Futures Exchange Loosely Based on IEM

Senate Democrats are in an uproar about a new Pentagon project they're calling too bizarre to be true: an online futures exchange where the "commodities" are possible Middle East events such as the assassination of political leaders. The intent of the project, called the Policy Analysis Market, is to use "market-based techniques for avoiding surprise and predicting future events," according to a Pentagon report to Congress. One question posed in the Pentagon report: "Will terrorists attack Israel with bioweapons in the next year?" Traders would be those willing to bet their own money on when the events will occur. Critics blasted the venture. Such a commodities market is "effectively an Internet casino," said Sen. Byron Dorgan (D., N.D.). He is seeking, along with colleagues, to thwart a Pentagon effort to secure $8 million to expand the project; the Pentagon already has spent about $750,000 to cover start-up costs. The effort is loosely based on the Iowa Electronic Markets, a futures exchange run by the UNIVERSITY OF IOWA TIPPIE COLLEGE OF BUSINESS, that anticipates U.S. election results and Federal Reserve decisions. "You're sort of making up a form of commerce," says Charles Polk, president of Net Exchange, a 10-person firm founded by California Institute of Technology faculty members that designed the Middle East exchange and will operate it.

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