Pentagon Plans Futures Market for Events in Mideast

July 28, 2003 2:19 PM

Pentagon Plans Futures Market for Events in Mideast Good and useful idea or repugnant and stupid?
posted by Postroad (42 comments total)

Fantasy league for policy wonks?
posted by strangeleftydoublethink at 2:27 PM on July 28, 2003

My $20 says the US becomes misguided and feeble twenty-three years ago.
posted by rocketman at 2:28 PM on July 28, 2003

I want Wolfowitz on my World Domination Fantasy League. Paul, if you're out there, it's group 17354, password USARULEZ.
posted by machaus at 2:30 PM on July 28, 2003

Might be useful. It seems a handy way to capture the opinions/predictions of People Who Can Be Bothered To Care. It's obviously based on the Iowa Electronic Markets, which do a reasonable job predicting elections. On the other hand, predicting election outcomes is not normally a very difficult task (1994 and 2000 excepted), and the markets are much more reactive than predictive.

I can't see why it would be repugnant. All it's doing is asking people how likely they think certain events are, in such a way that they have an incentive to be truthful. If they want to be nice and equal, I suppose they could have a market for Military Overthrow of the President of the US and so on.

The Iowa Electronic Markets, by the way are Way Cool. Doublepluscool.
posted by ROU_Xenophobe at 2:39 PM on July 28, 2003

It's like high-school policy debate for adults. I remember a time when it seemed like fantasy to discuss which three-way nuclear war was likely to destroy the world. Ah, sweet memories.
posted by Ignatius J. Reilly at 2:40 PM on July 28, 2003

I don't see it being successful unless they have participants from across the world, and not just USA-based policy wonks. It's basically the monetizing of information, which could be one of many ways to make predictions. Just as the stock-market can tell you a lot about the economy, it is also subject to huge crashes.
posted by cell divide at 2:45 PM on July 28, 2003

Hey, we're already basically playing Risk and Stratego and Civilization 3: Play the World in the Middle East (we gave up playing Diplomacy when the French kept spitting on the game board), so why not this?

Let's just hope no one tried to manipulate the market by launching, say, an attack on Israel so that their futures positions do well. But I'm tempted to buy into the "The Iranian Mullahs Get Overthrown" index bigtime, just to make them even more nervous. And definitely short-selling "The 'Roadmap' Will Actually Work"; that one stinks worse than Enron.
posted by Asparagirl at 2:49 PM on July 28, 2003

The more I think about it, ROU_XENOPHOBE makes a good case. They are doing themselves a disservice by describing it as a game and not screaming OH, IT's GAME THEORY, SO THAT'S OK. People will think it's callus or whatever, when really it is just an attempt at novel problem solving.
posted by Ignatius J. Reilly at 2:50 PM on July 28, 2003

This is partially a take-off on Idea Futures, which has had a play-money market on all kinds of things for a number of years. Unfortunately the IF market has some problems in predicting long-term future events. The biggest is that since everyone gets a fixed ammount of money, contrarians can move the market disproprortionately, leading to the so-called fifty cent bias.
posted by cameldrv at 2:51 PM on July 28, 2003

This approach has proven successful in predictions concerning elections, monetary policy decisions and movie box office receipts.

It's an interesting idea in theory, but the plain vanilla futures markets this is based are not predictable and don't yield useful information. It also seems a bit of a jump from movie box office receipts to the Middle East.
posted by carter at 2:55 PM on July 28, 2003

It's not really a big jump, carter, because in the end all people are doing is looking for information. Just as I can analyze box office receipts for the past 25 years in films starring females, I can look at other various events and attempt to predict an outcome. If 1m other people are doing the same thing, we might arrive at a kind of shifting consensus.

In such situations, since there is an economic incentive, people search out the best possible information, as well as look for new, yet uncovered sources to get the competitive edge.
posted by cell divide at 3:03 PM on July 28, 2003

It is just an extension of 'let the market decide'.

If you don't like the idea of the market deciding, you can talk to the invisible hand.
posted by rough ashlar at 3:09 PM on July 28, 2003

In other news, the American Terror Threat Average gained significant ground in heavy trading on word that the Government remains committed to playing Russian Roulette with civilization as we know it.
posted by moonbird at 3:12 PM on July 28, 2003

Try your hand at the Pentagon's futures market here.
posted by TBoneMcCool at 3:12 PM on July 28, 2003

Good and useful idea or repugnant and stupid?

