are essentially
0:34:31 betting markets, like betting on elections.
0:34:33 The work that I’ve done on this subject
0:34:37 is with a tremendous economic historian named Paul Rody.
0:34:40 And I was very interested in the modern version
0:34:41 of these markets.
0:34:43 This would be about 1999.
0:34:46 I said, look, there are this new thing that came around
0:34:49 with the internet, and it’s the wave of the future.
0:34:53 And Paul said, no, I was just reading the Brooklyn Eagle
0:34:55 in 1896.
0:34:57 And there was a very large market
0:35:00 of people betting on elections in New York City
0:35:05 that led to a four, five, six-year odyssey of learning
0:35:08 about these markets and their history.
0:35:12 It turns out the history goes back well before 1896.
0:35:15 In the 16th century, you can find people betting on
0:35:17 who gets elected as a pope.
0:35:20 Now, the Catholic Church was not exactly
0:35:21 a very big fan of this.
0:35:24 If you bet on cardinal selections of popes,
0:35:26 you could get excommunicated.
0:35:28 In the United States, you can find not so organized,
0:35:32 but versions of betting going back to George Washington.
0:35:36 These markets existed basically in any city
0:35:37 in the United States.
0:35:40 The biggest markets existed in New York
0:35:43 outside the stock exchange, almost all the attention
0:35:45 focused on who would get elected to president,
0:35:48 governor, even mayor of New York.
0:35:52 And these markets were really popular.
0:35:56 In this period, there were no scientific polls.
0:35:58 You did not have a New York Times, Seattle poll.
0:36:01 These things grew and grew in popularity.
0:36:05 Then starting in the 1930s, they started to disappear.
0:36:07 The newspapers were never comfortable
0:36:09 talking about these markets.
0:36:13 It was both morally and legally in a gray zone.
0:36:16 – In 1935, the statistician George Gallup
0:36:18 founded the American Institute of Public Opinion,
0:36:20 which a couple of decades later,
0:36:23 morphed into the Gallup polling organization.
0:36:25 By using modern survey sampling techniques,
0:36:28 Gallup made it safe for media outlets
0:36:31 to rely on polling data instead of gamblers.
0:36:34 The betting markets went underground.
0:36:36 But in the US, they started coming back
0:36:39 in the late 1980s, thanks to the internet.
0:36:42 Things were now a bit less carefree than in the old days.
0:36:46 If you want to run one of these markets
0:36:48 and have people invest real money in it,
0:36:49 it’s considered a futures market.
0:36:51 And in the United States,
0:36:53 the Commodities Futures Trading Commission
0:36:56 has jurisdiction over these markets.
0:36:58 – But the CFTC’s guidance on these markets,
0:37:03 according to Coleman Strumpf, is extremely opaque and unclear.
0:37:08 The CFTC has actually never formally recognized
0:37:10 any political prediction market,
0:37:12 but they’ve allowed two of these markets,
0:37:16 the Iowa Electronic Market and a site called Predictit,
0:37:19 which is located in New York and Washington DC.
0:37:22 They’ve allowed them to run these markets
0:37:24 under what’s called a no action letter,
0:37:26 which is essentially saying,
0:37:28 we’re not going to prosecute you for betting
0:37:29 or in participating on the site,
0:37:32 but it’s not a fully recognized exchange.
0:37:35 – Okay, let’s begin with the Iowa Electronic Market.
0:37:37 – This was started in 1988.
0:37:39 It’s run out of the business school
0:37:41 at the University of Iowa.
0:37:45 And it was always intended as a academic exercise.
0:37:47 The people who run the site were mainly interested
0:37:50 in testing theories about how markets work.
0:37:52 It was very small scale.
0:37:54 So there’s, I think a limit of $500
0:37:57 that you can put in every market that they have.
0:38:00 And then partly because the stakes were so small,
0:38:03 and for reasons I can’t fully understand,
0:38:05 people’s attention moved elsewhere.
0:38:07 – Elsewhere included the UK,
0:38:09 where gambling was more mainstream generally.
0:38:11 Sports gambling sites like Betfair
0:38:15 carried bets for elections in the UK and the US.
0:38:17 And then came a market called Intrade.
