The Policy Analysis Market (PAM) was a proposed prediction market initiative associated with forecasting geopolitical events. It became controversial and was shut down before it could meaningfully operate, largely due to backlash around what people thought it would incentivize.
What It Was
PAM was linked to the idea that markets could forecast events relevant to national security and policy. The concept was to use market prices as forecasting tools for complex geopolitical outcomes.
Why It Became Controversial
The public perception was that it could be interpreted as “betting on bad outcomes,” especially in sensitive areas like conflict, terrorism, or political violence. Even if the intent was forecasting, the incentive framing created a public and ethical conflict.
What This Case Teaches
Even if prediction markets can produce good information, the choice of topics and framing matters:
- Some markets trigger moral disgust or political backlash.
- The narrative can kill the project before the mechanics are tested.
- Institutional adoption depends on legitimacy and public trust.
Lessons for Modern Platforms
- Topic selection is a product and governance decision, not just a listing decision.
- Clear ethical policies and market guidelines matter.
- Optics can be as important as accuracy when launching sensitive markets.
Key Takeaways
- PAM shows that prediction markets can fail due to social and political backlash.
- The “what should be marketized” question is unavoidable.
- If you want mainstream adoption, you must manage ethics and optics.