In writing an entry motivated by Justin Wolfers’s article on prediction markets, I had another thought, which was a bit tangential to my main point (a poll is a snapshot, not a forecast, etc.), so I’m putting it separately here.
It is the accuracy of market-generated forecasts that led the Department of Defense to propose running prediction markets on geopolitical events. While political rhetoric about “terrorism futures” led the plug to be pulled on that particular experiment . . .
I don’t know exactly why the plug was pulled on that program, but I seem to recall that it was being run by convicted criminal John Poindexter—a guy who was actually involved in what were arguably terrorist activities (the project of secretly sending weapons to Iran in the 1980s). So, yeah, maybe we should be a bit suspicious! Labeling this as “political rhetoric” dodges the real concerns about this program.
Beyond concerns about foxes guarding the henhouse, etc., even the “good guys” (however you define them) are subject to all sorts of cognitive biases, and I don’t know that I want somebody in a position of power being in the position to make money if there is a terrorist attack. Even if it’s small amounts of money, this sort of thing can affect people’s judgment. Maybe it would affect people’s judgment in a good way, I don’t know, but it’s certainly not obvious to me that the “terorrism futures” thing is a good idea.