Obviously, I'm not the only one that took notice of the whole PAM fiasco, and many other folks have addressed it more thoroughly and cogently than me. But the analysis over at Slate caught my eye, because I think that it reveals a fundamental misunderstanding of the political situation in the Middle East. Specifically, Daniel Gross, the article's author, says that PAM would not have proven to be an accurate predictor of terrorist activity because it is based on the performance of irrational individuals:
More important, a havoc market wouldn't benefit from the rationality that regular financial markets require. By and large, markets for futures--as well as stocks and bonds--are presumed to be efficient and rational, Internet bubble notwithstanding. This collective rationality is precisely what the Pentagon was hoping to harness by creating a market for geopolitical events.
But in the Middle East, many of the figures who would have driven the pricing of PAM securities are not what international relations types refer to as "rational actors." Suicide bombers almost by definition are irrational, or at least not governed by a rationality with which we are familiar. We routinely refer to the main players with terms that place them beyond the field of reason--Saddam Hussein is "the Butcher of Baghdad," Osama Bin Laden is a "madman."
This is an interesting argument, but I think it fails on at least two levels, one obvious and one less so. Obviously, the fact that others refer to Saddam Hussein or Osama bin Laden by nicknames implying insanity is completely irrelevant to the relative rationality of either Hussen or bin Laden. Second, Mr. Gross assumes that those who motivate and plan terrorism are irrational. But however abominable terrorism is, it is a rational and predictable result of the economic, social, and political conditions that arise in a particular region. Certainly, individual terrorists may well be nuts--though I'd even dispute Mr. Gross's contention that suicide bombers are definitionally "not governed by a rationality with which we are familiar"; taking suicidal action for a just cause is nothing new to western culture--but to declare all those responsible for terrorism to be irrational is unhelpful and inaccurate. To ignore the real sociopolitical and economic factors underlying terrorism is no aid to eradicating the violence, much as calling all poor people lazy does nothing to ameliorate poverty. And Osama bin Laden, though bloodthirsty, has shown the capacity to act in very rational and predictable ways. So, while I agree that PAM was a silly, stupid, and immoral idea, I think that Mr. Gross's analysis is off the mark.