Wednesday, June 27, 2012

A Bout of Irrational Exuberance?

I was going to write something about the incredible unfairness of most sports leagues, but I got bogged down in a quagmire of numbers and I'm too tired to make a proper analysis of it. So I'll make it short and sweet today.

Intrade, a prediction market where people can trade and speculate on the outcomes of future events, is perhaps one of my favorite websites ever. And the most activity happens on politics. Currently, the most actively traded contract on it is the Supreme Court ruling on the individual mandate of the Patient Protection and Affordable Care Act (aka Obamacare).

The market has settled in the mid 70s to rule the mandate as unconstitutional, which baffles me. Because as far as I can tell, the people betting on the outcome are basing their confidence on two things:

1. Justice Kennedy's hostile questioning of Donald Verrilli, the Solicitor General charged with the task of arguing in favor of the PPACA in front of the court.

2. Justice Ginsburg's open musings on severability on the third day of verbal arguments.

Arguably #2 implies that the Court has moved passed the issue of ruling the individual mandate as unconstitutional and has to deal with the far messier issue of what to do with the rest of the law after overturning the mandate.

Most people are assuming it's going to be a 5-4 split decision either way (with some saying that Justice Roberts might make it a 6-3 in favor of the mandate just to write the majority opinion, which makes little sense to me), and I don't see how you can give another person 4 to 1 odds that the mandate won't be overturned. It seems incredibly risky to me.

I have always maintained that the value of a person's opinion is directly related to how much money that person is willing to bet on their opinion, which is why I think political pundits are essentially worthless. And a lot of people are betting a lot of money that the Court is going to rule against Obamacare, at least the individual mandate portion of it.

For the most part, I think I have a pretty accurate grasp on reality and seeing things "how they are" and not how I wish they could be. But the speculators on Intrade must be seeing something I don't, because there's no way I'd put up 4 to 1 odds on them affirming the individual mandate.

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