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Pentagon Plans 'Grotesque' Online Terror Bets
Published on Tuesday, July 29, 2003 by the BBC
Pentagon Plans Online Terror Bets
by Paul Reynolds

The Pentagon is planning to set up an online trading market in which bets could be made about future terrorist attacks and other major political developments.

Who's John Poindexter?
A retired Navy Admiral, John Poindexter lost his job as National Security Adviser under Ronald Reagan, and was convicted of conspiracy, lying to Congress, defrauding the government, and destroying evidence in the Iran Contra scandal. Poindexter now runs George W Bush's Pentagon unit known as the Terrorism Information Awareness project at the Defense Advanced Research Projects Agency.
The idea is to try to improve the prediction and prevention of events by using the expertise of the open market instead of relying on government agencies which have often failed in the past.

One example used on the website set up for the program is the possible overthrow of King Abdullah of Jordan.

But the plan has already run into fierce opposition in the US Congress.

Senators Ron Wyden of Oregon and Byron Dorgan of North Dakota, both Democrats, have written to the Pentagon urging it to abandon the idea.

"The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," said Senator Wyden.

Senator Dorgan said that it was "useless, offensive and unbelievably stupid". He said he had trouble in persuading other people that it was not a hoax.

"How would you feel if you were the King of Jordan and you learned that the US Defense Department was taking bets on your being overthrown within a year?" he asked.

Market vision

The US Defense Department defended the initiative and compared the proposed market to those predicting the price of petroleum, the results of elections and even the demand for cinema tickets.

"Research indicates that markets are extremely efficient, effective and timely aggregators of dispersed and even hidden information," it said in a statement.

"Futures markets have proven themselves to be good at predicting such things as election results; they are often better than expert opinions."

The scheme is called the Policy Analysis Market (PAM) and it is run by a Pentagon unit known as the Defense Advanced Research Projects Agency.

This is under the control of retired Admiral John Poindexter who has been involved in another controversy recently in a plan for a sweeping electronic intelligence operation.

The market would work by getting traders to deposit money in an account and using that to buy and sell contracts. They would make their money if a particular event actually happened.

DARPA FutureMAP (Futures Markets Applied to Prediction) program
Invitations have gone out online for an initial 1,000 traders to register on 1 August and the program is designed to start on 1 October.

Cost effective insight

Senator Wyden explained the system by saying: "You may think early on that Prime Minister X is going to be assassinated. So you buy the futures contracts for 5 cents each.

"The payoff if he is assassinated is $1 per futures. So if it comes to pass, those who bought at 5 cents make 95 cents and those who bought at 50 cents make 50 cents."

One of the organizations providing data for the project is the Economist Intelligence Unit in London.

Its Director of Risk Services, Merli Baroudi, told News Online: "It is trying to gather insights of people in a cost effective way. Markets have done this in economics for some time and the Iowa Electronic Markets does it for US presidential elections, so it is not really novel."

The website set up by PAM says that "it should prove as engaging as it is informative".

Copyright © 2003, BBC


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