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| Pentagon’s Futures Market Plan Condemned |
| 2003-07-29 |
| Who’s bright idea was this? The Pentagon is setting up a stock-market style system in which investors would bet on terror attacks, assassinations and other events in the Middle East. Defense officials hope to gain intelligence and useful predictions while investors who guessed right would win profits. Who’s gonna run it? Vegas? Two Democratic senators demanded Monday the project be stopped before investors begin registering this week. "The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque," Sen. Ron Wyden, D-Ore., said. A Dem who’s right. Is that a first? The Pentagon office overseeing the program, called the Policy Analysis Market, said it was part of a research effort "to investigate the broadest possible set of new ways to prevent terrorist attacks." It said there would be a re-evaluation before more money was committed. That might be a good move. The market would work this way. Investors would buy and sell futures contracts — essentially a series of predictions about what they believe might happen in the Mideast. Holder of a futures contract that came true would collect the proceeds of investors who put money into the market but predicted wrong. Oh the Saudis will love this! Think of what they’d be willing to bankroll if they got bets down on it! A graphic on the market’s Web page showed hypothetical futures contracts in which investors could trade on the likelihood that Palestinian leader Yasser Arafat would be assassinated or Jordanian King Abdullah II would be overthrown. Although the Web site described the Policy Analysis Market as "a market in the future of the Middle East," the graphic also included the possibility of a North Korea missile attack. Think of the possibilities if some high roller puts down a billion dollars on something that they want to happen. That graphic was apparently removed from the Web site hours after the news conference in which Wyden and fellow Democratic Sen. Byron Dorgan of North Dakota criticizing the market.Dorgan described it as useless, offensive and "unbelievably stupid." TWO dems that are right? That’s GOT to be a first. "Can you imagine if another country set up a betting parlor so that people could go in ... and bet on the assassination of an American political figure, or the overthrow of this institution or that institution?" he said. Wasn’t there a rumor that Binny pulled something like this with airline stocks before 9/11? According to its Web site, the Policy Analysis Market would be a joint program of the Pentagon’s Defense Advanced Research Projects Agency, known as DARPA, and two private companies: Net Exchange, a market technologies company, and the Economist Intelligence Unit, the business information arm of the publisher of The Economist magazine. Is this for real? Or is it like the Bambi hunts? DARPA has received strong criticism from Congress for its Terrorism Information Awareness program, a computerized surveillance program that has raised privacy concerns. Wyden said the Policy Analysis Market is under retired Adm. John Poindexter, the head of the Terrorism Information Awareness program and, in the 1980s, a key figure in the Iran-Contra scandal. In its statement Monday, DARPA said that markets offer efficient, effective and timely methods for collecting "dispersed and even hidden information. Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions." Let’s see who’s betting on what and when and how much. It’s still pretty sick. The description of the market on its Web site makes it appear similar to a computer-based commodities market. Contracts would be available based on economic health, civil stability, military disposition and U.S. economic and military involvement in Egypt, Iran, Iraq, Israel, Jordan, Saudi Arabia, Syria and Turkey. Contracts would also be available on "global economic and conflict indicators" and specific events, for example U.S. recognition of a Palestinian state. Place your bets! Israel nukes Teheran! Iran nukes Tel Aviv! Place your bets! Traders who believe an event will occur can buy a futures contract. Those who believe the event is unlikely can try to sell a contract. The Web site does not address how much money investors would be likely to put into the market but says analysts would be motivated by the "prospect of profit and at pain of loss" to make accurate predictions. Registration would begin Friday with trading beginning Oct. 1. The market would initially be limited to 1,000 traders, increasing to at least 10,000 by Jan. 1. The Web site says government agencies will not be allowed to participate and will not have access to the identities or funds of traders. Talk about insider trading. The market is a project of a DARPA division called FutureMAP, or "Futures Markets Applied to Prediction." FutureMAP is trying to develop programs that would allow the Defense Department to use market forces to predict future events, according to its Web site. Why don’t they call it "Beyond Thunderdome"? "The rapid reaction of markets to knowledge held by only a few participants may provide an early warning system to avoid surprise," it said. It said the markets must offer "compensation that is ethically and legally satisfactory to all sectors involved, while remaining attractive enough to ensure full and continuous participation of individual parties." Betting on Human Carnage. But ethically. Dorgan and Wyden released a letter to Poindexter calling for an immediate end to the program. They noted a May 20 report to lawmakers that cited the possibility of using market forces to predict whether terrorists would attack Israel with biological weapons. Can I get 3-1? 