July 29, 2003 | San Francisco ChronicleExperts say the DARPA-backed Policy Analysis Market (www.policyanalysismarket.org), used to predict terror attacks and political events, is based on a legitimate theory, the Efficient Market Hypothesis, that has a proven track record in predicting outcomes. Basically, the idea is that the collective consciousness is smarter than any single person. By forcing people to put their money where their mouths are, the wagers help weed out know-nothings and give more weight to the opinions of those in the know. Similar markets have predicted the box-office potential of movies or the future prices of petroleum. The Iowa Electronic Markets, run by the business school at the UNIVERSITY OF IOWA, lets investors buy and sell "shares" in candidates. Some studies have showed it does better than pollsters at predicting election results.
Contact: Forrest Nelson