Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread pboettke
The NYT article on this 


Pentagon Prepares a Futures Market on Terror Attacks
By CARL HULSE


ASHINGTON, July 28  The Pentagon office that proposed spying electronically on 
Americans to monitor potential terrorists has a new experiment. It is an online 
futures trading market, disclosed today by critics, in which anonymous speculators 
would bet on forecasting terrorist attacks, assassinations and coups.

Traders bullish on a biological attack on Israel or bearish on the chances of a North 
Korean missile strike would have the opportunity to bet on the likelihood of such 
events on a new Internet site established by the Defense Advanced Research Projects 
Agency. 

The Pentagon called its latest idea a new way of predicting events and part of its 
search for the broadest possible set of new ways to prevent terrorist attacks. Two 
Democratic senators who reported the plan called it morally repugnant and grotesque. 
The senators said the program fell under the control of Adm. John M. Poindexter, 
President Ronald Reagan's national security adviser.

One of the two senators, Byron L. Dorgan of North Dakota, said the idea seemed so 
preposterous that he had trouble persuading people it was not a hoax. Can you 
imagine, Mr. Dorgan asked, if another country set up a betting parlor so that people 
could go in  and is sponsored by the government itself  people could go in and bet 
on the assassination of an American political figure? 

After Mr. Dorgan and his fellow critic, Ron Wyden of Oregon, spoke out, the Pentagon 
sought to play down the importance of a program for which the Bush administration has 
sought $8 million through 2005. The White House also altered the Web site so that the 
potential events to be considered by the market that were visible earlier in the day 
at www.policyanalysismarket.org could no longer be seen.

But by that time, Republican officials in the Senate were privately shaking their 
heads over the planned trading. One top aide said he hoped that the Pentagon had a 
good explanation for it.

The Pentagon, in defending the program, said such futures trading had proven effective 
in predicting other events like oil prices, elections and movie ticket sales.

Research indicates that markets are extremely efficient, effective and timely 
aggregators of dispersed and even hidden information, the Defense Department said in 
a statement. Futures markets have proven themselves to be good at predicting such 
things as elections results; they are often better than expert opinions.

According to descriptions given to Congress, available at the Web site and provided by 
the two senators, traders who register would deposit money into an account similar to 
a stock account and win or lose money based on predicting events.

For instance, Mr. Wyden said, you may think early on that Prime Minister X is going 
to be assassinated. So you buy the futures contracts for 5 cents each. As more people 
begin to think the person's going to be assassinated, the cost of the contract could 
go up, to 50 cents.

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

The senators also suggested that terrorists could participate because the traders' 
identities will be unknown.

This appears to encourage terrorists to participate, either to profit from their 
terrorist activities or to bet against them in order to mislead U.S. intelligence 
authorities, they said in a letter to Admiral Poindexter, the director of the 
Terrorism Information Awareness Office, which the opponents said had developed the 
idea. 

The initiative, called the Policy Analysis Market, is to begin registering up to 1,000 
traders on Friday. It is the latest problem for the advanced projects agency, or 
Darpa, a Pentagon unit that has run into controversy for the Terrorism Information 
Office. Admiral Poindexter once described a sweeping electronic surveillance plan as a 
way of forestalling terrorism by tapping into computer databases to collect medical, 
travel, credit and financial records. 

Worried about the reach of the program, Congress this year prohibited what was called 
the Total Information Awareness program from being used against Americans. Its name 
was changed to the Terrorism Information Awareness program.

This month, the Senate agreed to block all spending on the program. The House did not. 
Mr. Wyden said he hoped that the new disclosure about the trading program would be the 
death blow for Admiral Poindexter's plan.

The Pentagon did not provide details of the program like how much money participants 
would have to deposit in accounts. Trading is to begin on Oct. 1, with the number of 
participants initially limited to 1,000 and possibly expanding to 10,000 by Jan. 1.

Involvement in this group prediction process should prove engaging and may prove 
profitable, the Web site said.

The overview of the plan 

Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread AdmrlLocke

In a message dated 7/29/03 4:05:03 AM, [EMAIL PROTECTED] writes:

The Pentagon office that proposed spying electronically on Americans to
monitor potential terrorists has a new experiment.

This is typical of the statist-liberal news media--starting a news article 
with an ad homenim attack.

DBL



RE: Senators Denounce Policy Analysis Markets

2003-07-29 Thread Barney Hamish
This story has even made it to Technology news site Slashdot
(www.slashdot.org)
http://slashdot.org/article.pl?sid=03/07/29/1249247mode=threadtid=126tid=
95

Perhaps you'd like to contribute to the discussion there to fight against
the prevailing negative mood.
Hamish

 -Original Message-
 From: Robin Hanson [mailto:[EMAIL PROTECTED]
 Sent: Monday, July 28, 2003 8:56 PM
 To: [EMAIL PROTECTED]; [EMAIL PROTECTED]
 Subject: Senators Denounce Policy Analysis Markets
 
 
 FYI, our DARPA project (www.policyanalysismarket.com) has 
 just been denounced
 by two senators: 
 http://wyden.senate.gov/media/2003/07282003_terrormarket.html
 
 
 Robin Hanson  [EMAIL PROTECTED]  http://hanson.gmu.edu
 Assistant Professor of Economics, George Mason University
 MSN 1D3, Carow Hall, Fairfax VA 22030-
 703-993-2326  FAX: 703-993-2323 
 
 



