Prediction Markets as an Alternative to One More Spy

Real-world policy decisions involve trade-offs. Sometimes the trade-offs involve both the efficacy and morality of potential policies. In this chapter, the morality and likely efficacy of hiring one more spy to help anti-terrorist intelligence gathering efforts is compared to the morality and likely efficacy of implementing a prediction market on terrorism. Prediction markets on terrorism allow registered traders to buy and sell shares in predictions about terrorism-related real-world events. The comparison at the heart of this chapter is based on the assumption that it would cost about $5 million to bankroll the prediction market project, or to establish another spy, including equipment and head office support, for 15 years. The comparison reveals that implementing a prediction market on terrorism is likely to be more efficacious and less morally problematic than hiring one more spy.