The story sounds like something out of The Onion, or maybe a dystopian science fiction short story. As reported widely in the news yesterday, the Pentagon has been planning an electronic futures market for analysis of foreign affairs. The idea is to create a market where people can anonymously bet on things like whether the US will reduce troop deployment in Iraq by year’s end, or whether Arafat will be assassinated. The current odds on the bet, so the argument goes, best reflects the actual probability given everything the collected thinkers know. Policy-makers could then use the probability to know where to focus their attention.
By today the firestorm had swept Washington and the Pentagon announced the project has been canceled. Apparently congressmen were not completely aware of what had been planned, in spite of the general plan being up for many months on DARPA’s web site and mention of the project in a March New Yorker article.
I can’t help but feel sympathy for Robin Hanson, the George Mason University Economics professor who has been spearheading the project. Critics were quick to describe the project as a marketplace where terrorists and mercenaries could make money by betting some horrific event would happen and then causing it. But as Hanson describes in interviews and on his Web site, the idea is more that professors, armchair analysts, and frequent travelers from all walks of life would combine their on-the-ground expertise to come to conclusions even the most expert intelligence worker in Washington wouldn’t be able to reach. But interested as I am by the concept I just can’t see it working for a number of reasons:
- First off, critics are right in thinking there’s something morally repugnant about the whole plan. The US government should not be hosting a Website dedicated to graveyard gambling, regardless of whether it would actually encourage terrorists to make money from their exploits. (Personally I don’t believe there’s any chance a halfway-competent terrorist would bet on his own success on a Website run by DARPA, regardless of their assurances that betters will remain anonymous.) In fact, the whole plan bears a striking resemblance to the Assassination Politics plan devised by the Cypherpunk-anarchist Jim Bell. The plan describes how communities of individuals could put a price on a government official’s head simply by donating a prize to whoever can predict the exact date of that person’s death. (Bell is currently facing a 10-year prison term for harassment of a Federal officer.)
- There has been a lot of talk about how the attack on the World Trade Center could have been avoided if all the information that was distributed around the country could have been brought together in one place. That may be true, but an ideas futures market wouldn’t have helped. What we needed was more analysis and communication; the marketplace is too abstract and mediated to allow anyone to put the pieces together. An ideas market won’t bring together the CIA agent studying Al Quaeda and the Florida flight-school instructor because neither would have enough pieces of the puzzle to realize what they were looking at. Marketplaces are additive; intelligence requires synthesis.
- Even if the market was a reasonable risk-estimation system, it’s not clear what the government could do with that information. As Bloomberg.com, points out, the market would be quite noisy, similar to the stock market. As we’ve seen from the constant rainbow of alerts we’ve gone through over the past two years, unspecified and uncoroborated threats aren’t all that useful when you’re trying to set up a defense.
Update: According to futures sales on Tradesports.com, John Poindexter’s chances of keeping his job after this uproar are around 70%.
- Idea Futures (Robert Hanson, first version 1996)
- DARPA Futures Market Applied to Prediction Program
- Decisions, Decisions (The New Yorker, 24 March 2003)
- Pentagon to start futures market for terror attacks / WAGERING: Concept is based on a legitimate theory (San Francisco Chronicle, 29 July 2003)
- Pentagon Prepares a Futures Market on Terror Attacks (New York Times, 29 July 2003)
- Pentagon’s threat-bet program to be canceled under fire from all sides (Associated Press, 29 July 2003)
- All Bets Are Off on Government Terrorism Futures (Caroline Baum, Bloomberg.com, 30 July 2003)
- Assassination Politics (Jim Bell, 3 April 1997)
- Cypherpunk Sentenced to 10 Years (Wired News, 27 August 2001)