Tuesday, July 29, 2003

An Important Post in Vodkaland: Stephen Green beat me to it on this fascinating story:
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.
Note the subtle english on the idea in the opening sentence. "From the same people who brought you bloating, nausea, intestinal cramps, and diarrhea . . ." Sounds like writer Carl Hulse is pretty neutral on the idea, eh?
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?"

After Mr. Dorgan and his fellow critic, Ron Wyden of Oregon, spoke out, the Pentagon sought to play down the importance of a program for which the Bush administration has sought $8 million through 2005.

Why downplay? This is one of the best ideas yet. Any free and open market is a fountain of predictive information, because, as Green explains, people with varying degrees of knowledge invest. This is why metrics as simple as market indicies are typically considered leading economic indicators. The aggregation of knowledge, combined with the potential financial returns, acts as a fairly reliable, if blunt, compass. Put another way, with open betting on terrorist acts, we get to be the house. Hell, we could even make some federal revenue on this if we run it right.

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