Hmmm... Can I split that? It's useful but not necessarily good; repugnant, but not stupid. I mean, there's no better way to gather information then to offer money for it, so it's not stupid. The information will be useful for someone... The thing is, who is it useful for and how? This will cause as many problems as it will solve, just think about it - this has the potential to cause everything from hording to riots to preemptive strikes over things that haven't happened yet.
Is it repugnant? I'd say so - betting on assassinations and wars is a pretty nasty thing to do, but there are worse things in the world I suppose...
posted by badstone at 3:15 PM on July 28, 2003

The biggest problem with this is that the power to make these things come true is in the hands of a much smaller group of people than previous examples. Election results, box-office receipts, frozen concentrated orange juice--these are based on the small decisions of millions of people. These millions of people, all acting on their own, end up creating patterns that can be read and predicted. But to assassinate someone, or launch N. Korean missles at Japan--these decisions can be made by a small group of people, keeping all their cards close to the chest. A trader has no idea what's going on in the mind of, say, Kim Jung Il (too lazy to look up the North Korean leader's name). Whereas in all the other "markets," you can always see the previews.
posted by thecaddy at 3:21 PM on July 28, 2003

thecaddy -
But those people don't make their decisions in a vacuum. OK, yes Kim Jung Il does, but in general the decision makers and assassins make their moves when the "market" calls them to. Furthermore, like any business venture with lots of money on the line, this will attract organized crime in a BIG way. These are the folks that know who just bought a hundred RPGs last weekend, who's desparately liquidating their assets, and who's hiring muscle to keep people away from voting booths.
posted by badstone at 3:30 PM on July 28, 2003

TradeSports has markets for a couple Mideast events. Here are the rules for the "Saddam/Bin Laden" Contracts:

These contracts will expire at 100 if Saddam Hussein/Osama Bin Laden is captured or neutralised by(i.e on or before) 11:59pm EST on the specific date. The contracts will expire at 0 should no proof come forward on the capture/neutralisation by this time.

Tradesports will expire the contracts based on an official US Government announcement stating the capture or neutralisation(death, deactivation, etc) of Saddam Hussein/Osama Bin Laden and crossed checked in 3 reliable independant media sources.

and "whether or not Weapons of Mass Destruction (WMD) will be found in Iraq" contracts:

These contracts will expire at 100 if Coalition Forces/United Nations or any other Legitimate Organisation/Group find Weapons of Mass Destruction by (i.e. on or before) 11:59pm EST on the specific date. The contracts will expire at 0 should no Weapons of Mass Destruction be officially recorded as found by that time on the specific date.

Tradesports will expire the contract based on information/announcements of independent sources such as the United Nations, or the US Government(Department of Defence) and crossed checked in 3 reliable independent media sources at that time.

posted by Sirius at 3:35 PM on July 28, 2003

Rather than a game, might not this be an actual futures market? I could see some utility in having such a market were you financially involved in the region as a way of hedging the economic impact of doing business in a volatile environment. Compare and contrast to "weather insurance" as a similar market.
posted by Ogre Lawless at 4:04 PM on July 28, 2003

This is great. Now instead of just bombing embassies, mid-east radicals can bomb embassies and make good money betting on it.
posted by VeGiTo at 4:44 PM on July 28, 2003

If another country came up with this, the right would be falling all over themselves to condemn it.
posted by goethean at 4:44 PM on July 28, 2003

Somebody's been reading Shockwave Rider
posted by skyscraper at 7:03 PM on July 28, 2003

Hmmm. Insider trading. Market manipulation.

Imagine if someone leaks knowledge of an impending attack because of this. Imagine if unusual price movements warn an ENEMY.

A lot or people do not believe in the efficient market hypothesis.

Leaving aside the morality of this kind of speculation, the utility seems highly dubious to me.
posted by i_am_joe's_spleen at 7:03 PM on July 28, 2003

any chance out of work enron flunkies cooked this one up? nah ...
posted by specialk420 at 9:43 PM on July 28, 2003

Absolutely zero, specialk420 -- you aren't out of work if you're working for the Pentagon.
posted by Ptrin at 9:56 PM on July 28, 2003

That was cool how you made an Onion article look like it was actually a Bloomberg link. I almost believed it for a sec...

*whisper*

Uh. Yeah.

I get more afraid every single day.

I wonder if someone (not me, I fear my government) setup an internet betting pool on when/if Dubya would get assassinated if those involved would get a courtesy call from the Secret Service?
posted by Ynoxas at 9:58 PM on July 28, 2003

Why on earth would anyone think that Enron people had anything to do with it?

It wasn't come up with by Enron executives or the Illuminati or the Trilateral Commission or the Deceptocons. It was come up with by economists, who find mechanisms that get people to tell the truth about stuff to be interesting.

There aren't going to be fortunes made and lost on any Pentagon futures scheme, any more than fortunes are made and lost on the IEM. The small amounts of money up for grabs are a very mild incentive to try to be right, that's all.

