The free market works. It works for just about everything. And no matter how often you say it, there are still people--lots of people--who will try to dispute it against all evidence. Commonly, they're called "Democrats."
Glenn Beck brought this to mind again this morning as I was listening to his show on my way into work. He was talking about the fact that TradeSports, a "futures market" website where people can actually place money on all sorts of future events, was the most accurate (by far) pre-election poll, perfectly picking all 50 states and Washington D.C. the day before the election.
As it turns out, people with good information like to make money on that information. And when money is riding on it, people tend to use only the absolute best information. With money on the line, bias is minimized and people have a financial stake in predicting the true outcome. Put all of that together, and you're pooling vast knowledge (in the form of money) about any given event, much more so than a pundit or even a polling company is able to do. It's a beautiful illustration of how the free market works to disseminate knowledge and information in a way that no other system does (which is part of the reason I am one of the few people opposed to "insider trading" laws).
The uncanny predictive success of the futures market in the presidential election naturally brings to mind the plan the Pentagon hatched last year to launch a futures market for terrorism, in which people would be able to put their money on the line predicting terrorist acts. It was an unusually inventive, savvy, and daring idea.
Such a system would have brought together vast pools of knowledge from people worldwide who had good information on terrorists' plans. But the entirely predictable hue and cry rose up against such a "callous" idea that people could make money betting on terrorism, and it was quickly scotched. (Democrat Senator Barbara Boxer called it "very sick" and demanded the firings of those responsible for the idea.)
The Pentagon caved to the political pressure. That's a shame, since such a market almost undoubtedly would have had greater predictive ability on terrorism issues than our nation's centralized (and limited) intelligence agencies. But heaven forbid that we be safer if it means someone might try to profit from it.