Skip to content

From the 1503 papal conclave to the 2015 Nobels: Forecasting Closed Door Decisions

May 9, 2016

When the Belarusian writer Svetlana Alexievich won the 2015 Nobel Prize for Literature, it was not unexpected. She was not only the clear favourite with the bookmakers but had traded as one of the leaders in the betting in the previous two years.

While firms lay odds on the literature and peace prizes, there are no betting lines available for the Nobel Prizes in physics, chemistry and medicine. Instead, there is an organised platform which seeks to predict winners based on research citations.

Betting: from Hollywood to the Vatican

2015 was a very good year for favourites in awards contests. The favourite in the betting won almost every single one of the 24 Oscar categories at the Academy Awards. This domination of the favourites has been documented in politics for nearly 150 years, ever since hot favourite Ulysses S Grant strolled to the US presidency in 1868. The favourite in the betting won almost every single presidential election held since, up until 2016.

But the Nobel Prize deliberations are quite different from a political election or even a Hollywood awards ceremony. Instead, they are a little more like a papal conclave, where the deliberations are secretive and there is no defined shortlist of nominees. Betting on papal conclaves has been formally recorded from as early as 1503. In that year, the brokers in the Roman banking houses who offered odds on who would be elected Pope made Cardinal Francesco Piccolomini the clear favourite. It was no surprise, therefore, when he went on to become Pope Pius III.

Since then the betting markets have had a mixed record of success in predicting the winner. For example, Cardinal Ratzinger was a warm favourite to be elected pope in 2005, and duly became Pope Benedict. The election of Cardinal Bergoglio as Pope Francis, on the other hand, came as more of a surprise to the markets.
Betting on processes that take place behind closed doors also happens outside the church. In 2009, crowdsourced fantasy league (or “prediction market”) launched an attempt to peer behind the doors of the US Supreme Court, predicting its deliberations – a market still going strong today. The Supreme Court might be particularly suitable for a prediction market, in that not only is there a relatively small number of decision makers, but the universe of possible outcomes is also very limited. Predicting the Nobel Prize announcements might be expected to be somewhat more difficult.

So how do the betting companies compile their odds when it comes to the Nobels? Ladbrokes has said that, in the absence of information, the best way is consulting literary contacts and following relevant online discussions. This is despite the fact that it only takes about ₤50,000 in bets on the Nobel in literature, compared with a couple of million for a big football match.

Patchy record

How well have the markets performed to date? For the Sveriges Riksbank Prize in Economic Sciences, established in 1968 by Sweden’s central bank and considered an unofficial “Nobel”, the most ironic failure of a sort came in 2009, when the betting market offered by Ladbrokes had Eugene Fama, a pioneering exponent of the theory of efficient markets, as the solid 2 to 1 favourite. Assuming the market was truly efficient in respect of all relevant information, we might have expected him to be well up there among the top contenders. But the prize was shared by Elinor Ostrom and Oliver Williamson, both of whom were trading as 50 to 1 longshots before the announcement. Fama did go on to share the Nobel Prize four years later.

On the other hand, Harvard University had already set up its own dedicated economics prize prediction market, which did much better than Ladbrokes by making Oliver Williamson one of the favourites. In 2010, Peter Diamond shared the prize after having been listed as one of the favourites by Harvard.

Of the others in the top eight in 2010, Jean Tirole went on to win in 2014, Robert Shiller and Lars Peter Hansen in 2013. Thomas Sargent and Christopher Sims, who shared the 2011 prize, were among the favourites in the 2008 Harvard prediction market, which has since closed down.

Most of the market based predictions, however, focus on the Nobel Prizes for Literature and Peace. In 2014, French writer Patrick Modiano won the Literature Prize. Before the announcement, Modiano was trading as a reasonably well fancied joint fourth favourite. The previous year, Canadian Alice Munro was heavily backed into second favourite before claiming the prize. In 2011, Tomas Transtomer won the Literature Prize having been clear favourite in 2010.

The peace prize, which is awarded by a committee of five people who are chosen by the parliament of Norway, is slightly more complicated as awards are sometimes given to organisations rather than individuals. This also makes it less satisfying for potential market players. Still, the 2014 Nobel Peace prize was shared by Malala Yousafzai and Kailash Satyarthi. Malala had actually been backed to win in the previous year.
Malala Yousafzai was the bookmaker’s favourite the year before she actually won. There’s a pattern there.

The physics, chemistry and medicine prizes, on the other hand, have not really attracted market attention to date, probably because it is too niche for the regular player. Instead this role has been taken up by Thomson Reuters, which claims to have identified 37 Nobel Prize winners since 2002, on the basis of an analysis of scientific research citations within the Web of Science. As an interesting development, Thomson Reuters has also now established a People’s Choice Poll, more akin to the “wisdom of crowds” methodology of a prediction market. Scientific society Sigma Xi has a prediction contest that enables people to vote for their favourite.

2015 Nobels: the verdict

This outline of the past few years is pretty much par for the course in the history of Nobel predictions. Far from perfect, but not at all unimpressive. Interestingly, the market is often a better predictor of future Nobel laureates than for that particular year.

In 2015, although the market got the Literature Prize spot on, it had not predicted that the Tunisian National Dialogue Quartet would win the peace prize. So well done to those who placed a bet on “none of the above”. It was trading as close second favourite to Angela Merkel on the PredictIt prediction market before the announcement.

Thomson Reuters got the 2015 physics, chemistry and medicine prizes wrong. This year it also highlighted Richard Blundell, John List and Charles Manski as the leading candidates for the economics prize, making special note of the former, who also won their People’s Choice poll. There was no organised betting on economics this year. This year’s economics Nobel went to Angus Deaton. Deaton, currently Dwight D. Eisenhower Professor of Economics and International Affairs at Princeton (formerly of Cambridge and Bristol universities) for his analysis of consumption, poverty and welfare.

So what will the prediction industry look like in ten years? On current trends, it will have grown up a lot. The science of forecasting and the power of prediction markets are currently growing apace. Will there ever come a time, I wonder, when we don’t need to wait for the announcement, but instead just look to the odds? Maybe we should set up a prediction market to answer that question.


Leighton Vaughan Williams and David Paton, ‘Forecasting the Outcome of Closed-Door Decisions: Evidence from 500 Years of betting on Papal Conclaves, Journal of Forecasting, 34 (5), August, 2015, pp. 391-404.

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: