August 1, 2003 | U.S. News & World ReportAn editorial by CNN's Lou Dobbs, who says critics pulled the plug too early on the Pentagon's Policy Analysis Market, which would have allowed traders to speculate in an artificial market on economic and political events in the Middle East, including assassinations and terrorist attacks. As it turns out, Dobbs writes, "such markets are actually very successful at predicting nonfinancial outcomes and events. The best-known and possibly most successful example is the Iowa Electronic Markets, a system set up in 1988 at the University of Iowa as a way to examine the behavior of markets. Results from the IEM have been better at predicting the outcome of political elections than opinion polls. Since its inception, the system has successfully predicted the outcome of every presidential election. ROBERT FORSYTHE, board member and cofounder of the IEM, told me the way that the Defense Advanced Research Projects Agency exchange was going to work appeared logical. '[It would have run] contracts whose payoffs were tied to the GDP of Iraq and Iran; that could make a lot of sense to me.'" A version of the story also ran Aug. 3 on the website of the NEW YORK DAILY NEWS.
Contact: Robert Forsythe