What went Wrong with Healthcare?
No, I’m not talking about the de/merits of the substantive decision on healthcare, or our overall healthcare system, both of which I am only marginally qualified to discuss.* No, rather, I’m concerned with why so many predictions about the decision were incorrect. I’m not talking about individual media pundits, or people who wrote blog posts with predictions. Rather, I’m talking about the erroneous decisions of the prediction markets. In the days leading up to the decision, I was checking the wisdom of the crowd on both Josh Blackman’s Fantasy Supreme Court and Intrade (for the record, Intrade was much more wrong (75% chance that the law was unconstitutional), but both were wrong).
I’ve written before about prediction markets and the Supreme Court, and how I think these markets might provide us with a valuable service. There’s a value in having predictable outcomes to cases. Holmes, I think, would support my view that predictability is akin to the rule of law. So why did this amazing new technology not work properly in this instance?
I don’t have a clear cut answer – yet – but I think some of it has to do with the way the prediction contracts were phrased, the oral argument, and the difficulty of predicting one person’s actions. First, prediction markets are crude tools that give us a “yes” or “no,” and not very good at trying to get at the reasons behind a ruling. Second, the oral argument was a turning point for many participants in the markets, even though there has been some discussion in the theoretical literature indicating that oral argument has little, if any effect, on actual outcomes. So it could be that participants were misled by a factor that was illusory, and once people started saying that the law might be overruled, it touched off an irrational feeding frenzy. Another possibility would be that prediction markets do not do particularly well with decisions that are left up to one person. After all, there is such a thing as free will. Just because we have prediction markets, it doesn’t mean that we can read someone’s mind. That’s why the prediction markets failed so badly to predict W’s nomination of Harriet Miers to the Supreme Court. It’s difficult to get into the mind of the president or his administration. Without inside information, the crowd is basically all equally uninformed. And so it was difficult – very hard for the crowd to predict – Robert’s decisions or reasons for voting as he did. I’ll be thinking more in the coming days about how prediction markets could avoid the trap they fell into with this decision.
*I say only marginally qualified because I teach contracts, business associations, and employment law, with a twist of all things tech and global, not constitutional law or health law. I have, however, read the decision, which puts me head and shoulders over a large number of television commentators yesterday (“I haven’t read the decision yet, but assuming that the court said X…”). Finally, speaking of “getting it wrong,” this post would not be complete without a big ole turkey to Fox and CNN for reporting the holding incorrectly.