The Independent Institute's take on PAM
THE LIGHTHOUSE, the weekly e-mail newsletter of The Independent Institute, the non-politicized public-policy research organization. "Enlightening Ideas for Public Policy..." http://www.independent.org/tii/lighthouse/Lighthouse.html. Excerpted via :Vol. 5, Issue 31, August 4, 2003 PENTAGON SCRAPS INFORMATION MARKET Even those who understandably scorned the Pentagon's recently cancelled Policy Analysis Market (PAM) -- a.k.a. the terrorism futures market, as some detractors called it -- should admit that it was innovative in a badly needed way. In proposing a virtual market to help predict contingencies in the Middle East and elsewhere, PAM set out to achieve what years of pseudo-reform of U.S. military and intelligence agencies had failed even to attempt -- to bypass the hierarchical bureaucracy that has led to numerous deadly intelligence failures. By making use of the knowledge of thousands of people willing to put their money on the line (maximum bet: $100), PAM was based on the insight that markets, driven by economic actors with powerful incentives to guess correctly, often know better than a handful of professional prognosticators. This point has been well illustrated by the web-based Iowa Political Stock Market, a virtual market that has consistently predicted election outcomes more accurately than pollsters. Because PAM was controversial for more than one reason, it should not be surprising that it was misrepresented by politicians and the media. "Contrary to impressions in the media, the primary purpose of the PAM was not to predict individual events of terrorism but rather to predict inputs into terrorism such as the economic growth rates of countries in the Middle East, political instability, and military activity," write Alexander Tabarrok, research director of the Independent Institute, and Robin Hanson, the principal architect of the Policy Analysis Market, in a new op-ed. Rather, write Tabarrok and Hanson, PAM was to help answer such questions as "What would happen to unrest in the Middle East if the US withdrew its troops in Saudi Arabia" and "How would Jordan fare politically if the 'roadmap' were successfully implemented?" Recent history suggests that traditional approaches to such questions, even if well-informed, can become ignored or politicized. "The yes-man phenomena means that information doesn't rise from the field to the decision-makers," write Tabarrok and Hanson. "And sometimes the bosses don't want to hear what the field has to say. Remember the CIA and FBI analysts who repeatedly tried to signal their worries about terrorism to their superiors but were rebuffed? In contrast, a PAM would produce a public and easily understood number that would be difficult to ignore." Fortunately, the future of such "information markets," "prediction aggregators," or "idea futures" doesn't rest on government funding and would be managed better without it. A few visionary institutions, such as Hewlett-Packard, have already used them to aid in decision-making, and many more will be adopted. But as with so many innovations, don't expect the government to employ them effectively for a long, long time. See "Another Intelligence Failure," by Alexander Tabarrok and Robin Hanson (8/4/03) http://www.independent.org/tii/news/030804Tabarrok.html Also see, "Decision Markets," by Robin Hanson. Chapter 5 in ENTREPRENEURIAL ECONOMICS: Bright Ideas from the Dismal Science, edited by Alexander Tabarrok. Information on ENTREPRENEURIAL ECONOMICS can be found at http://www.EntrepreneurialEconomics.org.
The Good Side of the Terror Futures Idea (Yes, There is One) Dr. David M. Pennock http://dpennock.com/pam.html Terror `market' was a creative idea killed by know-nothings By Pat Buchanan http://www.bayarea.com/mld/mercurynews/news/opinion/6460808.htm "Everything that is not forbidden is prohibited" -- Jim Davidson
At 01:57 PM 08/05/2003 -0700, Steve Schear wrote:
Terror `market' was a creative idea killed by know-nothings By Pat Buchanan http://www.bayarea.com/mld/mercurynews/news/opinion/6460808.htm
Nobody knows know-nothings like Pat Buchanan. But as occasionally happens, I have to say that he's written a really excellent article, knowing how to talk to a layperson about something that's obscure and technical (and probably not something he personally understands technically, but he's got the policy issues down pretty solidly.) He explains why it's important, and why it would have been a good thing to do, and some interesting speculation and facts about the Pearl Harbor attack I hadn't known, which he ties into the PAM issue well. Read it - it's good stuff. Then, of course, he reminds us that in spite of being intelligent, he's still good old offensive Pat Buchanan, by talking about how John Poindexter was first in his class at Annapolis and is being hounded out of Congress (without mentioning that Poindexter is also a convicted liar who's got no business in America's government though perhaps he ought to be out of jail by now), but even in doing that, he gets in a few well-deserved jabs at Congress.
participants (3)
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Bill Stewart
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Freematt357@aol.com
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Steve Schear