Taking Stock of Virtual Markets

"Pentagon Prepares a Futures Market on Terror Attacks" blared the headline in the New York Times above an article on the Pentagon's "policy analysis market" (PAM) project. The Pentagon intended to employ a "virtual stock market" — for the aggregation of information and derivation of forecasts — to help predict foreign-policy events such as a coup d'état in a particular country or terrorist attacks. Needless to say, the plan received plenty of attention [3], most of it negative from individuals expressing outrage that predicting such distasteful events would even be considered an appropriate goal of any stock market, real or virtual.