Bob Marks, an employee at the CIA's Counterterrorist Center, was intrigued by the controversy over the proposed Policy Analysis Market (PAM), which was the brainchild of the Department of Defense's Terrorism Information Awareness initiative. PAM would be a government-sponsored, real-money futures market aimed at providing insight into military activity and political instability, primarily in the Middle East. The proposal met with a furious outcry from politicians, the media, and the public, claiming that it was a way of profiting from disaster. Marks knew about the predictive power of markets and knew they were incredibly efficient aggregators of information, so he did not want to dismiss PAM outright. This case details the architecture of PAM, its relationship to the efficient market hypothesis (EMH), and basic theory about ideas futures and decision markets.
