Subject Closed - For Now
At least someone in Washington agrees with my assessment of the potential of the so-called "terror futures market." Here are Justin Wolfers and Eric Zitzewitz from today's Washington Post:
Betting on human lives seems ethically questionable. Yet if it helps save lives, surely the moral questions are mitigated. Not so, according to those in Congress (and elsewhere) who created such a furor this week over a planned Pentagon program to project geopolitical risks that the program was quickly shut down. The plan was to use markets to "price" such risks, and it was quickly dubbed a "terrorism futures market." Unfortunately, in hastily ending this program, the government may be closing the door on an important source of information and a promising avenue for research.
The authors are "assistant professors of economics at Stanford Graduate School of Business. They are co-authors (with Andrew Leigh of Harvard) of a study titled 'What Do Financial Markets Think of War in Iraq'," so they ought to know what they're talking about.
But don't take my word for it -- read the whole thing.