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Commentary from the Mile High City
Sunday, August 03, 2003
Futures and More Futures
I'm back from a little hiatus. Between work and school, time gets awfully short.
Apparently, Congressional Democrats (motto: "Often Wrong but Never in Doubt") got themselves into a tizzy over a proposed Information Market in terrorism futures. Never mind that, aside from Hilary, there's not a Democrat on that committee who hasn't distinguished himself by his ignorance of economics and financial markets. This was beyond the pale. By now, we all know that this market was based on, in fact advised by, the wildly successful Iowa Political information market, used to predict president nominees and winners, as well as the composition of Congress. Ron "Beetle" Bailey has published a fine defense of these things in Reason Online. Certainly, there's a large element of game theory here, as well as simple economics, but this was to be an intelligence tool, not just a way of cashing in.
One of the fellows over at Slate suggests that the success of the market would have eventually been its undoing. That if it were used to prevent the very events it was predicting, the market itself would have collapsed in reaction to that knowledge. If the market successfully predicts hijackings, for instance, and law enforcement can use it to prevent those hijackings, then I'll short any hijacking future that seems to be climbing, since I know that law enforcement will also see that "prediction," and respond accordingly.
I think this misunderstands the point of such a market. Information leaks, even under the best of circumstances. The fact is that major operations of any kind require logistical support beyond the principals carrying it out. Only an extremely sophisticated organization could compartmentalize its operations so that none of the ancillary participants could figure out, even in a vague way, what was going down. So far, al-Qaeda hasn't shown that kind of sophistication. I'm not certain that the CIA, or the KGB at it height would have been able to manage it, either. The kind of misdirection necessary to sway a broad-based information market in the wrong direction would also be a significant drain on al-Qaeda's resources, resources they probably can't command any more. Finally, you don't make the questions for bid too specific. You make them general enough to help confirm (or not) pre-existing intelligence. At the least it would have been an interesting experiment.
At least the guys over at Tradesports think so. Go there, and click on "Current Events" to place bets on the length of Saddam's future, or Osama's personal event horizon. Go to "DARPA Contract" to wager on a man's career. I found out about Tradesports on Wall Street Week with Two Terminally Boring People from Fortune, PBS's successor to WSW with Louis Rukeyser.
So, two salient points. First, this stuff is already out there. The genie is out of the bottle. Even if Tradesports doesn't put up specific, or general terrorist events, someone will. Secondly, if the Dems find out about this, what do you think the odds are they'll object? No, I didn't think so, either.