Did the Penatgon make a mistake in canceling its Policy Analysis Market -- the instantly-notorious terrorism trading floor?

"The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," Sen. Ron Wyden (D-OR) fumed, as he brought the project to the general public's attention.

But supporters of the program point out that gathering intelligence is often a messy business, with payoffs to unsavory characters and the elimination of potential adversaries. The futures market, ugly as it may sound, doesn't involve any of those moral compromises, said Robin Hanson, one of the earlier promoters of the concept of trading floors for ideas and a PAM project contributor. It's just a way of capturing people's collective wisdom.

"Among the many things we do for intelligence, this is one of the least reprehensible," Hanson said. "Paying people to tell us about bad things. That's intrinsic to the intelligence process."

And a trading floor could be more effective than paying off a snitch.

Projects similar to PAM, like the Iowa Electronic Markets, which speculate on election results, have been surprisingly reliable indicators of what's going to happen next.

My Wired News story has Hanson's -- and others' -- case for terrorism futures.

THERE'S MORE: Althought the market has been billed an aggregator of information, "oddly, the hope of the PAM might have been the ignorance of investors, rather than their intelligence," Slate notes.

Policy market day-traders who don't speak Arabic or have access to classified information wouldn't necessarily make worse bets than the professionals who spend their days sifting through Al Hayat and humintel reports. This is a seeming paradox called the "dumb agent" theory—one of my esteemed predecessors in this box explicated it a few years ago. Walk up to a traveler waiting in an airport, ask how many minutes late the plane will take off, and you're likely to get a wrong, uninformed answer. Ask 75 more of your fellow passengers the same question, and you'll get 75 more similarly wrong, uninformed answers. But throw them all together and take the mean, and you're likely to get something pretty close to the right answer.

Priorities & Frivolities digs up a Harvard/Stanford study of Tradesports.com, which has been offering "Saddam Securities."

"The price of the Saddam Security is a reasonable assessment of the likelihood of war. The time series movement in the series seems sensible as measured against both expert opinion and a narrative approach. The market is deep enough that it should have value as a forecasting tool, and market data meets simple tests of efficiency."

Salon's Scott Rosenberg makes a persuasive case against the trading floor:

Markets depend on good information. The DARPA plan is based on the theory that an open market will draw out the best information from multiple sources. That's fine if, in fact, the incentive of making money in the market is strong enough to overcome other motivations of participants. If you were a terrorist planning an attack, would you try to make a little money on the side by using your insider knowledge to place a winning bet? Or would you allocate a little extra money in your operating budget to placing decoy bets to delude those who you knew were turning to the U.S. military-funded terror market for intelligence? Or would you simply stay away, distrusting the market's anonymity mechanism on the assumption that its American designers will have built in some sort of back door? It's nearly impossible to imagine any set of circumstances in which this market would provide untainted information.

Finally, Andy Borowitz puts his signature Spinal Tap-esque spin on a New York Times editorial calling for John Poindexter to step down.

He writes, "The Pentagon has named Retired Admiral John Poindexter, the man responsible for the recently abandoned idea of a 'terrorism futures market,' to head the newly created Department of Bad Ideas."

AND MORE: New Yorker financial columnist James Surowiecki has a defense of the PAM plan in Slate that's just about identical, point-for-point, as my Wired News piece.