More on Terrorist Oddsmaking
Tuesday, July 29th, 2003Although this thing has already died, I’ve already seen a number of bloggers on the left come out in support of this dumbass idea :
- Most of the criticism seems to focus on its being distasteful or improper to bet on death. But shouldn’t the primary consideration be whether the system actually works? Isn’t it our government’s job to “bet on death” insofar as it allocates military resources based on its evaluation of most dangerous threats to national security? Doesn’t the government “bet on death” when it decides to build more airplanes and fewer tanks, or vice versa? It seems to me that market-based decision making is simply another tool for the government to do what it is already doing - and if it is an effective tool… shouldn’t we be using it?
Why? Because it will add even more data to an intelligence system that can’t deal with the data it already has. It would be one thing if this was an expansion of surveillance in existing markets. (After all, 9/11 was “predicted” by some questionable trends in the real stock market.) But setting up a new system in which people can bet on future terrorist activity is ludicrous.
Just like the undefinable “chatter” that prompts our semi-annual jump to orange alert, a terrorism futures market would reflect vague trends that could likely have little bearing on reality. Maybe this kind of ambiguity is acceptable when trying to track elections and the movie industry, but we should expect something a little more solid when we’re trying to decide whether or not we should be going to war.
For example, let’s say an intelligence analyst gets a “hot tip” that Iraq is trying to buy a bunch of Uranium in Niger and before sending this data into the intelligence ether (where it will soon be debunked), the analyst buys 1000 shares of “Iraq acquires a nuclear weapon”. With the analyst’s big buy, the price of I.a.n.w. starts to go up. Despite the fact that the IAEA, the UN, and the CIA express public doubts that Iraq has a nuclear program, the rising price of I.a.n.w. prompts others in the market to invest. Soon the rising price of I.a.n.w. is used to boost previously murky evidence such as aluminum tubes being used to enrich uranium. Before too long, I.a.n.w. is going through the roof and every piece of evidence is compared against the “conventional wisdom” (as determined by the market) that Iraq has clearly acquired a nuclear weapon. At this point, the president’s administration is stuck in a situation wherein they “know” that Iraq has a nuclear weapon but don’t have any specific undeniable evidence to support the claim.
Okay, maybe that example was a little over the top, but I think you get my point. Markets have a tendency to give too much credibility to whims and hunches. Sure, these hunches may often turn out to be legit, but you can say the same thing about your horoscope. If there’s anything to be learned from the last few years, it’s that rampant speculation can often obscure an economic (or in this case, terrorist) reality. Any number of factors could quickly lead to a terrorist threat being falsely exaggerated to the point of turning into the Enron of this pseudo-market. To paraphrase Billmon, this terrorist futures market idea is a bunch of pseudoscientific garbage that should have no role in a serious intelligence gathering operation.
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