A well-known experiment, run by Iowa

Electronic Markets, allows traders to place bets on the outcome

of political elections, including the current California governor’s

race. According to a paper

by Joyce Berg and others, the Iowa Political Market has

outperformed polls in predicting 9 out of 15 elections. Its

average error in predicting election results is about 1.5%, compared

to about 2% for an average poll. In some past elections, the Market

avoided major errors that marred all the major national surveys, whereas

it has never made a gross mistake itself. The apparently uncanny ability

of the Iowa Electronic Market to predict the future was one of the

reasons that the Defense Department recently floated the grisly idea

of a futures market in terrorism.

I’m struggling to understand the theoretical explanation for this

phenomenon. I realize that markets efficiently aggegrate the knowledge

of investors (who must try to make honest predictions, since their

money is on the line). But where do the investors in a political futures

market get their knowledge? They cannot simply ask themselves

how they intend to vote. As Berg et al. note, traders are "not

a representative sample of likely voters; they are overwhelmingly

male, well-educated, high income, and young" (p. 2). Some are

not even US residents. Thus their own choices in the real election,

assuming they vote at all, will be very different from those of the

American people. Yet they seem to be able to predict the actual result

more accurately than a random-digit telephone poll.

One clue is that a relatively small number of "marginal traders"

drive the market; they make many more trades than other people and

are less prone to sticking with an unlikely bet out of loyalty. I

would guess that these "marginal traders" are political

junkies: people who have no sentimental attachment to any of the candidates

but love to prognosticate about elections. We can assume that they

have seen all the polls—but that still doesn’t explain how they

outperform surveys on average. Could it be that they instinctively

recognize a consistent error in polling, and adjust accordingly? For

example, maybe polls tend to pick the real winner but predict a larger

margin of victory than actually occurs. (Races tend to "tighten"

right at the end.) Or maybe polls tend to make inflated predictions

for the Democrats’ share of the vote, because they count too many

low-income people as "likely voters." It’s also possible

that the marginal traders rely on one or two polls that are better

than the average. (Then we would find that the market outperformed

polls in general, but was no more accurate than the best of the polls.)

These are hypotheses backed with no evidence. But if one of them

turns out to be true, then we don’t need a market to improve on surveys.

We just need to make the same adjustment to poll results that the

marginal traders (a.k.a., the political junkies) are making. Likewise,

we would not benefit from a futures market in terrorism, but we should

strive to understand how the best informed and least sentimental observers

of terrorism make their predictions.

(Written while stuck in the Manchester, NH, airport, and posted on

Thursday): Imagine that some of the major political philosophers of

the eighteenth century are observing modern politics from their permanent

perches in Limbo. What would they say?

Edmund Burke: We should normally maintain the status

quo (whatever it may be), since people have learned to adjust to it

and it embodies the accumulated wishes and experiences of generations.

I am especially skeptical of efforts to reform societies quickly by

imposing ideas that came from other cultures or from the exercise of

"universal reason" (as if there were such a thing). Good conservatives

are hard to find today. This Newt Gingrich person represents the polar

opposite of my views. Daniel Patrick Moynihan was sensible throughout

his career, from his days opposing Great Society programs to his battles

to preserve welfare (always in the interests of maintaining an existing

social structure). Some modern leftists are Burkeans, in their efforts

to conserve indigenous cultures against markets. The IMF and the World

Bank remind me of the British Raj—they are arrogant purveyors

of a rationalist philosophy that will backfire in distant lands. I’d

vote Green, just to shock people.

Edward Gibbon: The Roman Republic exemplified the

main civic virtues: patriotism, military discipline, sobriety, love

of the common good, and worldly reason. These virtues were undermined

by Christianity, which was other-worldly, pacifistic, superstitious,

and hostile to national pride. I have a soft spot for your deist Founding

Fathers, but I can’t find anyone to like these days. Conservatives share

my list of virtues, but they’re revoltingly pious. Things continue to

decline and fall.