0:38:19 – Intrade was an Irish site.
0:38:22 They did not really go down the route
0:38:25 of trying to get approval from US regulators.
0:38:27 Despite the fact that almost everybody
0:38:29 on the site was American.
0:38:31 This was the biggest show in town
0:38:34 from around 2004 to 2012.
0:38:38 The CFDC was very, very upset with them.
0:38:41 The CEO of Intrade basically couldn’t come to the United States
0:38:43 for fear of getting arrested.
0:38:48 Intrade collapsed around 2013 for old fashioned reasons,
0:38:52 misconduct by the people running the company.
0:38:56 After Intrade disappeared, Predictit came online.
0:38:58 That started to really catch fire
0:39:01 between 2016 and 2020.
0:39:03 – Predictit came out of
0:39:06 Victoria University of Wellington in New Zealand.
0:39:08 In order to operate in the US,
0:39:10 it accepted limitations that would satisfy
0:39:12 the American regulators.
0:39:17 – Predictit as part of the CFDC no action letter
0:39:19 had to say, we’re gonna have limited stakes.
0:39:24 So you could invest up to $850 in one of these markets.
0:39:27 If you’re a financial person,
0:39:29 that’s not even pocket change.
0:39:32 – But even that limit didn’t satisfy the CFTC,
0:39:36 which in 2022 withdrew its no action letter
0:39:38 and tried to ban Predictit.
0:39:40 That standoff has been in court ever since.
0:39:42 But new players continue to emerge,
0:39:46 despite or maybe because of the CFTC’s
0:39:48 opaque and uncertain guidelines.
0:39:50 Two of the most prominent markets right now
0:39:53 are Colchee and Polymarket.
0:39:56 – Polymarket is a crypto based site.
0:39:59 They are set up at least in principle
0:40:03 to not allow any American batters on their site.
0:40:06 But if you quickly Google Polymarket,
0:40:08 you’ll find many people explaining
0:40:11 that there are ways to send money to the site.
0:40:14 So Polymarket has had its day in the sun
0:40:16 in the last several months.
0:40:18 They’re the biggest of any of these markets.
0:40:21 Their biggest market, which is on who gets elected president
0:40:24 has taken about a billion dollars a bet.
0:40:26 – A billion dollars, at least in a cryptocurrency
0:40:30 called USD coin, which is pegged to the US dollar.
0:40:32 And then there’s a market named Colchee,
0:40:35 which is an Arabic word meaning everything.
0:40:39 – Colchee is a site that allows people to bet on events,
0:40:42 weather outcomes, movies, things like that.
0:40:45 The one thing that they really want to have markets on
0:40:46 are elections.
0:40:51 So they starting about two years back went to the CFTC
0:40:54 and said, look, we are relatively experienced
0:40:56 running these event contracts.
0:40:57 We’re regulated by you guys.
0:40:59 We want to run an election market.
0:41:04 The CFTC basically ignored their request and let it sit
0:41:08 and Colchee then turned around and sued the CFTC
0:41:10 and said, we need a decision.
0:41:11 This was sitting in the courts.
0:41:13 And then a few weeks back,
0:41:16 the judge made her initial decision
0:41:17 and ruled in Colchee’s favor.
0:41:20 This happened on a Thursday at noon
0:41:22 by one or two o’clock in the afternoon,
0:41:24 Colchee had set these markets up.
0:41:27 And these were markets on which party
0:41:28 would control Congress.
0:41:31 They had a lot of money flowing into this.
0:41:34 By the next day, the CFTC appealed
0:41:37 and we’re kind of in this gray zone again.
0:41:40 – But that gray zone has shifted even since we spoke
0:41:42 with Coleman Strumpf.
0:41:45 A panel of three judges for the DC Circuit Court of Appeals
0:41:48 voted unanimously to lift the ban
0:41:50 while the CFTC’s appeal is ongoing
0:41:54 and Colchee reopened their election markets.
0:41:56 So what is Colchee’s pitch?
0:41:59 – Their biggest pitch is saying,
0:42:02 look, we’re gonna have very deep liquid markets,
0:42:05 which is just financial jargon for allowing people
0:42:07 to put a lot of money into these markets.