It's a mildly clever scheme designed to elicit considered opinions about the future. That's it, sum and total.
posted by ROU_Xenophobe at 10:46 PM on July 28, 2003

It's a mildly clever scheme designed to elicit considered opinions about the future.

how much is this "mildly clever scheme" costing tax payers? and shouldn't that money be spent on protecting our childrens fast (i could post a dozen links to each pixel in the word "fast") crumbling environment?

shame on you xenophobe - please link to the "economists" you mention.
posted by specialk420 at 11:48 PM on July 28, 2003

and shouldn't that money be spent on protecting our childrens fast (i could post a dozen links to each pixel in the word "fast") crumbling environment?

Dude, what are you doing posting on MetaFilter when you could be out saving the environment? Especially since the Pentagon's not doing anything about it.
posted by kindall at 11:59 PM on July 28, 2003

how much is this "mildly clever scheme" costing tax payers?

They're asking for $3M.

and shouldn't that money be spent on protecting our childrens fast (i could post a dozen links to each pixel in the word "fast") crumbling environment?

You apparently think so. Other people seem to disagree. Others might think we should spend the money on some manner of social-welfare, or on a nice art project. I might think any or none or all of these things for all that you know.

shame on you xenophobe - please link to the "economists" you mention.

Yes, shame on me. I feel duly shamed, and will hang my head in my shameful shamey shame, as someone who's been shamefully shamed by a shamer should do. That, or go to bed.

I'd have to go and look stuff up to find the originators of the idea, mostly because by now it's a pretty bog-standard idea, even in poli-sci. The most obvious example of this sort of thing is the Iowa Electronic Market / IA Political Stock Market, to which I've already linked.

It's not a big deal; it's basically a different approach to polling.
posted by ROU_Xenophobe at 12:29 AM on July 29, 2003

I like the idea that having millions, perhaps billions of dollars witha profit motive incentive for terrorist attacks to come to fruition might actually prevent such attacks. I can't see how it can fail.
posted by vbfg at 6:22 AM on July 29, 2003

How is this different from a bookmaker taking bets on political events?
Now why didn't they think of calling the football pools a "futures market for events in the premiership"? It's way more cool and it's a handy way to capture the opinions/predictions of People Who Can Be Bothered To Care about english football.
The BBC reports:
Senator Dorgan said that [the planned "futures' market"] 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 Defence Department was taking bets on your being overthrown within a year?" he asked.
posted by talos at 7:45 AM on July 29, 2003

I am wondering if I can buy a future on whether the United States gets hit with another terrorist attack in 12 months that kills over 500 people. Would they allow this? If not, I think that Iran should set a futures market up based on this.
posted by meanie at 7:49 AM on July 29, 2003

How is this different from a bookmaker taking bets on political events?

It's the same idea, with the contract price replacing the market odds.

I've known poli-sci types in Britain who would routinely bet on Parliamentary election outcomes, and would usually but not always win since they usually know more than either the bookies or the general public.
posted by ROU_Xenophobe at 8:49 AM on July 29, 2003

meanie is on to something - "The Web site for the Policy Analysis Market cites ``Overthrow of Jordanian monarchy' as an example of the sort of event traders might speculate on. Others include Arafat's assassination and the likelihood of a North Korea missile attack on the U.S.

``PAM will focus on the economic, civil, and military futures of Egypt, Jordan, Iran, Iraq, Israel, Saudi Arabia, Syria, and Turkey and the impact of U.S. involvement with each,'' according to the ``Concept Overview'' on its Web site."

If this futures market has an unlimited number of possible futures for traders to bet on so that I can bet on "The US invasion and occupation of Iraq is likely to continue devolve as Iraqis become increasingly furious at the US occupation - attacks on US troops will increase and the ranks of indigenous radical islamicists in Iraq will swell. As casualties mount and the war proves increasingly costly in both financial and international terms, the political ramifications within the US will be immense." futures, well then - wonderful!

But if the stories' description accurately characterizes this PRogram, it sounds as if the DARPA crew who are developing this idea are working in tight conjunction some in the PsyOps world. What the hell would average Americans know about a possible overthrow of the Jordanian monarchy? - next to nothing. So who trades in these "Jordanian Overthrow" futures? - presumably those in the know - including members of the Jordanian government and Jordanian royalty, experts in Jordanian and Mideast politics, and spooks (American, Jordanian, Saudi, Israeli, and so on) with some some cash to burn in PsyOps campaigns - and, of course, those in the know who hope to cash in.

I have a hard time seeing how DARPA will derive useful information from this sort of cacophony of clashing agents and interest groups. Convince me otherwise, somebody! I see little more in the idea than 1) It's potential as a great PsyOps tool for the US and 2) The proposed market's potential value as a cash cow for anonymous agents with highly confidential information.

