IAR: DARPA Bets on Online Terrorism Futures

Two Democrat U.S. senators asked DARPA, the defense group that created the Internet, to stop work on an online market project that was designed to help predict international political events and terrorism targets.

The Policy Analysis Market (PAM) online software effort creates the equivalent of a financial futures market, where participants bet on which outcomes are most likely to happen. But instead of betting on stock prices in this market, the PAM system allows betting on political and other types of events. DARPA designed the PAM project with an eye to providing probability analysis for events in the Middle East and even predicting which types of institutions might become terrorist targets.

Senators Ron Wyden (D-Ore.) and Byron Dorgan (D-N.D.) called for DARPA to end the program. In a joint letter, they stated, "Spending taxpayer dollars to create terrorism betting parlors is as wasteful as it is repugnant. The American people want the Federal government to use its resources enhancing our security, not gambling on it."

The PAM project could provide the government with the same predictive capabilities seen in the interest rate markets, with bond prices reflecting the market perceptions of likely outcomes.