A Futures Market On Terrorist Attacks

A program which would have established a futures market on terrorist attacks has been cancelled according to ABS News. It's unfortunate that this program got cancelled as it would have led the FBI and CIA to accumulate information they might not have otherwise been able to get. In my article, "How Markets Use Information To Set Prices" we saw how futures markets, such as the one at TradeSports aggregate the information that all participants have into a probability of an event happening. In my example we looked at the probability the American League would win the All-Star Game. The Terrorist Attack futures market would have determined the belief of market participants on how likely certain targets are to be attacked. This seems to me to be valuable information, and I'm not alone.

In an article in Fortune titled " Is a Futures Market on Terror Outlandish?" Jeremy Kahn reiterates what I stated in my "How Markets Use Information To Set Prices" article:

"While the Pentagon program may sound outlandish, there is strong evidence that futures exchanges can predict events better than other forms of analysis. Betting pools on election results have proven more accurate than polls, and options markets are better predictors of future stock prices than the price targets set by individual equity research analysts. The reason, economists say, is that markets are extremely efficient at aggregating information from all investors—including inside information."

While the idea sounds morbid and grizzly, I think the United States has thrown away a chance to collect a lot of information very cheaply.