Okay, these free-market zealots have finally flown off the deep end :

The Pentagon is setting up a stock-market style system in which investors would bet on terror attacks, assassinations and other events in the Middle East. Defense officials hope to gain intelligence and useful predictions while investors who guessed right would win profits.

Two senate senators demanded Monday the project be stopped before investors begin registering this week. “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque,” Sen. Ron Wyden, D-Ore., said.
. . .
The market would work this way. Investors would buy and sell futures contracts ? essentially a series of predictions about what they believe might happen in the Mideast. Holder of a futures contract that came true would collect the proceeds of investors who put money into the market but predicted wrong.

A graphic on the market’s Web page showed hypothetical futures contracts in which investors could trade on the likelihood that Palestinian leader Yasser Arafat would be assassinated or Jordanian King Abdullah II would be overthrown.
. . .
In its statement Monday, DARPA said that markets offer efficient, effective and timely methods for collecting “dispersed and even hidden information. Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions.”

First of all, the fact that our government is essentially setting up a terrorist bookmaking operation is despicable. This is one of the most callous and plainly retarded ideas I’ve ever heard come out of this government.

Secondly, the admission that our intelligence services aren’t as good at making predictions as the odds table at the racetrack isn’t something that should be taken lightly. If our intellegence agencies are that incompetent, shouldn’t we be more concerned with improving the intelligence than setting up some goofy-ass online casino?

And finally, as stupid as this idea is, there is a little nugget of truth here. Terrorist incidents can be predicted by market forces :

From August 26th to September 11th 2001, events in the stock market should have alerted those in government that something was amiss. Were those trades missed by our “experts’ that cost us 30 billion dollars in taxes each year or did our government know what was happening and look the other way?
The presently unknown “speculators” operated out of the Toronto, Canada and Frankfurt, Germany, stock exchanges and their profits have been estimated to be in the billions of dollars.

These speculators sold “short” 38 stocks that could reasonably be expected to fall in value as a result of the attacks of September 11. Short selling of stocks involves the opportunity to gain large profits by passing shares to a friendly third party, then buying them back when the price falls.

So far, there hasn’t been much revealed (as ar as I know) about the 9/11 insider traders, but it’s pretty clear that if the government is trying to root out terrorists, they should spend more time paying attention to the real stock market and forget about setting up their own betting pool.