Pentagon's Terror Market on Track to Open

Remember the Policy Analysis Market – the "financial market" in which investors could speculate on political developments, including assassinations and terrorism, in the Middle East?

Well, it's back again. Its Web site has a placeholder page that proclaims that "PAM wil open for trading in March 2004 free of government involvement."

I believe that this effort is doomed to failure. Separate and apart from any moral question, the Policy Analysis Market is a bad idea: it is unsustainable. My opinion of last July still stands:

The market will respond usefully to the activities of a knowledgeable few if and only if it is sufficiently liquid, that is, if there is sufficient interest in buying (or selling) contracts when someone suddenly wants to sell (or buy). Are the market-makers prepared to take the kind of short-term risks that are needed to provide that liquidity? How large a spread between bid and asking prices will be needed to tempt them into taking that risk? ...

In order to gather the information needed to consistently come out ahead in this market, a punter would need intelligence that was good and consistent enough to rival (if not outperform) the secret services and intelligence agencies active in the region. Everyone else is going to lose their shirts, on average, to the market makers' spreads.

(via Daily Kos)