Richmond Times Dispatch (Virginia)

October 15, 2003 Wednesday City Edition

SECTION: EDITORIAL; Pg. A-10

LENGTH: 236 words

HEADLINE: THE WHIRLWIND

BODY:
Remember the Policy Analysis Market - that short-lived proposal by a research
arm of the Defense Department that would have traded in terrorism futures? The
concept was killed as soon as word of it leaked out. Creating what amounted to a
market to predict future terrorist events was condemned as a repugnant "plan to
trade in death," in the words of Senator Tom Daschle.

Well, it's back.

Not under the aegis of Defense, however. Net Exchange, which developed the
concept, has received offers from investors who want to sell the predictive
results to insurance and finance firms. While the terrorism futures got the
headlines, the market also would have traded in futures regarding the economics,
stability, and military posture of Middle Eastern countries; terrorism was to
have been only a small slice of the project.

Meanwhile, numerous companies such as IBM, Microsoft, and Ford are establishing
internal markets of their own that allow their executives to wager on future
sales and revenue. The companies have found the mini-markets do a better job of
making such predictions than other methods.

Such experimental economics projects, says economic scientist Kay-Yut Chen, are
"a wind tunnel for business." Wind tunnels, of course, simulate real-world
conditions without real-world danger. It's a shame a few politicians' knee-jerk
reactions prevented the Policy Analysis Market from doing the same.