JOHN NASH SAYS, "IT'S NOT SO CRAZY" (via The Mother Judd)

Pentagon Prepares a Futures Market on Terror Attacks (CARL HULSE, July 29, 2003, NY Times)

The Pentagon office that proposed spying electronically on Americans to monitor potential terrorists has a new experiment. It is an online futures trading market, disclosed today by critics, in which anonymous speculators would bet on forecasting terrorist attacks, assassinations and coups.

Traders bullish on a biological attack on Israel or bearish on the chances of a North Korean missile strike would have the opportunity to bet on the likelihood of such events on a new Internet site established by the Defense Advanced Research Projects Agency.

The Pentagon called its latest idea a new way of predicting events and part of its search for the "broadest possible set of new ways to prevent terrorist attacks." Two Democratic senators who reported the plan called it morally repugnant and grotesque. The senators said the program fell under the control of Adm. John M. Poindexter, President Ronald Reagan's national security adviser.

One of the two senators, Byron L. Dorgan of North Dakota, said the idea seemed so preposterous that he had trouble persuading people it was not a hoax. "Can you imagine," Mr. Dorgan asked, "if another country set up a betting parlor so that people could go in--and is sponsored by the government itself--people could go in and bet on the assassination of an American political figure?" [...]

The Pentagon, in defending the program, said such futures trading had proven effective in predicting other events like oil prices, elections and movie ticket sales.

"Research indicates that markets are extremely efficient, effective and timely aggregators of dispersed and even hidden information," the Defense Department said in a statement. "Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions."

It sounds like they need tighter controls on who could play the market, but it's really just a way to use games to distribute information more efficiently. And the military's used game theory since it was invented. Does anyone doubt, for instance, that such a device would have had the WTC at or near the top on 9-10 and thereby, at least potentially, focussed the government's attention better? Posted by Orrin Judd at July 29, 2003 9:44 AM