Minutes before we learned Chief Justice Roberts had sided with the majority in ruling the Affordable Care Act constitutional, between 70% and 80% of savvy reality arbitrageurs on InTrade were predicting with their dollars that the Court would strike down the individual mandate. Surely, this is what we have the internet for: wisdom of crowds, yada, yada.Actually, you would have made a pretty penny if you listened to the other big winner of the 2008 election. Since then, Nate Silver has gone corporate—FiveThirtyEight has long been folded in as an autonomous arm under the New York Times umbrella—but has lost none of his indispensability. Last night, taking a break from the state-by-state prognostication that made him a star in the days of Obama v. Hillary, Silver warned against the “conventional wisdom” of doom for ObamaCare:After these oral arguments, Intrade's betting shifted dramatically. Quickly, the chance of the mandate's being overturned climbed to about 65 percent from 35 percent at the market.
The odds of the mandate's being overturned have fluctuated some since then, but have risen even further in the past few weeks, according to the market.
Is such a large shift in sentiment justified? In my view, probably not. This may be another case of traders being overconfident about the value of their information, a property which has also been observed in the stock market.
To be clear, the evidence is that oral arguments do have some predictive power in forecasting Supreme Court decisions, according to a variety of empirical analyses from academic and legal scholars. It's just a question of how much power they have, and how unambiguous the evidence about oral arguments is in any particular case.The former fantasy-baseball prodigy then dissects the data in a singularly unhysterical way. (The contrast with famed legal analyst and ObamaDoom-merchant Jeffrey Toobin of CNN and the New Yorker, who’s eating significant amounts of crow today, is instructive.) One would probably not want to actually think like Nate Silver, whose reduction of all important matters to confidence bands and meta-analyses, seems more than a bit dystopic. But if the internet’s done anything good for public discourse, it’s not in making it possible for everyone to jabber (and bet) on anything. It’s in making it possible for true savants without the usual lawyerly or beltway bonafides (Rachel Maddow is another Obama-coattails star from 2008 that keeps getting better) make it in the mainstream. The noisy democratization of opinion is just a nasty side effect.Silver continues:What about all the "intangible" factors that pundits and legal experts have cited as being important – everything from Mr. Verrilli's coughing to Justice Ruth Bader Ginsburg's comments about broccoli?
These indicators are probably of little value. Instead, studies have found that predictions made by "expert" commentators on the Supreme Court do barely any better than a coin flip and are beaten by the statistical methods (a finding that follows the poor overall track record of experts in making predictions under many other circumstances). These experts are irrationally confident about their ability to read the tea leaves, and their predictions suffer for it.
There are, however, some statistical indicators that might be of predictive value above and beyond the number of questions during oral arguments. For instance, as Mr. Epstein's study noted, the petitioner wins about 60 percent of cases before the Supreme Court. In this case, the petitioner is Mr. Verrilli and the federal government, so that would favor the mandate being upheld.
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In short, the conventional wisdom may have gotten ahead of itself. The more tangible factors, in my view, roughly balance one another out rather than favoring one or another side by a 3-to-1 margin.Read Nate Silver, national treasure, while you still can. It won’t be long before someone wises up and gives him a hedge fund to run.
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