In Republican debate, Gingrich and Romney make big bets

Both Mitt Romney and Newt Gingrich placed prominent wagers in Saturday night's Republican Presidential debate. Romney's was spontaneous and flip while Gingrich's was calculated and quite cold. Meanwhile, prediction market traders bet on whose bet was best, giving Gingrich a significant edge.

Romney, denying an allegation that he endorsed mandatory national health insurance in the first edition of his book "No Apology", put out his hand and challenged his accuser, Rick Perry, to a $10,000 bet to settle the issue. Perry refused the bet and smartly so. According to FactCheck.org, Romney would have won.

Commentators jumped on Romney as out of touch for blithely risking "more than some people make in a year", as one Yahoo! user put it, or 20 percent of the median American household's income. (That's 0.005 percent of Romney's own reported wealth.) Most debate reactions focused on the high stakes of the challenge or whether Romney's act violated his Mormon faith, but ignored the simple fact that Romney was right. Knowing that he had a 100 percent chance of winning--he wrote the book after all--Romney was never actually in danger of losing anything. The gravity of the bet signified his certainty.

Had Romney offered to bet $1 or even $1 million, the stunt may have been laughed off. But at $10,000, Romney seemed serious. Distasteful or not, there's no more direct way to break out of a "he said, he said" stalemate than to propose a wager. The act quantifies confidence on both sides and, once resolved, allows a public accounting of who was right, a ledger sorely missing in politics.

Romney's bet was likely unplanned and, given the volume of mostly negative reaction, while not quite his own "oops" moment, something that he may end up regretting. Like Perry's memory lapse, it's a non-substantive issue that has, somehow, been manufactured into something real.

Gingrich's bet during the debate was figurative but, if anything, far bolder. Rather than back away from his earlier statement that Palestinians are an "invented people", he doubled down, saying that "these people are terrorists" who "teach terrorism in their schools" using textbooks funded with American aid.

Gingrich's stunningly blunt defense of Israel was equal parts refreshing and reckless. On the one hand, he gave a stirring defense of the truth as he sees it, refusing to strike a false balance on a tricky issue. On the other hand, as Romney and, most cogently, Rick Santorum, warned, taking such a hard-line position--more extreme than the Israeli leadership's own position--is a dangerous game for a presidential hopeful.

This is especially pertinent for Gingrich, because one of the biggest criticism of him from establishment Republicans has been that he is a "human hand grenade." Gingrich defended his stand as an answer to W.W.R.D.--What Would Reagan Do? "I will tell the truth, even if it's at the risk of causing some confusion sometimes with the timid," Gingrich declared in full-testosterone mode.

Political theater aside, the important question is how Gingrich's stance helps or hurts the prospects of a two-state solution. On this point, it seems clear that such "truth telling" from an American President could significantly damage a fragile peace process.

Gingrich's bet may attract a small number of Jewish voters in the general election, but, more to the point, his strong words will please the Christian conservative movement that has embraced the cause of Jewish control over all of ancient Israel.

While not as well covered, we should mention a smaller gamble that Gingrich made by endorsing science. So far Jon Huntsman has stood alone in the Republican field in embracing science, defending research into climate change and stating that "[he puts his] faith and trust in science." In the debate, Gingrich called for more young people to "study science and math and technology", and for funding space exploration to the moon and Mars, positions likely to boost Gingrich's mainstream appeal in the general election.

Pundits and quick-reaction polls largely rated Gingrich the winner. His Palestinian comments have degraded in the public sphere into a question of theatrics where Gingrich appears forceful, ignoring the dangerous policy implications. Polls denounced Romney's gamble and by the following evening the only debate headline left on Fox News mocked Romney's $10,000 bet. Twitter was equally relentless; several of the top hashtags now associated with Romney include #What10kBuys, #OutOfTouch, and #10kBet. Overall, more Yahoo! users were satisfied with Gingrich's answers than Romney's.

Immediately following the debate, a real-time analysis of social media sentiment by Attensity rated Gingrich both the winner and the loser, having both the highest positives and the strongest negatives. Now, Romney's negatives are highest and Ron Paul, as before, has the highest positive sentiment by far.

Former George W. Bush adviser Matthew Dowd crowned Gingrich the clear frontrunner on ABC following the debate; he was just one of the first of many Republican insiders and pundits to crown Gingrich.

There was third group of people placing bets Saturday night as well, on prediction markets Betfair and Intrade. They bet more on Gingrich than ever before. Prior the debate, Romney led Gingrich by 10 percentage points. As of this writing, Gingrich (39.5 percent) is just 1.5 percent less likely to win the nomination than Romney (41.0 percent). On Betfair, Gingrich is ahead for the first time.

Notice that Romney and Gingrich started converging during the debate, but continued to move for a few hours afterward. The markets reacted less to the substance of the debate than to the spin, buzz, and commentary in social and establishment media post debate, as they assumed the majority of the Republican electorate would learn about the debate through this lens.

Track all the candidates' chances of winning the Republican nomination in real time on PredictWise.

David Pennock has a Ph.D. in computer science from the University of Michigan and currently heads the algorithmic economics group at Yahoo! Research. Follow him on twitter @pennockd.

Other popular Yahoo! News stories:
What now? Why the next 10 days are the most critical of the GOP campaign
Analysis: Newt Gingrich survives first big night of attacks
Politicians never 'lie'

Want more? Visit The Signal blog or connect with us on Facebook and follow us on Twitter.