The Policy Analysis Market (PAM) was to have been a market in which participants could wager on Middle East events say, the gross domestic product of Syria in coming years or the political stability of Iran.
Critics labelled the project a “terrorism futures market” and denounced it as morally repugnant and grotesque, but the concept rests on solid scientific foundations. Work begun by economist Vernon Smith and others in the 1960s has shown that carefully designed markets can be among the most effective prediction tools. They can allow many, physically isolated individuals to share, aggregate and evaluate knowledge. For example:
In contrast to other information-gathering institutions, such as committees and polls, markets require participants to put hard dollars behind their opinions. What’s more, markets reward the people who are right, not those who lie convincingly or are loudest or most aggressive or who have the longest string of titles after their name.
Source: Erica Klarreich, Best Guess, Science News, October 18, 2003.
For text http://www.sciencenews.org/20031018/bob9.asp
For more on Stock Market and Other Financial Markets http://www.ncpa.org/iss/eco/
FMF Policy Bulletin\18 November 2003
