The termination of terrorism futures recently created by the U.S Pentagon makes some America scholars and supporters regret. "Among the many things we do for intelligence, this is one of the least reprehensible, Paying people to tell us about bad things. That's intrinsic to the intelligence process." Said Robin Hanson, who is the earlier contributor of PAM( Policy Analysis Market). Most people support PMA mainly for its high accuracy in predicting terrorism.
Though this program causes a sharp congressional outcry, concerning about moral issue and manipulation possibility, it’s still more accurate than most other forecasting method we have. There are two reasons:
* Market will become extremely efficient when information aggregate from all investors, especially from investors with different knowledge bases. And market can predict future better when no one knows the result. Comparing to individual studies, PAM captures people’s collective wisdom, attracting more-knowledgeable people from all parts of the world. For example, university professors, people who is interested in Mideast foreign policy, people who keep track of certain countries and insiders. These people will try to make money using the information they think is useful, in this way the information would be out in the open, so government and relative authorities can take action. Comparing to the conventional sources, free market has ways of winking out sensitive information.
* Market is more accurate when people put their money and reputation in it. In PAM people trade with real money, for sake of self-interest, people won’t beholden by certain biases. What’s more, with the effect of pricing process, information in the free market updated continuously and political pressures and external factors can’t impede it. For this reason, PAM is more accurate than any other methods.
As evidences of PAM’s accuracy, similar markets shows impressive predict ability. Iowa...