In Defense of Terrorist Futures

[AntiLempa]

This is interesting. . .

Another Intelligence Failure
By Alexander Tabarrok and Robin Hanson*


In light of the massive failures of U.S. intelligence agencies to avert the events of 9/11, one would believe politicians would be eager to try new and better institutions. Yet, when one such innovative endeavor was recently proposed – the Policy Analysis Market (PAM) – Senators Ron Wyden (D-OR) and Byron Dorgan (D-ND) characterized the idea a “terror market” and before the idea could be rationally debated – let alone tested – the program was terminated.

The ideas behind policy markets are simple and powerful. Markets are well-known aggregators and communicators of information dispersed among multiple individuals. Businesses, economists and the public have long looked to markets to help divine the future. Airlines look to the futures price of oil to intuit the effect of the war in Iraq on oil supplies, Wall Street watches interest rates to help predict future actions by the Federal Reserve, one economist has even used orange juice futures to help predict the weather in Florida.

Most markets are primarily for trade with information as a byproduct. But in recent years markets have been created specifically for the express purpose of ferreting out and gathering information.

The best known of these “information” or “prediction markets” is the on-going Iowa Political Stock Market. The Iowa market lets traders use real money to buy and sell “shares” of political candidates. A share in George W. Bush, for example, pays $1 if President Bush wins the next election and nothing otherwise. If the market price for a Bush share is 75 cents, this suggests that market participants think President Bush has a 75 percent chance of winning the next election.

More http://www.independent.org/tii/news/030804Tabarrok.html