Oddly, the hope of the PAM might have been the ignorance of investors, rather than their intelligence. 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.
It may seem cavalier to place national security in the hands of dumb agents in the future markets. When professionals rely on laypeople for their intelligence, the results are usually poor. But the recent Congressional report on Sept. 11 leads one to conclude that the government has been relying on its own dumb agents for far too long. *
Correction, July 30, 2003:Gross originally wrote that: "When professionals rely on laypeople for their intelligence—as Britain did with its Internet-downloaded treatise on weapons of mass destruction—the results are usually poor." This sentence incorrectly characterized an incident involving a British government dossier on Iraq. The government plagiarized portions of an article from the Middle East Review of International Affairs by scholar Ibrahim al-Marashi. Al-Marashi's article did not deal with Iraq's weapons of mass destruction. Rather, it concerned the structure of Saddam Hussein's regime. For more on the issue, see here. For the article itself, see here.