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Catfish and Cod
Wednesday, July 30, 2003
Public idea futures: I must dissent!
(Link path: King of the Blogs, the New York Times [free and pointless registration required])

"Faced with know-nothing criticism from members of Congress, the Pentagon has abandoned its plans for a "futures market" to predict terror. How dumb is this?"

Not at all!

That stance won't win me kudos from the King of the Blogs, but it's the only proper response for those who believe in strong but limited government. Everyone seems to be drawing parallels with the Iowa Electronic Markets and other private-sector uses of the "idea market" concept. Why can't the Pentagon use the same idea for predicting public events?

(1) Death profits. Unlike predicting economic/political events such as sports, the weather, or the election, the items the Pentagon wants people to bet on include assassinations, bombings, and WMD attacks. People detest betting on such matters viscerally. No one wants people to profit from other people's death; the idea elicits images of looters on the battlefield and mafiosos gunning down competitors. In addition, the charge could be brought that Osama and similar creatures could profit by driving down up the price of a future (say, bombing of a plane over Africa) and then immediately enacting the disaster described, in the same way that Osama presumably profited from the post-Eleventh stock bounces.

(2) The government is not the private sector. People seem to be makng the argument that people should get over their concerns and enact the futures market anyway. Indeed, they point to Tradesports.com's current events market, which seems to be fulfilling a small part of the role the Pentagon was envisioning. The problem is that the Pentagon isn't some random company; it represents the people of the United States. If Joe Schmoe turns out to have profited from, say, the death of Hosni Mubarak, then he alone gets the acclaim and the disdain. But if the Pentagon oversaw the transaction, then the People of the United States will get the extra bad press, no matter who actually did the deed.

(3) Potential for abuse. Whenever a new government program is introduced, it is prudent for the citizenry to ask, "What's the worst that could happen?" With the addition of Homeland Security to our nation's defense/security portfolio, domestic events could be considered fair game for the Pentagon's "idea market". How many kooks might raise the price of the "Presidential Assassination" or "Chemical Attack in San Antonio" stocks? What if one or more of them personally decided to collect? And, in the worst-case looney-Orwellian scenario, what if an eeevil Pentagon or intelligence agency started using the futures market to encourage measures and events as "they" desired?

The current-events futures market idea did, and does, have potential. But the U.S. government cannot publicly be involved in such activities. The government could get around this restriction by quietly encouraging the development of private current-events markets and quietly monitoring the results. Surfing the Web is a great way to gather intelligence, as the IAEA Niger investigators know. Maybe they should read blogs, too...