The University of Chicago Law School Faculty Blog

Today's Availability Cascade

All of the experts thought that Barack Obama would win the New Hampshire primary. Perhaps more significantly, the prices at Intrade, the political prediction market, suggested that Obama was overwhelmingly likely to win. Many of us have been quite excited about the potential of prediction markets, in which people "bet" on political (and many other) outcomes. Such markets have a terrific track record in politics and elsewhere. And yet Clinton was a huge underdog in New Hampshire. Should we conclude that the prediction markets are unreliable after all? That nobody knows anything? That polls themselves mean nothing?

Conditional Prediction Markets, Presidential and Otherwise

The heat of the presidential primary races brings us a new application for prediction markets. Long-used to predict the outcome of presidential elections, these markets are now being deployed to measure economic and strategic variables conditional on who is elected president. The for-profit firm Intrade is offering (for no transaction fee) a variety of conditional markets designed to predict oil prices, long-term interest rates, government debt loads, and the number of troops in Iraq depending on who wins the 2008 election. This forecasting tool has the virtue of capturing the market's best guess about the state of the world after the election, which thereby informs our views of the election. For example, if the market thinks that the number of troops in Iraq will be the same whether Obama or McCain wins in November, this tells us that perhaps we shouldn’t vote based on this issue since the wisdom of the crowd says it isn’t one. Or, if we are a firm interested in oil prices or interest rates (which one isn’t?), these markets may provide very useful information about future uncertainties.

Of course, these conditional markets have great appeal and wide possible application in the corporate law world too.

The Strange Case of One Laptop per Child

Charles Dickens invented the term “telescopic philanthropy” for people, like his Mrs. Jellyby, who are preoccupied with the lives of people in faraway places and ignore their own children and others at home. There is another type of telescopic philanthropy, where the telescope is aimed not far away but firmly at one’s own navel. Consider Nicholas Negroponte, a computer scientist at MIT, who has established a charitable organization to help poor children in the developing world. What would a computer scientist think that poor children need that they currently lack? Food, medicine, clean water? Or maybe a laptop computer?

Lee Fennell: "Order With Outlaws?"

Over at the Penn Law Review PENNUmbra, Lee Fennell has published a response to an article in which Eduardo Peñalver and Sonia Katyal "provocatively argue that the violation of property laws can enhance the social order." In her response, Lee suggests a "way to distinguish socially valuable boundary crossings from socially destructive ones." You can read the full response here.

Video: Eric Posner and Jack Balkin on Liberty vs. Security

Over at Bloggingheads.tv, you can watch Eric Posner and Jack Balkin of Yale Law School discuss civil liberties, security, and the National Surveillance State.

The Nanny Corporation

The “Nanny State” seems to be thriving as never before. To see this, I need only peer out from my 6th Floor window at the City of Chicago, which has recently banned foie gras (it is bad for the geese) and smoking in bars (it is bad for the smokers, non-smoking patrons, and bar employees). Similar moves are happening all over the country. This well-known phenomenon is getting traction among Republican presidential candidates, and was the subject of a recent book by journalist David Harsanyi.

We are also seeing the rise of the “Nanny Corporation”.

Are Federal Judges Overpaid?

Chief Justice Roberts has just issued his year-end report on the federal judiciary. As in past years, he urges Congress to raise the salaries of federal judges. The accompanying data can be found here. The latter web page might seem to make up in beautiful graphics for what it lacks in statistical rigor, but let’s hope that lower-court judges do not use it as a guide for evaluating expert testimony. Roberts’ argument boils down to two points: that the real wages of federal judges have declined since 1969 because of inflation; and that today first-year associates in some law firms, law school deans, and many senior law professors make more than judges do.

(Last year Roberts also noted that federal judges make less than counterparts in the UK; however, it turns out that in most developed countries with sophisticated legal systems, judges make less than American judges do.  The judiciaries in those countries are also less prestigious, yet they seem to perform just as well as ours does.)