Could “prediction markets” clarify the likelihood of major legal events?

Prediction markets harness the collective intelligence of large groups of people, who put money behind their conclusions, and experience has proved such markets accurate seers for presidential elections, Oscar winners, oil prices, and other events (See my post of Dec. 9, 2005 on scenario planning and Sept. 13, 2005 on an early version of this.). Robin Hanson, an economist at George Mason University has popularized the concept of corporate prediction markets, as well as Justin Wolfers, an economist at the Wharton School.

There are even investment opportunities on legal events, such as the Enron trials currently underway.

Along with for-profit trading on predictions, perhaps someone seeking insights could sponsor a prediction market on asbestos reform legislation, or ground-breaking class actions, or Supreme Court nominees, or other significant law-related events. Punters would pay to play as in any market or the sponsor’s money might be distributed to the most accurate predictors.

Whatever the mechanism, a legal prediction market would collect and distill the wisdom of many people and would almost certainly be more accurate than the most astute individual or small group.