THE REAL COMMODITY IS INFORMATION

What Peculiar Futures Can You Buy?: A guide to online prediction markets (Brendan I. Koerner, July 29, 2003, Slate)

The Pentagon has scrapped its plans to operate the Policy Analysis Market, which would have allowed online traders to wager on the likelihood of future terrorist attacks. Aside from commodities like pork bellies, what sorts of futures can wannabe brokers buy and sell?

A whole galaxy, thanks to the proliferation of Internet-based prediction markets, also known as decision markets. These online bazaars allow punters to plunk down money, real or imagined, on the potential of films, ideas, or the U.S. military's success in snagging Saddam Hussein. It may sound like nothing more than glorified sports gambling, but many economists believe that such markets can suss out vital, hidden information about future events—much in the same way that a soaring stock on Wall Street can indicate that good things are afoot for the company in question. That's why the Defense Advanced Research Projects Agency has been funding so much research on the topic, hoping that prediction markets can assist military planners.

The granddad of online prediction markets is the Iowa Electronic Markets, which was started in 1988 to forecast the fortunes of presidential candidates; the market now covers the Fed's interest rate decisions as well. IEM participants can use real money, with starting accounts capped at $500. The market is regulated by the Commodity Futures Trading Commission. [...]

The Foresight Exchange Prediction Market allows traders to bet on the likelihood of a range of events, from the resignation of Donald Rumsfeld by October to a devastating earthquake in the western United States by 2010. (A celebrity version of the Foresight Exchange is Long Bets, where pundits are encouraged to lay down a few thousand bucks on such outré prophecies as whether there'll be a four-day work week in the year 2070.)

If you ever had trouble making sense of the blogosphere, Blogshares may help separate the wheat from the chaff. No money's exchanged on this market—though there is a $500 contest taking place right now—but it does give bloggers bragging rights as to the popularity of their daily thoughts among Web surfers.

These markets on politicians and bloggers are delightfully ironic, since many of the folks complaining most loudly today about the commodification of terror may in effect be commodities themselves. Posted by Orrin Judd at July 30, 2003 12:42 AM