If Musharraf goes, should we celebrate?

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Benazir Bhutto made a compelling case in the Sunday New York Times that she would be a better partner for the West than Musharraf. As she noted, $10 billion in U.S. aid since 2001 has not resulted in the elimination of Al Qaeda&#8217-s base there. There seems to be substantial reason to believe that Pakistan and its intelligence service are part of the problem, not the solution.

But would Musharraf&#8217-s fall be good news? It&#8217-s not obvious, since we don&#8217-t know who will replace him (i.e., Bhutto or someone more anti-Western). And even if it&#8217-s Bhutto, we don&#8217-t know how much help she&#8217-ll be once in office.

Intrade has just listed a contract that may help provide an answer. In addition to adding Musharraf to their foreign leader departure series (as Chris noted yesterday), they also added a parlay for Musharraf leaving and Osama being captured (at my suggestion). So if these contracts turn out to be liquid, we&#8217-ll be able to get a market-based estimate of the correlation between Musharraf and a reasonable summary statistic for whether outcomes in Pakistan are good for the West.

Of course, the usual caution about correlation and causality applies here. If Osama is caught tomorrow, it probably helps Musharraf keep his job. The longer term conditional probabilities should be less contaminated by this problem and the difference betweens between the prices of the long and short dated contracts might be used to contract a clean(er) estimate of a causal effect.

This seems like the most interesting geopolitical decision market to come along in a little while. But it&#8217-ll only work if it&#8217-s liquid. So those of you with Intrade accounts, put up an order or two. Your country needs you.

Price for Pakistani National General Election Date at intrade.com

Price for Pervez Musharraf (Pakistan) (Rule 1.8 Applies) at intrade.com

Price for Osama Bin Laden at intrade.com

One thought on “If Musharraf goes, should we celebrate?

  1. Chris. F. Masse said:

    “So if these contracts turn out to be liquid,”

    I would like to see the play-money prediction exchanges (betting exchanges, bet exchanges) float the same event derivatives.

    – Inkling Markets

    – NewsFutures

    – FT Predict, etc.

    “And even if it’s Bhutto, we don’t know how much help she’ll be once in office.”

    Benazir Bhutto was the prime minister of Pakistan from 1988 to 1990 and from 1993 to 1996. An historian could tell us what was her relationship with Pakistan’s intelligence service, and what was her relationship with the West.





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