4-1? "Surely such a threat should be met with intelligence gathering of the highest quality — not by putting the question to individuals betting on an Internet Web site," they said. Wyden said $600,000 has been spent on the program so far and the Pentagon plans to spend an additional $149,000 this year. The Pentagon has requested $3 million for the program for next year and $5 million for the following year. Coming up next:"John Poindexter: Disaster Bookie". Wyden said the Senate version of next year’s defense spending bill would cut off money for the program, but the House version would fund it. The two versions will have to be reconciled. This is about as bizzare as it gets. |
| Posted by:tu3031 |
| #10 At least all of America's enemies would finally have an interest in learning how free markets work... |
| Posted by: jason 2003-7-29 3:54:03 PM |
| #9 Too weird. If Dimwit Johnny Jihad could go from Marin County to OBL's doorstep in a couple of years basically out of his parents' pocketbook, why the hell didn't CIA think about placing their own "American" looking agents in Afgh.? What about FBI's actions/deficiencies? Gumshoe work is how you get the goods on the bad folks. Look, I like thinking out of the box, but, as others have said, theoretically-speaking, very fascinating, but practically? Please save the money and put it away in somebody's filing cabinet. |
| Posted by: Michael 2003-7-29 1:51:14 PM |
| #8 Latest news indicates it's been pulled, due to all the attacks the Pentagon got over the idea. Al Guardian report. |
| Posted by: Old Patriot 2003-7-29 1:25:54 PM |
| #7 I'll stay small potatoes on this one: I want a market that predicts the height of that friggin' pink paper in the stack of documents you see in every shot of Arafat at his desk. |
| Posted by: Carl in NH 2003-7-29 12:16:24 PM |
| #6 I tend to agree with MJH and LH. The theory might be valid as a statistical model but what do you open yourself up for on that "insider trading" angle? That's why I consider it a bad idea. That said, I'll go long odds on Yasser taking a shower before '05. |
| Posted by: tu3031 2003-7-29 12:03:25 PM |
| #5 I'm not surprised by you liberalhawk. I don't always agree with you but you are consistent and non-trollish. The problem that I see with this futures market concept is that the entire purpose really is to predict terrorist activities and prevent them from happening. So if you prevent them, then how does everyone know that the market predicted this non-event? Plus I agree that market manipulation will be a major problem. An interesting intellectual exercise and maybe it will lead to something useful but I think $8 million over a few years is just a bit too much. |
| Posted by: Kelvin Zero 2003-7-29 11:47:54 AM |
| #4 I agree that this would be a good idea if the market could be free of intervention, but the possibilities of manipulation are just too huge. That said, I'm long calls on Arafat's assassination by 05. |
| Posted by: mjh 2003-7-29 11:35:12 AM |
| #3 BTW, if you guys are surprised at me, this is one of the few domestic issues where i lean to the far right - the efficiency of financial markets. |
| Posted by: liberalhawk 2003-7-29 11:13:49 AM |
| #2 it makes a lot of sense. Markets tend to distill all the information available to investors. Thus oil markets, for example, tend to reflect info on the mideast political situation faster than any other public source. Unfortunately its not easy to tease out the political side of the oil market from, say, forecasts on summer driving in the US. Markets work precisely because the people speculating have money at stake, and thus an incentive to gather the best info available. The idea would be that we would let investors make side bets, and DoD would monitor the market to look for rumours and such they wouldnt otherwise hear about. The real problem is the possible incentive for "insider trading" - what if terrorists place bets to make money off events they control? Or worse, what if they attempt to manipulate the markets to give false signals? Or what if states, even "friendly" states, attempt to manipulate the market. (Crown prince abdullah: if we spread the rumour that the israelis are going to assasinate arafat, that would sure distract from us, wouldnt it. Sharon: we know the Saudis are manipulating the market, we have no choice but to respond in kind, etc, etc.) So its a VERY interesting theoretical idea, but i dont know it would work in practice. |
| Posted by: liberalhawk 2003-7-29 11:12:29 AM |
| #1 It's actually not as bizarre as it sounds. Check out Instapundit for more info. |
| Posted by: Spot 2003-7-29 10:58:07 AM |