[LibertyAndJusticeForAll]

"Defense officials said the market-based system is highly accurate when assessing such things as political and civil stability, economic health and military disposition of Middle East countries."

Assuming this premise is correct, how does the market-based system achieve such good results? Why can't the Defense officials do the research and analysis that the market does?
Couldn't a conflict of interest arise if someone with a large bet decides to insure that they collect by perhaps, allowing a particular terrorist activity occur?
The person who dreamed this up needs a vacation.

[tortoise]

Assuming this premise is correct, how does the market-based system achieve such good results? Why can't the Defense officials do the research and analysis that the market does?

Very roughly speaking, having thousands of people "bet" on a single issue tends to allow vectors to emerge by canceling out the subjective bias of the individual. Patterns emerge that you would not see if you asked a single person to do an analysis. Research has shown that these emergent vectors are generally far more accurate than any single person's analysis.