How Many Troops will Obama Withdraw from Iraq?

The InTrade prediction markets allows individuals to bet on the winner of the presidential elections and US recession timings.  They can also be used to bet on US foreign policy.  The graph below shows the contract price for the outcome “Number of US Troops in Iraq (given a Democratic president) as of June 2010.”

A couple of features stand out.  First, the price was relatively constant for almost all of 2008.  Second, the price has fluctuated wildly since November 5th and is now 30% below its 2008 average.  Here is how you calculate the implied June 2010 troop level from the contract price:

expected 2010 troop level = contract price x 2000

As of the end of June [pdf], there were 183,100 troops participating in Operation Iraqi Freedom.  So a price for a “no change in troop levels” is 91.55 compared to a current price of 29.9. This price says that the Intrade “market” expects about 60,000 US troops in Iraq by the end of June 2010. (Note: As a thinly traded contract, it is difficult to infer true market expectations from the price.)  If you predict less “change” from this administration, you might think this is an extremely low number.  If you have little hope for real change, then perhaps you should purchase the contract today.  Contracts on other foreign policy-related issues are also available:

Gitmo closed by December 31st, 2009 (low number –> low predicted likelihood)

Gates as Sec. of Defense (high number –> high expected likelihood)