Thomas Jefferson: The New Dealers used to like me

because I was a civil libertarian and a political populist. They built

me a nice monument. Now conservatives love to quote statements of mine

like "That government is best which governs least." But I’ve

given up on politics. I don’t know what to make of a society in which

independent family farmers represent much less than one percent of the

population. I was surprised when governments started enacting expensive

programs with the intention of benefiting ordinary people; that never

happened before 1850. Did the programs of the Progressive Era and the

New Deal represent popular will, or did they interfere excessively in

private life? I can’t decide. In any case, my own dead hand should not

weigh heavily on the living, so I advise you to ignore any advice I

gave in my own lifetime. I now spend my whole time working on labor-saving

gadgets.

James Madison: I sought to construct a political system

that would tame the ruling class (to which I admit that I belonged)

and align our interests with those of the broad public. The ruling elite

in my day included Southern planters and Northern traders, manufacturers,

and bankers. They had reasons to care about their own families’ reputations

(especially locally), and thus could be induced to play constructive

roles. Also, they had conflicting interests: planters stood on the opposite

side of many issues from manufacturers and shippers. Thus each group

could be persuaded to check the worst ambitions of the others. I expected

men of my class to hold all the offices in an elaborate system of mutually

competitive institutions. They would seize opportunities to feather

their own nests, but they would also care about the long-term prospects

of their home communities, the institutions within which they served,

and the United States. Therefore, they would act in reasonably public-spirited

ways. In contrast, today’s ruling class consists of large, publicly

traded corporations. They have no concern with their political reputations,

and no loyalty to communities or the nation. You moderns need to look

for a different mechanism for inducing today’s ruling class to serve

public purposes. I do not view the system that I created as adequate

for that purpose.

Jean-Jacques Rousseau: All patriotic, decent people

have the same interests and goals. Disagreements arise because people

chatter together privately in little groups or factions, and also because

some people mislead others with their clever rhetoric. A perfect democracy

would have no factions and no debate. I am heartened to read in a book

by Hibbing and Morse that millions of Americans are Rousseauians.

They hate political debate, parties, legislatures, and professional

politicians, for they realize that all decent people have the same interests.

I like this Schwartzenegger fellow; he seems so natural.

Tom Paine: Most Americans still agree with me, and

yet the aristocrats run things. I’m going to endorse Dean.

Adam Smith: Everyone realizes now that international

trade creates wealth, that markets encourage specialization (and thus

efficiency), and that official monopolies and trade barriers are bad

for the economy. Fewer people pay attention to my moral philosophy and

my account of civil society. I get plenty of praise, but some of it

from embarrassing quarters.

I’m

still in Indianapolis at the Kettering Foundation

retreat. Meanwhile, here’s something I’ve been thinking about lately:

Most

moral philosophers appeal to intuitions as the test of an argument’s validity.

At the same time, they presume that our moral judgments should conform to clear,

general rules or principles. An important function of modern moral philosophy

is to improve our intuitions by making them more clear, general, and consistent.

This

methodology can be attacked on two fronts. From one side, those who admire the

rich, complex, and ambiguous vocabulary that has evolved within our culture over

time may resist the effort to reform traditional moral reasoning in this particular

way.

As J.L. Austin wrote: "Our common stock of words embodies all

the distinctions men have found worth drawing, and all the connexions they have

found worth marking, in the lifetime of many generations." Thus there is

a lot of wisdom contained in the vague and morally indeterminate vocabulary that

ordinary language gives us. Words like "love" introduce complex and

not entirely predictable penumbra of allusions, implications, and connotations.

Barely conscious images of concrete events from history, literature, and our personal

lives may flit through our heads when someone uses words. Everyone may recall

a somewhat different set of such images, sometimes with contrary moral implications.

This array of sometimes inconsistent references is problematic if we prize clarity.