0:42:11 The reason why this could potentially be a good thing
0:42:14 is there are lots of people
0:42:16 who have what we call political risk
0:42:18 or political uncertainty.
0:42:23 Imagine you’re a investor in green energy companies.
0:42:26 Well, based on which party wins the presidency,
0:42:30 your financial future is gonna be very different.
0:42:31 Maybe you really wanted something
0:42:35 that was associated with the Democrats winning the election.
0:42:37 You would actually bet on the Republicans
0:42:39 to win in this market.
0:42:41 This is what a financial person would call hedging.
0:42:43 – You can imagine that some people
0:42:45 might not appreciate the idea
0:42:49 of using electoral outcomes for financial hedging
0:42:50 or they might not appreciate the idea
0:42:53 of betting on elections period.
0:42:54 One such person is Jeff Merkley,
0:42:56 a Democratic Senator from Oregon.
0:43:00 He recently introduced the Ban Gambling on Elections Act.
0:43:02 Here’s what Merkley said in a statement.
0:43:04 “When big bets are cast on elections
0:43:07 and dark money can smear candidates,
0:43:09 you have the perfect combination of factors
0:43:12 that can undermine trust in our democracy.”
0:43:14 The CFTC has the same concern.
0:43:17 – Their concern is that this would lead
0:43:21 to both manipulation of the markets
0:43:24 and challenges to election integrity.
0:43:26 In terms of manipulation of a market,
0:43:29 what they’re concerned about is that somebody
0:43:32 tries to move prices in the market
0:43:35 for reasons that aren’t related to fundamental information.
0:43:38 They’re just trying to trick a bunch of people
0:43:41 into, for example, saying that Vice President Harris
0:43:44 is much stronger candidate than we think she is
0:43:46 and to financially profit from it.
0:43:47 So that’s the first thing.
0:43:52 The second thing that is probably the more fundamental concern
0:43:56 is that if we have these markets, the CFTC claims,
0:43:58 people will now have incentives
0:44:02 to either try to change election outcomes
0:44:06 or a related point is that if people watch these markets,
0:44:09 just regular folks who aren’t even participating
0:44:11 in these markets and they see that there’s something
0:44:15 going on in these markets, it might change how they vote.
0:44:19 The head of the CFTC put all this up into a succinct phrase
0:44:22 as he doesn’t want to become an election cop.
0:44:25 – You could, of course, argue that election polls
0:44:27 can also influence how people vote.
0:44:31 In any case, here’s how strump sees the CFTC’s position.
0:44:35 – The CFTC does not have it in their powers
0:44:36 to get rid of these markets.
0:44:39 If the CFTC tomorrow said, look,
0:44:42 we will not allow Cauchy to have a market,
0:44:44 we’re gonna shut down predicted, okay?
0:44:46 Does that mean election betting disappears tomorrow?
0:44:47 Absolutely not.
0:44:51 Exactly the same way that prior to 2018,
0:44:53 if you went to almost any city in the United States
0:44:55 and you wanted to make a sports bet,
0:44:56 even if it wasn’t legal,
0:44:58 you wouldn’t have too much trouble
0:45:00 finding somebody to take your bet.
0:45:03 The analogy that I think most people would understand
0:45:04 would be prohibition.
0:45:06 Even if you totally oppose alcohol,
0:45:09 you’re a T-totaler, you have religious reasons, whatever,
0:45:12 having it legal and regulated as a country,
0:45:14 we’ve decided is a much better approach
0:45:16 from a social perspective.
0:45:19 A truism of economics is when there is
0:45:21 a tremendous demand for an activity,
0:45:23 supply will arise to meet it.
0:45:26 And when it is a supply that’s arising
0:45:31 in an unregulated, wild west environment, bad things happen.
0:45:33 – This is one reason strump thinks it might be wise
0:45:36 to have legal, regulated election markets.
0:45:38 There is another reason too,
0:45:40 even for all the regular people
0:45:41 who would never place a bet.
0:45:44 For regular people, the amount of information
0:45:47 you can get out of these markets is vast.
0:45:48 It’s the best.
0:45:50 – Consider one research paper strump wrote
0:45:53 with the economic historian Paul Rodey.
