Policy Analysis Market

The Policy Analysis Market (PAM) was a proposed futures exchange developed by the United States' Defense Advanced Research Projects Agency and based on an idea first proposed by Net Exchange[1], a San Diego research firm specializing in the development of online markets.

PAM was to be a "a market in the future of the Middle East", and would have allowed trading of futures contracts based on possible political developments in several Middle Eastern countries. The theory behind such a market is that the monetary value of a futures contract on an event reflects the probability that that event will actually occur, since a market's actors rationally bid a contract either up or down based on reliable information. One of the models for PAM was a political futures market run by the University of Iowa, which has allegedly proven more accurate in predicting the outcomes of U.S. elections than either opinion polls or political pundits. PAM was also inspired by the work of George Mason University economist Robin Hanson.

At a July 28, 2003 press conference, Senators Byron L. Dorgan (Democrat- North Dakota) and Ron Wyden (Democrat- Oregon) revealed that PAM would allow trading in such events as coups d'état, assassinations, and terrorist attacks. This information caused a political uproar, with opponents of the program denouncing it as "grotesque", "bizarre", and "morally repugnant". Almost immediately afterwards (within less than a day) the Pentagon announced the cancellation of PAM, and by the end of the week John Poindexter, head of the DARPA unit responsible for developing it, had offered his resignation.

See also

• American Action Market
• Prediction market
• The Wisdom of Crowds book which supports the Policy Analysis Market

External links

• Policy Analysis Market website (was policyanalysis.org, no longer present)
  • Background graphic
  • Example contract
• Policy Analysis Market Archive
  • The Informed Press Favored the Policy Analysis Market: Research paper by Robin Hanson analyzing press reaction to PAM
  • A Terror futures trading market is being developed by the Pentagon / Darpa: Collection of dated articles from WSJ and others
• Blogs
  • Talent Show: Even More on Terrorist Futures. Contains relevant analytical quotes and clips.
• New York Times: Pentagon Prepares a Futures Market on Terror Attacks
• Washington Post: Poindexter to Leave Pentagon Research Job
• Robin Hanson: Idea Futures
• Images from the now defunct PAM website
• Wired: Robin Hanson Policy Analysis Market
• Slate: James Surowiecki
• DARPA - FutureMAP Program - Policy Analysis Market Cancelled
• Congressional Record: July 29, 2003 (Senate): Transcript of the debate on the Senate floor after NY Times wrote an article about PAM.