7/31/2003 08:13:00 AM
by The MinuteMan
More On The "Futures On Terror"
Glenn Reynolds comments that "THE IDIOTS WIN A ROUND: Faced with know-nothing criticism from members of Congress, the Pentagon has abandoned its plans for a "futures market" to predict terror."
I'm sure he's right that most Congressfolk understand nothing about the workings of a futures market. However, this "know-nothing" wave would not have swept the program away if Hillary! had been in the meeting. [When cheap shots go bad - here
Most of the criticism of this proposal amounted to "reasoning by extreme example", and ran as follows: A contract pegged to the assassination of Jacques Chirac would be a bad idea; therefore all contracts this program might develop will be bad ideas. [Note: for "bad", insert "immoral", "repugnant", "insane", or some such].
Or, there are serious conflicts with the incentives created by having intelligence officials bet on the same activities they are meant to stop; therefore, this program is a terrible idea.
I apologize - it is hard to summarize the "bad program" arguments in a way that does not make them sound silly, and I really am doing my best. But illustrating the fallacy behind this is (painfully) simple - it is easy to prove that driving a car at 80 miles per hour in a residential neighborhood is a bad idea. To then leap to the conclusion that all driving is a bad idea is probably not something most of us would do.
Similarly, in the context of "futures on terror", it is easy to think of a million terrible ideas. But proving the foolishness of the "Wack Chirac" contract hardly constitutes proof that all the ideas that might have come out of this program are terrible. The challenge facing the designers was to come up with good, creative ideas (and explain them - more on that to follow), not bad ones.
From the depths of the comments at Prof. DeLong, we extract this
I spent some time today talking to the CEO of Net Exchange, the company that had set up and was going to be running PAM. As far as I can tell, PAM was going to be a market in which there were essentially two types of futures contracts offered. The first would be contracts relating to three categories: economic health, civil stability, and military preparedness. (Contracts would be available in these categories for eight countries.) These contracts would be pegged to indices compiled by the Economist Intelligence Unit. (There are obviously problems with how accurate any such index could be, but the point is that it would serve as an independent arbiter that could measure improvements or declines.) In other words, if the value of the index on the day trading began was assumed to be 100, a contract might be something like: "the civil stability index in Jordan will be 86 in August 2004." It's more complicated than this, since combinatorial contracts would be available, but in essence these contracts would attempt to forecast predict, in broad strokes, the region's economic, political, and military future.
The second type of futures contract would be event-specific. These contracts would not attempt to predict things like when Hamas' next bombing in Israel would occur. Instead, they would attempt to forecast major events, events which arguably have some component of non-randomness built into them. These contracts might ask questions like: "Will Mahmoud Abbas still be in power by the end of next year?" or "Will the U.S. still be taking daily casualties in Iraq six months from now?" or even "Will Hamas join a coalition PA government?"
Now, the idea that this market might offer good forecasts seems not just reasonable, but likely. It's not asking anyone to penetrate an opaque terrorist cell. (In any case, the idea that Hamas does not have long-term patterns of behavior which can be interpreted seems to me wrong.)...
That tracks, with more detail, the description provided by the developers in the NY Times
(you have to read well past he critics hypotheticals to find it), and at P. 68-69 of the DARPA proposal
(B-8 in the Appendix).
OK, props to the commenter. And shouldn't he have a blog? Well, he is a bit too lofty for that, if we accept Slate
as an upgrade. And, although we note that a contract on the political survival of Abbas may create PR problems, the rest of this sounds eminently defensible.
So, my question - how dumb were the developers? They lost the PR battle before it started. When they needed a clear press package providing sensible examples of what might be done, they came up virtually empty, and left the stage to the caricaturists of the other side. If the developers are this politically tone-deaf and inept, they may have earned their fate. In this round.
And following that thought, what motivated the opponents? Are they honestly that unimaginative, or was this just an opportunity to embarrass the Administration generally, and Adm. Poindexter specifically?
They weakened a country today
. Well, yesterday. Whenever. I'm sort of ready for the weekend my self.
UPDATE: Lots of comments have floated around about odd behavior in the stock market prior to 9/11. Believe the rumors! Well, some of them - Snopes has more
, from Oct. 3, 2001. Huh? Updates?
MORE: Rupert Murdoch's Post editorial
. You knew what side they would take, but did you know they would make sense (i.e., agree with me)?
MORE: Adm. Poindexter to resign
. Mission accomplished? And now the "futures on terror" idea is radioactive. But, depending on the half-life of the contaminants, it will be back, under much clearer political guidance.
THE LAST: I have TAPPED
on my side, and Lambert of the Atrios site (anf the problematic links), and who will stand against us!
UNTIL LATER: This is the only person I saw making a connection
to the Heisenberg Uncertainly Principle. Cool.