The rational case for why Obama supported gay marriage when he did

When Barack Obama announced his support for gay marriage on May 9, most commentators immediately turned to how this would affect his chances in the 2012 campaign. Now that a few days have elapsed, we can say with confidence that the effect was negligible.

The following chart illustrates the most accurate and real-time forecasts, derived from prediction market data, two days before and after the announcement.

Sources: Betfair and Intrade.

When we think about this political issue as an economic problem, as I like to do, the first thing to ask is what new information has been introduced into the system. For anyone who regularly follows politics, the fact that Obama privately supports gay marriage is not really news. He quietly supported same-sex marriage in 1996, and many assumed he never really changed his position. Massachusetts Congressman Barney Frank, a Democrat, called the president's revelation a political "nonevent."

Nor did his announcement represent any change in policy. The executive branch has already repealed "don't ask, don't tell" and decided not to defend the Defense of Marriage Act. Obama, in his interview, specifically left the job of enacting or subtracting gay marriage rights to the states, solidifying his administration's current position.

What is new is that there will be a political fallout to the announcement that is just now coming into focus. Polls suggest that support for legalizing gay marriage is increasing. But an overnight Gallup poll found that there are more people who would potentially switch their votes to Romney than switch to Obama because of the move. But the election is six months away, and many other factors will accumulate before then.

Shifts in donations of both time and money are harder to estimate. There are vocal and engaged activists in both the pro- and anti-gay rights groups. Many of these people are engaged in the process already, so it is possible that the marginal shift in donations will be small. While Obama has been vigorously fundraising on the issue over the last few days, Romney has been relatively subdued in his opposition to gay marriage. While it is likely that the net shift in donations will favor Obama, the overall result could very well be minimal.

Given this relatively modest shift in the political arithmetic, born out in the unflagging market odds for Obama's re-election, one can't help but wonder why Obama didn't make this politically calculated move earlier in his presidency, or even as a senator. The answer, I think, is that only recently has public opinion on gay marriage shifted to the extent that such an announcement would help the president more than it hurts him, or at least come out in the wash. Our political system does not reward bold leadership on behalf of minority groups. The support and donations of an entrenched majority will dominate the gratitude of a minority until that group gains enough outside support. The same Gallup poll that showed a negative shift in support for Obama for supporting gay marriage publicly also noted at a 51 to 45 percent support for Obama's actions.

Follow along in real-time with PredictWise.

David Rothschild is an economist. He has a Ph.D. in applied economics from the Wharton School of Business at the University of Pennsylvania. Follow him on Twitter @DavMicRot and email him at thesignal@yahoo-inc.com.

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