Don't bet on it
Ginger Szala. Futures. Chicago: Sep 2003.Vol.32, Iss. 11;  pg. 10

Abstract (Document Summary)

The Pentagon had planned to launch a so-called "terrorist futures market," 
or in government-speak, the Policy Analysis Market (PAM). The PAM idea, in a 
nutshell, was to have an electronic market as part of which analysts and 
non-analysts alike would "bet" on terrorist actions, moves, theories, etc. 
At best, it would be a clearinghouse of information, a possible way for the 
intelligence community to gear up for the next terrorist attack, a way to 
get an edge on an increasingly abstract threat. 



I first heard about "PAM" while getting ready for work. The radio host was 
understandably appalled by the idea and didn't hold back any criticism. I 
thought it was a hoax.

But when I got to work, the e-mails and phone calls I received confirmed it 
was true. The Pentagon had planned to launch a so-called "terrorist futures 
market," or in government-speak, the Policy Analysis Market (PAM). It was no 
hoax, but surely one of the worst conceived ideas to come out of this 
administration.

Luckily, PAM was dead by noon, before exchange leaders could get on a plane 
to protest this guilt by association idea. Meantime, the leader of this 
brain trust, John Poindexter yes that one - who headed the Pentagon's 
Defense Advanced Research Projects Agency, has been given the boot.

The PAM idea, in a nutshell, was to have an electronic market, a la the Iowa 
Electronic Market, as part of which analysts and non-analysts alike would 
"bet" on terrorist actions, moves, theories, etc. At best, it would be a 
clearinghouse of information, a possible way for the intelligence community 
to gear up for the next terrorist attack, a way to get an edge on an 
increasingly abstract threat.

But at worst, it could be a way to bet on an assassination and then, well, 
carry it out to collect the money. Far fetched, perhaps, but possible. 
Further, to have the term "futures" associated with it was a disservice to a 
vital and important industry and business. Obviously, people were not 
thinking this through in Washington D.C. I'm not sure how it even got to the 
point of seeing light. However, as quickly as it was kaboshed makes you 
wonder if it didn't serve another purpose.

And leave it to the private sector to perhaps serve that purpose, albeit in 
a political way. On the heels of PAM's demise was the planned launch of the 
American Action Market, which one of its organizers says is designed to help 
predict the White House's "next insane act." Following the models of the 
Iowa markets or Tradesports.com, the AAM hopes to "provide insights into the 
actions and decisions of the U.S. government and how these affect world 
interests" (www.americanactionmarket.org). I'm sure both sides of the 
political spectrum will have plenty of opinions to serve this site, and 
that's what this market is made of, opinions, not necessarily useful 
information.

The fact is, futures markets - the legitimate kind - have been developed on 
off-beat ideas, such as weather, real estate, computer chips, earthquakes. 
These contracts are or were traded on futures exchanges and developed based 
on an economic purpose. As Leo Melamed, Chicago Mercantile Exchange chairman 
emeritus, says "You must have an economic purpose and an economic 
justification and an economic use of the market as a tool to hedge. [PAM] 
had none of that." (Trendlines, see page 17). The most successful contracts 
are traded by both hedgers and speculators, and they already incorporate 
events, such as war, government decisions, economic forecasts, public 
sentiment. Perhaps a better use of government time and tax payer money would 
be if the Pentagon - and the White House - follow these legitimate futures 
markets to get a clearer view of how their policies are working.

E-mail me at gszala@futuresmag.com
(she is female)