If markets are infallible towards correctly predicting outcomes why would the same participants in markets be infallible in creating regulation?

What about the unintended consequences of trying to regulate the unknown unknowns?

As Yogi Berra stated predictions are difficult, especially about the future, however, prediction markets have done quite well versus human forecasting.

This is because once more than 3 variables are put into a model its is difficult to determine the weighting for each variable and then there is the unknown variables. This is why most regulation fails to deliver what it promises.

Consider the following counter examples...

What if the world was entering an ice age during the last 100 years (as believed by GreenPeace co-founder and PhD biologist Patrick Moore) and the fossil fuels we have burned have warmed the earth enough to keep it out of an ice age, should hydrocarbons then have been priced lower?

There is a movement called the Right to Try, or something like that. It is made up of terminally ill people who are pressuring the regulatory authorities to let them experiment on themselves with yet to approve drugs that may extend their lives. I believe your ROI and unintended consequences of pharmaceuticals is only relevant or minor conditions. This is not a failure of the market but a misjudgement of risk by people too busy or lazy to do their own research. The side effects suffered by those who take pills for minor conditions are either risk adverse people did not calculate risk properly or are risk takers. This is not a market failure but a market success and failure of individual understanding of risk tolerance.

Instead of your ideas for solutions a study of risk tolerance should be encouraged and then let markets do their jobs. It is simpler and likely more successful than what you have suggested.

Bradley Parkes