Thursday, July 31, 2003
Auf Wiedersehn, Dr. Strangelove
Unlike his celluloid doppelganger, John Poindexter has finally had to resign. The flap over the Total Information Awareness program did not get him, but the "terrorism futures" idea did. While I thought TIA was an unbelievably bad idea, I happen to think that the "futures market" on terror had some merit and was shot down due to a lack of understanding of how it worked and an overdose of political correctness. Just for my own intellectual curiosity, it woud have been interesting to see if the idea would work. Perhaps I feel that way because of my own interest in both the role of information in efficient functioning of markets and the way markets capture information better than any other tool seems to. Professor Hal Varian agrees with my assessment of the terrorism futures idea in this piece he wrote in today's New York Times.
Markets do an awfully good job of forecasting many events and trends. The futures price for oil is about the best predictor available for this critical commodity, and it is widely used for forecasting by both political and economic analysts. The question is whether speculative markets would work well for other policy-relevant events.
Markets do an awfully good job of forecasting many events and trends. The futures price for oil is about the best predictor available for this critical commodity, and it is widely used for forecasting by both political and economic analysts. The question is whether speculative markets would work well for other policy-relevant events.