0:45:56 It’s called historical presidential betting markets
0:45:59 and it contains this tantalizing conclusion.
0:46:02 We show that the market did a remarkable job
0:46:05 forecasting elections in an era before scientific polling.
0:46:08 In only one case did the candidate clearly favored
0:46:11 in the betting a month before election day lose.
0:46:15 And even state specific forecasts were quite accurate.
0:46:18 Strump also argues that betting markets
0:46:20 can give us a better view of reality
0:46:22 than most media coverage.
0:46:24 – I’ll give an example which is in North Carolina
0:46:27 where I’m located right now, but it’s a national story.
0:46:30 We have a very contentious governor’s race
0:46:31 going on in the state.
0:46:34 And in the recent period,
0:46:37 the Republican candidate for governor,
0:46:39 there was a big news story in CNN that said
0:46:43 that the candidate had written some very offensive things
0:46:46 on a not very nice website.
0:46:47 If we don’t have these markets,
0:46:50 I have to rely on news media to think about,
0:46:52 is this a big story?
0:46:54 Even if you’re not in North Carolina,
0:46:56 you’d say, wow, this is going to really hurt
0:46:59 a Republican candidate in North Carolina.
0:47:02 And that probably will have a spillover effect
0:47:05 on whether Donald Trump will win North Carolina
0:47:06 in the electoral college
0:47:08 and this could change who gets elected president.
0:47:11 So this is a gigantic story.
0:47:13 Okay, that’s what the New York Times says.
0:47:16 – Okay, and what do the betting markets say?
0:47:18 – A bunch of people who put hard money down collectively
0:47:21 said both those two things are incorrect.
0:47:24 First, it turned out this candidate
0:47:26 had very little chance of getting elected governor
0:47:28 before all this stuff came out.
0:47:30 The second thing is Trump’s election chances
0:47:33 in these markets barely moved.
0:47:36 So I could understand as a citizen,
0:47:39 what’s the effect of this big news story?
0:47:43 I could go to a new site and have their spin on things,
0:47:45 which sometimes is right and sometimes is wrong.
0:47:46 Or I could go to one of these markets
0:47:47 that cuts right to the chase
0:47:51 and tells me the information that I’d like to know.
0:47:54 – But what about the traditional election polls
0:47:55 we’ve been relying on for decades?
0:47:58 Don’t they provide this information?
0:48:00 Nate Silver, for instance, has gained fame
0:48:03 by aggregating a variety of polls,
0:48:06 waiting them according to a variety of criteria,
0:48:09 and then creating a probabilistic forecast.
0:48:12 So what can these markets do that Silver can’t?
0:48:14 – One of the things that he cannot do
0:48:18 is he can’t generate a real-time forecast.
0:48:20 Like, okay, there’s a news story
0:48:23 that comes out at one in the morning.
0:48:25 Nate’s gonna have to go collect a bunch of poll numbers
0:48:27 that usually takes a day for a poll to happen
0:48:29 and then run through his statistical model.
0:48:33 And if this is a Monday, he’ll tell me Wednesday.
0:48:34 And that’s sometimes not so bad,
0:48:37 but these markets tell me Monday.
0:48:39 One minute after the event happens,
0:48:42 I can understand what’s exactly going on.
0:48:44 The other thing to point out is that
0:48:46 if you go look on these sites,
0:48:49 we can have markets on anything under the sun.
0:48:51 Nate Silver is one person.
0:48:54 He can give us forecasts on the big stuff
0:48:56 who gets elected president,
0:49:00 who wins Pennsylvania in the electoral college,
0:49:02 but suppose I’m interested in what’s going on
0:49:04 with the mayor in New York City.
0:49:05 – In case you haven’t heard,
0:49:07 New York City Mayor Eric Adams
0:49:08 is under federal indictment
0:49:11 for a bunch of fraud and bribery charges.
0:49:13 – I don’t think Nate has a model for that.
0:49:14 And if he has a model for that,
0:49:17 he doesn’t have one for every city you could ever think of.
0:49:18 He doesn’t scale very well.
0:49:21 He can do one thing, he can do 10 things.
