Defense Advanced Research Projects Agency had started a project called "the Policy Analysis Market." [Via Trader Mike and Fredrik Norman.] The idea was to have a futures market on forthcoming events in the Middle East. I think it is a fascinating idea, but I am not so sure that it would work in the way they had planned it. The financial traders are already taking care of the situation and they are predicting the future by acting as hedgers and arbitragers. This kind of project should have been organized by private companies only [via InstaPundit] (e.g., Economist Intelligence Unit), without any involvement by an agency like D.A.R.P.A.
I think that the government should focus the energy and resources on other things. It should be a top priority for Bush & Co. to come up with a firm policy in the Middle East. America should support a real ally as Israel and learn on how to deal with terrorism, instead of "going to bed with" a country like Saudi Arabia.
In the news:
Is a Futures Market on Terror Outlandish?
Betting on Terror: Don't Bet on It.
The Case for Terrorism Futures.
What Peculiar Futures Can You Buy? A guide to online prediction markets.