Policy Analysis Market
Encyclopedia
The Policy Analysis Market (PAM), part of the FutureMAP project, was a proposed futures exchange
developed by the United States
' Defense Advanced Research Projects Agency
(DARPA) and based on an idea first proposed by Net Exchange, a San Diego
research firm specializing in the development of online prediction market
s.
s based on possible political developments in several Middle East
ern 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 had predicted U.S. election
outcomes more accurately than either opinion poll
s or political pundit
s. PAM was also inspired by the work of George Mason University
economist
Robin Hanson
.
Byron L. Dorgan(D-ND
) and Ron Wyden
(D-OR
) claimed that PAM would allow trading in such events as coups d'état
, assassination
s, and terrorist
attacks, due to such events appearing on interface pictures on the project website.
They denounced the idea, with Wyden stating, "The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," while Dorgan called it "useless, offensive and unbelievably stupid". Other critics offered similar outrage. 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; the PAM had first been proposed & funded in 2001, and Poindexter joined DARPA in December 2002. Robin Hanson writes that Poindexter "actually had little involvement with PAM".
On June 11, 2007, Popular Science
launched a similar program, known as the Popsci Predictions Exchange. Another project was the 'American Action Market' announced by Tad Hirsh of the MIT Media Lab
in 2003, which would permit for-profit betting on major events.
There are now commercial policy analysis markets, such as Intrade
, which offers futures on events such as the capture of Osama bin Laden, the U.S. Presidential Election, and the bombing of Iran.
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...
developed by the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
' Defense Advanced Research Projects Agency
Defense Advanced Research Projects Agency
The Defense Advanced Research Projects Agency is an agency of the United States Department of Defense responsible for the development of new technology for use by the military...
(DARPA) and based on an idea first proposed by Net Exchange, a San Diego
San Diego, California
San Diego is the eighth-largest city in the United States and second-largest city in California. The city is located on the coast of the Pacific Ocean in Southern California, immediately adjacent to the Mexican border. The birthplace of California, San Diego is known for its mild year-round...
research firm specializing in the development of online prediction market
Prediction market
Prediction markets are speculative markets created for the purpose of making predictions...
s.
Proposal
PAM was to be a "a market in the future of the Middle East", and would have allowed trading of futures contractFutures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
s based on possible political developments in several Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
ern 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
University of Iowa
The University of Iowa is a public state-supported research university located in Iowa City, Iowa, United States. It is the oldest public university in the state. The university is organized into eleven colleges granting undergraduate, graduate, and professional degrees...
, which had predicted U.S. election
Election
An election is a formal decision-making process by which a population chooses an individual to hold public office. Elections have been the usual mechanism by which modern representative democracy operates since the 17th century. Elections may fill offices in the legislature, sometimes in the...
outcomes more accurately than either opinion poll
Opinion poll
An opinion poll, sometimes simply referred to as a poll is a survey of public opinion from a particular sample. Opinion polls are usually designed to represent the opinions of a population by conducting a series of questions and then extrapolating generalities in ratio or within confidence...
s or political pundit
Pundit (politics)
A pundit is someone who offers to mass media his or her opinion or commentary on a particular subject area on which they are knowledgeable. The term has been increasingly applied to popular media personalities...
s. PAM was also inspired by the work of George Mason University
George Mason University
George Mason University is a public university based in unincorporated Fairfax County, Virginia, United States, south of and adjacent to the city of Fairfax. Additional campuses are located nearby in Arlington County, Prince William County, and Loudoun County...
economist
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
Robin Hanson
Robin Hanson
Robin D. Hanson is an associate professor of economics at George Mason University and a research associate at the Future of Humanity Institute of Oxford University. He is known as an expert on idea futures, markets and was involved in the creation of the Foresight Exchange and DARPA's FutureMAP...
.
Opposition
At a July 28, 2003 press conference, SenatorsUnited States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
Byron L. Dorgan(D-ND
North Dakota
North Dakota is a state located in the Midwestern region of the United States of America, along the Canadian border. The state is bordered by Canada to the north, Minnesota to the east, South Dakota to the south and Montana to the west. North Dakota is the 19th-largest state by area in the U.S....
) and Ron Wyden
Ron Wyden
Ronald Lee "Ron" Wyden is the senior U.S. Senator for Oregon, serving since 1996, and a member of the Democratic Party. He previously served in the United States House of Representatives from 1981 to 1996....
(D-OR
Oregon
Oregon is a state in the Pacific Northwest region of the United States. It is located on the Pacific coast, with Washington to the north, California to the south, Nevada on the southeast and Idaho to the east. The Columbia and Snake rivers delineate much of Oregon's northern and eastern...
) claimed that PAM would allow trading in such events as coups d'état
Coup d'état
A coup d'état state, literally: strike/blow of state)—also known as a coup, putsch, and overthrow—is the sudden, extrajudicial deposition of a government, usually by a small group of the existing state establishment—typically the military—to replace the deposed government with another body; either...