Remember: DARPA's plan has already been put into practice. The alleged (and little investigated) massive insider trading which took place both days, and minutes ( when really sum huge sums were alleged to have traded) before September 11th amounted to "Futures Trading" on the bet that a massive attack against the US would occur. There are, indeed, US agencies which monitor for such signals, but they appear to have not noticed or ignored these pre-9/11 market signals. It is likely that those who made fortunes on the "9/11 Futures Market" were somehow connected to the plot - I don't see how the DARPA plan will avoid this sort of abuse.

Those example "futures" listed seem a bit too congruent with the Bush Administration agenda for my tastes. A North Korean missile attack on the US? Possible, I suppose. But floating that possibility as a "future" in this proposed "Futures Market" seems like a convenient way for the Bush administration to whip up US public fear and hysteria about North Korea in order to justify a war against that country.

I wonder if I'll be able to purchase "Bush Administration successfully manipulates the US public through yet another sensationalistic 'terror alert' " futures?
posted by troutfishing at 9:08 AM on July 29, 2003

Except it aint going to happen:
Pentagon axes online terror bets
posted by brettski at 9:12 AM on July 29, 2003

3000 people died in the terrorist attacks, and all I got was this lousy patriotic t-shirt. Hmmm...if there were only a way I could come out ahead next time...
posted by troybob at 9:14 AM on July 29, 2003

This sounds a lot like Jim Bell's "Assassination Politics" essay to me.
posted by trondant at 11:50 AM on July 29, 2003

troutfishing: it strikes me that insider trading in this market would be a good thing. If people that are aware of an impending attack buy a ton of futures and cause a spike in the market price, then the alarm bells at the Pentagon go off and we (hopefully) prevent the attack.

Insider trading in the stock market is bad because it allows the insiders to profit at the expense of everyone else. But the changes in the stock price that result from insider trading generally lead to a more accurate valuation of the company. In this case, we don't care whether the market is fair to investors, we just care about it's predictive power. Thus, the logical thing to do would be to actually invite insider trading, not condemn it.
posted by boltman at 12:48 PM on July 29, 2003

You scooped me, brettski. I just learned via CNN. This is disappointing and distressing.

The speed with which we cast aside a clever, creative new idea just illustrates that we're not yet serious about preventing terrorism.

Congress to intelligence community: Why the hell didn't you guys predict and prevent 9/11? You'd better come up with some out-of-the-box ways of doing a better job, and fast!

Intelligence community: Well, we could try a new information-aggregation technique that has a proven track record... It's orthogonal to our existing expert analyses, it's very cheap, and...

Congress: WHAT? Are you crazy? Shut it down immediately! Go no further!

The beauty of markets is that they surprise you by making calls that the Expert Analyst™ misses. Speaking of futures, I wonder how many lives will be lost because Sens. Wyden (D-OR) and Dorgan (D-ND) willfully cast aside a tool with the potential to make us smarter? When the next 9/11 occurs, will anyone look back and ask what part they played in the failure? And thanks a lot for your "leadership", Sens. Daschle and Warner.

Welcome back to the herd, fellow sheep.
posted by Hieronymous Coward at 12:58 PM on July 29, 2003

The beauty of markets is that they surprise you by making calls that the Expert Analyst™ misses

In real markets, sure. It wasn't really likely that this would actually expose a plot that was brewing, or anything of that magnitude -- especially since the people doing the trading won't normally have access to the traffic-analysis data and so on that real policy drones do.

What it would have been good for is a quick summary indicator of considered opinion on the different issues, as well as giving policy drones a sense of what predicts that summary-judgment of considered opinion, and what (if anything interesting) that summary judgment could be used to predict.
posted by ROU_Xenophobe at 1:33 PM on July 29, 2003

Damn, the mills of mobocracy grind quickly. PAM's web site is already gone.

Ynoxas: I wonder if someone ... set up an internet betting pool on when/if Dubya would get assassinated if those involved would get a courtesy call from the Secret Service?

Done. Jim Bell, inventor of Assassination Politics (linked above) has been in trouble with the law for some time. (Although I'm guessing his case is one of chicken-and-egg.)

specialk420: how much is this "mildly clever scheme" costing tax payers? and shouldn't that money be spent on protecting our childrens fast ... crumbling environment?

It costs peanuts in the grand scheme of things, and no, that money should not be spent on the environment instead. (Although Richard Sandor, "the father of financial futures," thinks that a related market tool will help clean up the environment.)

please link to the "economists"

The question wasn't directed to me, but some CalTech folks at Net Exchange were hired to operate PAM. The Economist Intelligence Unit was working with Net Exchange to collect and process the data on which the securities in PAM are based, and then to assess the value of the securities when they mature. [Source: PAM's defunct website, still on my screen] AFAIK, Robin Hanson is the economist who popularized the idea, even proposing a government based entirely on futures markets.

We now return you to the same tools and techniques and mindsets that did such a fine job protecting us in the past. And remember, Think Same.
posted by Hieronymous Coward at 5:19 PM on July 29, 2003