And buzz games, as decentralized problem-solving systems, have become big business. Business Week covered them extensively in its August 3, 2006 issue. TradeSports Betting Exchange, based in Ireland, has traded 70 million real-money prediction contracts worth over $2.3 billion, and in 2001 launched a non-sports arm, InTrade. Now 10 years old, Hollywood Stock Exchange, "the world's longest continuously operating prediction market," has nearly 625,000 active players and half a dozen fansites that read like stock-tip newsletters. NewsFutures runs a prediction market for the World Economic Forum, the Davos guys who control much of the planet. Speaking of running the planet, both Microsoft and Google use internal markets. Dinky but hopeful newcomers track futures for domain names (itsdEx) and Amazon product sales (Smarkets). Even the BBC runs a celebrity stock exchange, Celebdaq.

You, yes you, can start your own buzz game. Consensus Point, which runs both The Foresight Exchange and BizPredict, is one of many companies offering proprietary, custom-built in-house markets for corporate intranets. On the web, CrowdIQ and Inkling both let you define your own markets and contracts. CrowdIQ also offers a good overview of information markets. Open-source roll-your-own solutions include Zocalo and FreeMarket.


Perhaps prediction markets may grow even bigger someday. Robin Hanson, Associate Professor of Economics at George Mason University in Fairfax, Virginia, has proposed "futarchy" - predictions as a system of government. In "Futarchy: Vote Values, but Bet Beliefs," Hanson expounds the idea: "In futarchy, democracy would continue to say what we want, but betting markets would now say how to get it. That is, elected representatives would formally define and manage an after-the-fact measurement of national welfare, while market speculators would say which policies they expect to raise national welfare. The basic rule of government would be: When a betting market clearly estimates that a proposed policy would increase expected national welfare, that proposal becomes law."

One of Hanson's attempts to use markets in government met a calamitous end. In 2001, the Defense Advanced Research Project Agency (DARPA) funded a prediction market research program. One of the winning bidders, Net Exchange, undertook to forecast political and military instability by creating a public real-money Policy Analysis Market (PAM); Hanson was a subcontractor on PAM. He writes, "For each nation in each quarter of a year, we planned to have traders predict its military activity, political instability, economic growth, US military activity, and US financial involvement. In addition, traders would predict U.S. GDP, world trade, U.S. military casualties, and western terrorist casualties. ... [W]e wanted to let our traders predict combinations of these, such has how moving U.S. troops out of Saudi Arabia would affect political stability there, how that would affect stability in neighboring nations, and how all that might change oil prices."

In December 2002, PAM fell under the purview of DARPA's Information Awareness Office. The IAO was run by DARPA executive Admiral John Poindexter, whose 1990 felony convictions for conspiracy, obstruction of justice, perjury, fraud and other Iran-Contra Affair crimes had been reversed on a technicality. At the IAO, Poindexter drew widespread public criticism for his Orwellian "Total Information Awareness" proposal, a "counterterrorism information architecture" that could eventually data-mine all government databases to assemble dossiers on private citizens. On July 28, 2003, this criticism carried over to PAM, when two senators denounced the program as a "terror market." Oregon Senator Ron Wyden wrote, "Some of the possibilities the Policy Analysis Market website offers for sale are the overthrow of the King of Jordan, the assassination of Yasser Arafat, and a missile attack by North Korea. ... Terrorists themselves could drive up the market for an event they are planning and profit from an attack" - so PAM would become not so much a prediction market as its malign variant, an assassination market.

PAM brought a firestorm of ghastly publicity. DARPA cancelled it immediately, and Poindexter resigned a month later. (Several Total Information Awareness programs are still funded under classified appropriations.) In a Slate commentary called "Bookmakers for the Bomb-Makers," Daniel Gross observed that "the market might defeat itself. The Pentagon wanted to create the PAM in order to gather information it could use to stop terrorism and reduce instability. If it saw, say, that people were betting heavily on the assassination of Iraq's interim president, the Defense Department would start searching for some assassination plot in the hopes of rooting it out. But preventing the assassination would cause all the people who bet on it to lose their money. Insofar as the market helped the United States stabilize the region and prevent terror, investors would suffer. The more it succeeded on policy, the more it would fail as a market, and the sooner it would collapse."

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