A Market in Rankings?
Complaining about law school rankings is a cottage industry in the legal academy. (Or rather more than a cottage industry, I suppose.) Everyone — or nearly everyone — dislikes the current system, and while I am less skeptical than most — it doesn’t seem unreasonable to me that students planning on shelling out $70,000+ in tuition might want some comparative measure of quality — I agree that the current system leaves something to be desired. It seems to me that we could set up a market based solution.
A student recently suggested to me that inTrade ought to set up a prediction market in U.S. News Rankings. That way students could hedge against the risk that the value of their degree may drop if their school shifts in the rankings. It is not a bad idea, but the problem is that such a market — while allowing a bit of U.S. News risk arbitrage and hedging — would ultimately be about simply predicting the mysteries of the U.S. News system. Suppose, however, that we set up contracts for something other than U.S. News status. For example, one might purchase a contract predicting that West Dakota Law School’s graduates would have an average starting salary of $100,000 or more. This would provide information of the kind that most students care about. Alternatively, one might create a contract that pays out if East Carolina Law School’s faculty places 10 articles in top-ten law reviews this year or some other measure of scholarly accomplishment. Then we could compare the share prices for Harvard and Yale. Of course, we would still just be getting a market in prediction of a particular outcome, rather than actual quality, but it might not be a bad proxy and it might capture more of the dispersed knowledge about law school quality. Of course, in order for the system to work you would need a relatively thick market in the contracts offered and even if there were only three or four contracts per law school, the number of contracts available in the market would be huge. On the other hand, law profs and law students are nothing if not obsessed with status, and I suspect that there would be a sizable contingent eager to cash in on their obsession.
What do you say? What contracts do you think inTrade should offer?