[Ecommerce] Promote Progress of Science and Useful Arts: Scientific Prediction Exchange

[Seth Johnson]

> http://agoraphilia.blogspot.com/2006/08/prediction-markets-whup-on-copyrights.html


Prediction Markets Whup on Copyrights and Patents

posted 8:04 PM by Tom W. Bell


Tuesday, August 29, 2006


I've just posted to SSRN my forthcoming paper, "Prediction
Markets for Promoting the Progress of Sciences and the Useful
Arts." It will appear in vol. 14 of the George Mason Law Review.
You can download a pretty-to-close-to-final draft at here. The
abstract:

    Copyrights and patents promote only superficial progress in
    the sciences and useful arts. Copyright law primarily
    encourages entertaining works, whereas patent law mainly
    inspires marginal improvements in mature technologies.
    Neither form of intellectual property does much to encourage
    basic research and development. Essential progress suffers.

    Prediction markets offer another way to promote the sciences
    and useful arts. In general, prediction markets support
    transactions in claims about unresolved questions of fact. A
    prediction market specifically designed to promote progress
    in the sciences and useful arts - call it a scientific
    prediction exchange or SPEx - would support transactions in a
    variety of prediction certificates, each one of which
    promises to pay its bearer in the event that an associated
    claim about science, technology, or public policy comes true.
    Like other, similar markets in information, a scientific
    prediction exchange would aggregate, measure, and share the
    opinions of people paid to find the truth.

    Because it would reward accurate answers to factual
    questions, a SPEx would encourage essential discoveries about
    the sciences and useful arts. Researchers and developers in
    those fields could count on the exchange to turn their
    insights into profit. In contrast to copyrights or patents,
    therefore, a SPEx would target fundamental progress.
    Furthermore, and in contrast to copyrights and patents, the
    exchange would not impose deadweight social costs by legally
    restricting access to public goods. To the contrary, a
    scientific prediction exchange would generate a significant
    positive externality: Claim prices that quantify the current
    consensus about vital controversies.

    This article measures copyright and patent law against the
    Constitution's call for promotion of the Progress of science
    and useful Arts, to find those traditional forms of
    intellectual property lacking. As a cure for that policy
    failure, it suggests scientific prediction exchanges. Given
    that such exchanges offer the promise of large net public and
    private benefits, why don't they already thrive in the United
    States? Because the laws written for commodity futures,
    securities, and gambling markets cast a pall of legal
    uncertainty over scientific prediction exchanges. To ease
    that unwarranted burden, the article explores a variety of
    strategies designed to guarantee the legality of scientific
    prediction exchanges. The article concludes with an all-too-
    apt illustration of how legal risks can discourage prediction
    markets from promoting the progress of science and the useful
    arts.