0:49:23 Maybe he can do a hundred things,
0:49:25 but there’s thousands of these prediction markets
0:49:28 on anything you’d ever be interested in.
0:49:30 – As it turns out, Nate Silver recently joined
0:49:33 the advisory board of Polymarket,
0:49:35 the biggest prediction market out there.
0:49:38 So what happens if sites like Polymarket
0:49:40 and Colchee grow and grow,
0:49:41 and if you really can make a bet
0:49:44 on anything you would ever be interested in,
0:49:46 like Coleman Strumpf says,
0:49:48 wouldn’t that create even stronger incentives
0:49:51 for political bribery and fraud?
0:49:55 – My claim is that those incentives all exist right now.
0:49:57 I don’t, like the alarmist views of things
0:49:59 that the CFTC would say.
0:50:03 I don’t see a basis for this in history,
0:50:06 in our modern experience, in anything.
0:50:09 As somebody who studied centuries of data
0:50:12 from these markets, I can’t give you one piece of evidence.
0:50:14 We’ve had a lot of very contentious things
0:50:16 in our political system in the last 10 years.
0:50:19 That had nothing to do with political prediction markets.
0:50:24 I think the burden is on the people who make this claim,
0:50:26 to give an example, to give hard evidence
0:50:29 that this thing is gonna happen,
0:50:31 we just don’t see examples of this.
0:50:32 – So Strumpf isn’t alarmed,
0:50:35 but he does think there is one industry that ought to be.
0:50:38 – I’m pretty interested in politics,
0:50:40 but what I’m definitely not interested in
0:50:43 is watching cable shows of people opining
0:50:45 about what’s going on.
0:50:49 CNN, Fox News is not in any broad sense different from ESPN.
0:50:52 They want you to watch their show.
0:50:56 So if they know something, they could tell you that,
0:50:59 or they could string it out and tell you in 30 minutes,
0:51:01 that’s the benign part.
0:51:03 The last benign part is you might even think
0:51:07 that they’re going to spin actual data or information
0:51:11 in a way that’s consistent with their worldview.
0:51:14 A market doesn’t delay information,
0:51:16 a market doesn’t spin numbers,
0:51:18 a market just gives you numbers.
0:51:20 That’s a better way of learning information.
0:51:23 The people who are probably most threatened
0:51:26 by these markets are the media sites,
0:51:30 because the media sites right now are intermediary
0:51:31 to learning about polls,
0:51:33 to learning about candidates,
0:51:35 what they think about things.
0:51:38 Newspapers and TV shows do great analysis,
0:51:41 but if at the end of the day I just want numbers,
0:51:43 these markets cut through that
0:51:46 and give me a direct line into what’s going on.
0:51:47 That’s what I want.
0:51:49 That’s what a lot of people want.
0:51:51 I think the big question is,
0:51:54 will people understand what these markets are saying
0:51:56 if they become more prominent?
0:51:59 I would say first that you probably need
0:52:03 some level of education explaining what these markets are,
0:52:05 but let’s just turn that same spotlight
0:52:06 in the other direction.
0:52:08 I actually would argue
0:52:10 that most people don’t understand
0:52:11 what polls are telling us.
0:52:16 If I look at a poll and it says right now
0:52:20 that the expected national voting numbers
0:52:23 are say 50/50, well, what does that mean?
0:52:26 It doesn’t tell us very much
0:52:28 about who’s going to get elected president,
0:52:32 because A, that’s based on the state-by-state contest,
0:52:35 and B, it’s just a guess of the total vote.
0:52:36 We’re pretty sure that the Democrats
0:52:39 are going to get more votes than the Republicans,
0:52:41 but the Republicans could still win the electoral college.
0:52:44 Now, if you asked a typical reader of a poll,
0:52:46 what do you take away from this number?
0:52:50 You’d say, oh, this poll means that everything’s tied right now,
0:52:52 and I don’t think that’s the actual lesson.
0:52:56 So what do the betting markets say
0:52:59 about the election between Trump and Harris?
0:53:00 According to Polymarket,
0:53:04 the race is essentially a dead heat,
0:53:06 and the betting volume is rising fast,
0:53:08 including some betting that could be
0:53:12 the kind of manipulation that the CFTC is worried about.