Hence moral theorists attempt to excise overly vague terms or to stipulate clear

meanings. But the complexity and vagueness of words is beneficial (rather than

problematic) if human beings have embodied in their language real family resemblances

and real ambiguities. There really are curries, and it would reduce our understanding

of food to ban the word "curry" for vagueness or to define it arbitrarily.

Likewise, there really is "love," and it would impoverish our grasp

of moral issues to try to reason without this concept or to define it in such

a way that it shed its complex and ambiguous connotations, some of which derive

from profound works of poetry, drama, and fiction.

The methods of modern

philosophy can be attacked on another flank, too. Instead of saying that philosophers

are too eager to improve our intuitions, we could say that they respect intuitions

too much. For classical pagans and medieval Christians alike, the test

of a moral judgment was not intuition; it was whether the judgment was consistent

with the end or purpose of human life. However, modern moral philosophers deny

that there is a knowable telos for human beings. Philosophers (as Alasdair

MacIntyre argues) are therefore thrown back on intuition as the test of truth.

Even moral realists, who believe that there is a moral truth independent of human

knowledge, must still rely on our intuitions as the best evidence of truth. But

this is something of a scandal, because no one thinks that intuitions are reliable.

It is unlikely that we were built with internal meters that accurately measure

morality.

For me, one of the most interesting aspects of Monday’s Supreme

Court decisions on affirmative action was Justice O’Connor’s deference to universities.

In her majority opinion, she writes:

The Law School’s educational

judgment that such diversity is essential to its educational mission is one to

which we defer. … Our scrutiny of the interest asserted by the Law School is

no less strict for taking into account complex educational judgments in an area

that lies primarily within the expertise of the university. Our holding today

is in keeping with our tradition of giving a degree of deference to a university’s

academic decisions, within constitutionally prescribed limits. …. We have long

recognized that, given the important purpose of public education and the expansive

freedoms of speech and thought associated with the university environment, universities

occupy a special niche in our constitutional tradition. … In announcing the

principle of student body diversity as a compelling state interest, Justice Powell

invoked our cases recognizing a constitutional dimension, grounded in the First

Amendment, of educational autonomy: ‘The freedom of a university to make its own

judgments as to education includes the selection of its student body.’

Courts

have occasionally deferred to universities, not only in admissions, but also in

free-speech cases. Most people think that it is unacceptable for a university,

especially a public one, to discriminate against students or faculty who adopt

radical views, even in the classroom or in their writing. However, most people

think that a university can discriminate against teachers and students

for failing to use appropriate methods of reasoning in the classroom, in papers,

and in publications. The first amendment does not guarantee you a passing grade

even if your final exam is lousy. Thus "academic freedom" is not only

an individual right; it is also an institutional right of colleges to set their

own standards of discourse. (See J. Peter Byrne, "Academic Freedom: A ‘Special

Concern of the First Amendment’," Yale Law Journal, November, 1989,

pp. 251 ff.) In Bakke and other cases, justices have extended institutional

freedom to cover admissions and hiring decisions, within broad limits. Peter Byrne

observes that moderate jurists like O’Connor and Frankfurter are the ones who

typically argue this way. Strong liberals and conservatives of each generation

want to decide constitutional issues that arise within colleges; moderates

prefer to defer to academic institutions.

Deference to universities could

be grounded in freedom of association—but this defense would not apply to

state institutions. Byrne and other commentators want to base institutional academic

freedom on respect for academia as a separate social sphere. They say that science

and scholarship should be masters of their own domains. After about a decade in

the academic business, I can’t decide whether this degree of respect is warranted.

Sometimes I think that academia is an impressive social sector guided by Robert

Merton’s KUDOS norms: knowledge held in common, universalism, disinterestedness,

and organized skepticism. At other times, I think that academia

is a snake pit of favoritism, logrolling, and faddish conformity. I also think

that the broader question is complicated, i.e., Should (or must) democratic governments

defer to professions as the authorities within their own spheres of expertise?

Monday,

June 23