Saul Levmore

Recently, the idea of self-negating prophecies has gained traction as a public choice problem. It might now be situated in behavioral economics as much as in sociology and psychology. In capital markets, small investors might be dissuaded from taking optimal precautions simply because it is difficult to evaluate risks. An investment manager is nonetheless rewarded for producing high rates of return and is often abandoned when underperforming other professional investors. Things are different for a recognized oracle with significant influence on the market. This Essay explores the phenomenon of self-negating prophecies in the business world and evaluates the likelihood that predictions by this oracle can be self-negating rather than self-fulfilling.

Search costs matter and are reflected in many areas of law. For example, most disclosure requirements economize on search costs. A homeowner who must disclose the presence of termites saves a potential buyer, and perhaps many such buyers, from spending money to search, or inspect, the property. Similarly, requirements to reveal expected miles per gallon, or risks posed by a drug, economize on search costs. But these examples point to simple strategies and costs that can be minimized or entirely avoided with some legal intervention. Law can do better and take account of more subtle things once sophisticated search strategies are understood. This Essay introduces such search strategies and their implications for law.

When the past is thought to predict the future, it is unsurprising that machine learning, with access to large data sets, wins prediction contests when competing against an individual, including a judge. Just as computers predict next week’s weather better than any human working alone, at least one study shows that machine learning can make better decisions than can judges when deciding whether or not to grant bail.

Richard Posner was certainly the most able judge in the history of tort law and in the development and deployment of law and economics.