, assassination
Assassination
To carry out an assassination is "to murder by a sudden and/or secret attack, often for political reasons." Alternatively, assassination may be defined as "the act of deliberately killing someone, especially a public figure, usually for hire or for political reasons."An assassination may be...
s, and terrorist
Terrorism
Terrorism is the systematic use of terror, especially as a means of coercion. In the international community, however, terrorism has no universally agreed, legally binding, criminal law definition...
attacks, due to such events appearing on interface pictures on the project website.
They denounced the idea, with Wyden stating, "The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," while Dorgan called it "useless, offensive and unbelievably stupid". Other critics offered similar outrage. Almost immediately afterwards (within less than a day) the Pentagon
The Pentagon
The Pentagon is the headquarters of the United States Department of Defense, located in Arlington County, Virginia. As a symbol of the U.S. military, "the Pentagon" is often used metonymically to refer to the Department of Defense rather than the building itself.Designed by the American architect...
announced the cancellation of PAM, and by the end of the week John Poindexter
John Poindexter
John Marlan Poindexter is a retired United States naval officer and Department of Defense official. He was Deputy National Security Advisor and National Security Advisor for the Reagan administration. He was convicted in April 1990 of multiple felonies as a result of his actions in the Iran-Contra...
, head of the DARPA unit responsible for developing it, had offered his resignation; the PAM had first been proposed & funded in 2001, and Poindexter joined DARPA in December 2002. Robin Hanson writes that Poindexter "actually had little involvement with PAM".
Further developments
CNN reported the program would be relaunched by the private firm, Net Exchange, which helped create it, but that the newer version "will not include any securities based on forecasts of violent events such as assassinations or terror attacks".On June 11, 2007, Popular Science
Popular Science
Popular Science is an American monthly magazine founded in 1872 carrying articles for the general reader on science and technology subjects. Popular Science has won over 58 awards, including the ASME awards for its journalistic excellence in both 2003 and 2004...
launched a similar program, known as the Popsci Predictions Exchange. Another project was the 'American Action Market' announced by Tad Hirsh of the MIT Media Lab
MIT Media Lab
The MIT Media Lab is a laboratory of MIT School of Architecture and Planning. Devoted to research projects at the convergence of design, multimedia and technology, the Media Lab has been widely popularized since the 1990s by business and technology publications such as Wired and Red Herring for a...
in 2003, which would permit for-profit betting on major events.
There are now commercial policy analysis markets, such as Intrade
Intrade
Intrade is an online trading exchange website. The website's members speculate on the outcomes of non-sports-related future events. Intrade was founded by John Delaney in 2001 and acquired by Tradesports in 2003. Dublin-based owner Trade Exchange Network Limited also operated TradeBetX.com, which...
, which offers futures on events such as the capture of Osama bin Laden, the U.S. Presidential Election, and the bombing of Iran.
See also
- Assassination marketAssassination marketAn assassination market or market for assassinations is a prediction market where any party can place a bet on the date of death of a given individual, and collect a payoff if they "guess" the date accurately...
- Future MapFuture MapThe Future Map is a methodology for building scenarios based on the collection of anticipated events.The concept is based on the idea that a group of people who integrate the partial visions of its members into a common, shared, discussed, large enough, collection of anticipated events it can...
and Information Awareness Office FutureMap Project - The Wisdom of CrowdsThe Wisdom of CrowdsThe Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, published in 2004, is a book written by James Surowiecki about the aggregation of information in groups, resulting in decisions that, he argues, are often better...
, a popular book which supports the Policy Analysis Market - Dumb agent theoryDumb agent theoryThe dumb agent theory states that many people making individual buying and selling decisions will better reflect true value than any one individual can. In finance this theory is predicated on the efficient-market hypothesis . One of the first instances of the dumb agent theory in action was with...
External links
Was http://wwww.policyanalysis.org, no longer present.- Robin Hanson: Idea Futures
- SlateSlate (magazine)Slate is a US-based English language online current affairs and culture magazine created in 1996 by former New Republic editor Michael Kinsley, initially under the ownership of Microsoft as part of MSN. On 21 December 2004 it was purchased by the Washington Post Company...
: "Damn the Slam PAM Plan!", James SurowieckiJames SurowieckiJames Michael Surowiecki is an American journalist. He is a staff writer at The New Yorker, where he writes a regular column on business and finance called "The Financial Page".-Background:...
, Slate magazine - Hanson, Robin
- The Informed Press Favored the Policy Analysis Market: Research paper by Robin Hanson analyzing press reaction to PAM
- Robin Hanson Policy Analysis Market
- DARPA - FutureMAP Program - Policy Analysis Market Cancelled
Congressional record
- Congressional Record: July 29, 2003 (Senate): Transcript of the debate on the Senate floor after NY Times wrote an article about PAM.
Blogs
- Talent Show: Even More on Terrorist Futures. Contains relevant analytical quotes and clips.