Blinding me with science ... contracts

Tom Bell has a great paper on the great value of prediction markets in science:

The scientific prediction exchange would promote progress in the sciences and useful arts in a variety of ways. By rewarding skilled claims about those public goods, the SPEx would promote basic research and development.115 By aggregating, quantifying, and disseminating traders' consensus opinions about disputed questions of fact, moreover, the scientific prediction exchange would produce a vital input for promoting the sciences and useful arts: Accurate and timely information about progress in those fields.116 Even those of us who merely watch trading from the sidelines stand to learn something about the drama and value of scientific disputes. Reporters would find claim prices on a scientific prediction exchange offer a quick, objective, and neatly packaged way to follow esoteric debates. Scientific prediction exchanges would thus
fund, measure, and publicize progress in the sciences and useful arts. Scientific prediction exchanges offer to deliver those public goods at little or no public expense. In contrast to patent and copyright rights, the rights created by scientific prediction exchanges do not impose deadweight social costs.117 Those who buy prediction certificates get only the right to receive payment in the event an associated claim holds true—not the right to prevent anyone from enjoying progress in the sciences or useful arts. Far from enclosing public goods, prediction markets help to create and share them.

He also talks about the problems with U.S. law, and proposes some approaches:

Freeing scientific prediction exchanges from the failure of U.S. law takes a fair amount of work. It gives appeal to the prospect of escaping U.S. law altogether. As Part IV.A explains, though, there remain convincing reasons to endure and ultimately redeem U.S. law. In pursuit of that worthy goal, Part IV.B describes and evaluates several legal strategies for liberating scientific prediction exchanges from the risk of unduly burdensome regulations or outright prohibitions. Each of those strategies leaves success uncomfortably doubtful, however. Legal uncertainties continue to haunt scientific prediction exchanges. Part IV.C thus offers a statutory cure: the Scientific Prediction Exchange Act.

It would be great if our elected legislators knew a bit about law, economics, and/or innovation incentives. However, the evidence seems to suggest that they know very little beyond getting votes, as this review of The Moral Consequences of Economic Growth, a book on government programs, argues.

UPDATE: Tom Bell debates Senator Kyl on internet gambling.