0:53:14 Because this is such a contentious election,
0:53:17 I expect to see many billions of dollars
0:53:19 bet on these markets.
0:53:22 Feel free to keep an eye on the Polymarket betting
0:53:24 as the election approaches.
0:53:25 Also, feel free to let us know
0:53:28 what you thought of this episode.
0:53:31 Our email is radio@freakonomics.com.
0:53:34 Thanks to Coleman Strumpf and Eric Posner
0:53:36 for a pair of excellent conversations,
0:53:38 and thanks to you, as always, for listening.
0:53:41 Coming up next time on the show,
0:53:43 if somebody came up to me today and said,
0:53:45 we’ll make a deal with you,
0:53:49 you can replace all alcohol use with cannabis use,
0:53:51 I would immediately agree to that deal.
0:53:53 Here is a startling fact.
0:53:55 There are now more people in the U.S.
0:53:58 who use cannabis every day
0:54:00 than those who use alcohol every day.
0:54:03 You’re talking about needing a whole army
0:54:06 to study the effects of cannabis
0:54:08 from these new products
0:54:10 that we still do not know anything about.
0:54:13 And how are the economics working?
0:54:15 The entirety of the cannabis market
0:54:19 is filled with an amazing number of contradictions.
0:54:22 And we will engage in some political predictions.
0:54:23 A president, Harris,
0:54:26 is going to sign a federal legalization bill.
0:54:28 A special series on the state of cannabis
0:54:31 that starts next time on the show.
0:54:32 Until then, take care of yourself.
0:54:35 And if you can, someone else too.
0:54:38 Freakonomics Radio is produced by Stitcher and Renbud Radio.
0:54:41 You can find our entire archive on any podcast app,
0:54:43 also at Freakonomics.com,
0:54:45 where we publish transcripts and show notes.
0:54:48 This episode was produced by Theo Jacobs.
0:54:49 Our staff also includes
0:54:52 Alina Coleman, Augusta Chapman, Dalvin Abouwajie,
0:54:54 Eleanor Osborne, Ellen Frankman, Elsa Hernandez,
0:54:56 Gabriel Roth, Greg Rippin,
0:54:58 Jasmine Klinger, Jeremy Johnston, John Schnars,
0:55:00 Lyric Bowditch, Morgan Levy,
0:55:02 Neil Carruth, Rebecca Lee Douglas,
0:55:04 Sarah Lilly, and Zach Lipinski.
0:55:06 Our theme song is “Mr. Fortune” by the Hitchhikers.
0:55:09 Our composer is Luis Guerra.
0:55:14 I have a long-standing interest in presidential power,
0:55:16 but I’m also interested in antitrust law.
0:55:18 For both of those subjects,
0:55:20 you’re living in boom times, are you not?
0:55:21 Couldn’t be better.
0:55:28 The Freakonomics Radio Network,
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Are betting markets more accurate than polls? What kind of chaos would a second Trump term bring? And is U.S. democracy really in danger, or just “sputtering on”? (Part two of a two-part series.)
- SOURCES:
- Eric Posner, professor of law at the University of Chicago Law School.
- Koleman Strumpf, professor of economics at Wake Forest University.
- RESOURCES:
- “A Trump Dictatorship Won’t Happen,” by Eric Posner (Project Syndicate, 2023).
- The Demagogue’s Playbook: The Battle for American Democracy from the Founders to Trump, by Eric Posner (2020).
- “The Long History of Political Betting Markets: An International Perspective,” by Paul W. Rhode and Koleman Strumpf (The Oxford Handbook of the Economics of Gambling, 2013).
- “Manipulating Political Stock Markets: A Field Experiment and a Century of Observational Data,” by Paul W. Rhode and Koleman S. Strumpf (Working Paper, 2007).
- “Historical Presidential Betting Markets,” by Paul W. Rhode and Koleman S. Strumpf (Journal of Economic Perspectives, 2004).
- EXTRAS:
- “Has the U.S. Presidency Become a Dictatorship? (Update),” by Freakonomics Radio (2024).
- “Does the President Matter as Much as You Think?” by Freakonomics Radio (2020).
- “How Much Does the President Really Matter?” by Freakonomics Radio (2010).