Steering the Invisible Hand

Faith in the futures market as a predictive tool reached a ridiculous parody of itself recently as the Defense Advanced Research Projects Agency (DARPA) partnered with the Economist Intelligence Unit (the business information arm of the Economist Group, publisher of The Economist and Net Exchange (which "has a ten year history of applying innovative market technologies to processes not traditionally handled with markets.") to create the PAM, the Policy Analysis Market. Here you can anonymously register as a trader, place bets on the likelihood that Yasser Arafat will be assassinated in March, or that North Korea will launch a nuclear attack, or even that the rebuilt WTC will be attacked within a particular time frame. The idea is that the opportunity to profit anonymously will ferret out clues as to which targets and tactics could be expected to materialize. (In other words, the trading system presumes rampant "insider trading," profitting those with guilty knowledge). This would be a more sophisticated and focussed repackaging of the investigation of futures trading on airlines before September 11, 2001. The global dead pool.

It reeks of a cultist view of market forces. A macabre twisting of Adam Smith. A "root of all evil" approach to national security. A profoundly cynical and deeply flawed appropriation of policy analysis by the most organized of racketeers, the exchanges.

Update: After Daschle pointed out on the House floor that the system provided an incentive to commit acts of terror, the Pentagon agreed to "disestablish" the program. Viva disestablishmentarianism!

Second Update: The American Auction Market (AAM), a new futures market, inspired by PAM is set to open in October, giving academics the chance to bet on the probability that another high level State Department staffer will resign this month in disgust, or that another powerful CIA asset overseas will become public enemy number one.