Policy Analysis Market

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The Policy Analysis Market (PAM) was a proposed futures exchange developed by the United States Defense Advanced Research Projects Agency and based on an idea first proposed by Net Exchange[1] , a San Diego research firm specializing in the development of online markets.

PAM was to be a "a market in the future of the Middle East", and would have allowed trading of futures contracts based on possible political developments in several Middle Eastern countries. The theory behind such a market is that the monetary value of a futures contract would be reflective of the probability of the event it is tied to occurring, as market actors rationally bid a contract either up or down based on reliable information. One of the models for PAM was a political futures market run by the University of Iowa, which has allegedly proven more accurate in predicting the outcomes of U.S. elections than either opinion polls or political pundits. PAM was also inspired by the work of George Mason University economist, Robin Hanson.

At a July 28, 2003 press conference, Senators Byron L. Dorgan (Democrat - North Dakota) and Ron Wyden (Democrat-Oregon) revealed that PAM would allow trading in such events as coup d'états, assassinations, and terrorist attacks. This information caused a political uproar, with opponents of the program denouncing it as "grotesque", "bizarre", and "morally repugnant". Almost immediately afterwards the Pentagon announced the cancellation of PAM, and by the end of the week John Poindexter, head of the DARPA unit responsible for developing it, had offered his resignation.