As some wag once said (surely there was a first person to say it, but I’ve no idea who), “Predictions are often difficult, particularly about the future.” Much ignorant fuss and feathers was made of the proposal to set up a futures market for dire events. There may be some intelligent arguments against it, but we certainly heard none emanating from the chambers of our elected representatives.

Look, the reality is that we already do this–we just do it inefficiently and ambiguously. What is a stock trade (either long or short) other than a bet on future events? The existing stock and futures markets already perform some of the function that was being proposed here (e.g., orange juice futures do a better job of long-term weather prediction than the US Weather Service), except that it’s done by surrogates, and it can be quite opaque. As has been pointed out elsewhere, the terrorists already had the capability to make money on their evil deeds, by shorting airline stocks, or even index funds, or going long on security companies and defense. Everyone who does a stock trade is doing it on the expectation of certain events or non events, so it’s hard to see how one can argue that this is moral, but that making the bet directly on the event itself is not so.

All that’s being proposed here is to make the predictions more transparent, so we don’t have to try to infer why certain stocks or sectors go up and down (as news reporters and stock analysts do absurdly every day–e.g., “Stocks rose today on the expectation that…or as a result of the president’s announcement that…”). Rather than making second-hand bets via stock picks, we can get right to the underlying chase, and get an unambiguous market opinion of the event itself.

Sadly, I suspect that if someone tries to do this privately, they’ll probably be shut down because it would be “gambling” (though it would be so no more than any stock market trade is a gamble). But if so, Caymans anyone?