Re: California Recall

2003-07-29 Thread Fred Foldvary
--- [EMAIL PROTECTED] wrote:
 I'd wager 
 $10 that Davis will be recalled--and then win reelection. 
 David

Does the recall law permit the incumbent to be on the ballot for the new
governor if he loses the recall?
Fred 


=
[EMAIL PROTECTED]



Re: California Recall

2003-07-29 Thread Fred Foldvary
--- fabio guillermo rojas [EMAIL PROTECTED] wrote:
 It seems that optimal strategy for Democrats is to choose one candidate
 and pay off the others not to run, and hope the GOP vote is split.
 Fabio 

If Governor Davis is recalled, the election for the next California
governor will be won by a plurality.  With many candidates on the ballot, a
well-organized group can win the plurality even if they have a small total
portion of the vote.  So far, the Democrats do not want to put up a major
candidate because that would increase the vote to recall the incumbent.  So
the optimal strategy for the Democrats would be for Davis to win the recall
election, thus they are avoiding providing an attractive Democrat
alternative.

Fred Foldvary

=
[EMAIL PROTECTED]



Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread Christopher Rasch
Glenn Reynolds (Instapundit) blogged about the DARPA project controversy:

THE PENTAGON WANTS TO USE A FUTURES MARKET 
http://nytimes.com/2003/07/29/politics/29TERR.html to predict terror 
attacks. Although this is getting a lot of criticism (mostly from 
members of Congress who, I suspect, couldn't accurately describe the 
operation of /existing/ futures markets) I think it's an excellent 
example of creative thinking, and the Pentagon deserves to be 
congratulated for it. As I've suggested before (here 
http://www.techcentralstation.com/1051/defensewrapper.jsp?PID=1051-350CID=1051-041603A, 
here, 
http://www.techcentralstation.com/1051/defensewrapper.jsp?PID=1051-350CID=1051-021203A 
and especially here 
http://techcentralstation.com/1051/techwrapper.jsp?PID=1051-250CID=1051-103002A) 
the diffuse, fast-moving threat of terrorism requires a diffuse, 
fast-moving response. And this sounds like a very plausible way of 
recruiting a lot of minds in the service of anti-terrorism.

Josh Chafetz agrees: 
http://www.oxblog.blogspot.com/2003_07_27_oxblog_archive.html#105943317047655345

   A futures market in terrorist attacks, while it sounds grisly, may
   help us to aggregate diffuse knowledge in a way that will prove
   superior to expert knowledge. It also may not, but it seems to me
   that it's worth a try. At the very least, if we're going to demand
   that the government get creative in fighting terror, we shouldn't be
   so quick to criticize when it does just that.
Yep.

UPDATE: Reader Fred Butzen emails:

   The story about the Pentgon's terrorism market clearly is an
   extension of Iowa Electronic Markets, which has been run for years
   by the University of Iowa's Tippett School of Business. Here's a
   link to the Iowa Information Market's web site:
   Link http://www.biz.uiowa.edu/iem/

   In brief, the IEM lets persons place bets on the likelihood of given
   events' happening; for example, people could bet on the likelihood
   that Saddam Hussein will survive this year, or who will win the next
   presidential election. The collective expertise of the participants
   has proven to be extremely useful in predicting events.
   The notion that the dim-bulbs in Congress and the media should
   attack such a useful and proven idea as the Pentagon's is utterly
   absurd.
This is absolutely right. Whether or not the Pentagon's idea is a good 
one depends on details I don't know about. But the lame criticism makes 
clear that the critics are -- as usual -- clueless on the subject.

ANOTHER UPDATE: Mitch Berg points out 
http://www.mitchberg.com/shotindark/2003_07_01_archive.html#105948759942593174 
that this approach has worked in the past.

posted at 08:44 AM by *Glenn Reynolds* 
http://www.instapundit.com/archives/010668.php

Robin Hanson wrote:

FYI, our DARPA project (www.policyanalysismarket.com) has just been 
denounced
by two senators: 
http://wyden.senate.gov/media/2003/07282003_terrormarket.html

Robin Hanson  [EMAIL PROTECTED]  http://hanson.gmu.edu
Assistant Professor of Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-
703-993-2326  FAX: 703-993-2323







Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread Eric Crampton

All of the criticism seems based on the betting on events, not on the
use of conditional markets for developing policy.  Wonder what they'll say
when they figure that bit out

On Mon, 28 Jul 2003, Robin Hanson wrote:

 FYI, our DARPA project (www.policyanalysismarket.com) has just been denounced
 by two senators: http://wyden.senate.gov/media/2003/07282003_terrormarket.html
 
 
 Robin Hanson  [EMAIL PROTECTED]  http://hanson.gmu.edu
 Assistant Professor of Economics, George Mason University
 MSN 1D3, Carow Hall, Fairfax VA 22030-
 703-993-2326  FAX: 703-993-2323 
 
 
 
 




Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread fabio guillermo rojas


On Tue, 29 Jul 2003, Jeffrey Rous wrote:

 I seem to remember looking at the Iowa Electronic Market right before
 the 2000 election and noticing that it had Gore winning the
 winner-take-all and Bush getting a higher percentage of the vote. And
 I remember thinking that this was just an indication of how close the
 race really was.
 
 Am I remembering this correctly.

Yes, that is correct. I remember making the same observation. I think the
Iowa markets seem to do better than most pundits. Fabio 




Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread mhc_lists
More likely than not they'll say nothing and the story will quietly go away... 
conveniently relieving people like reporters and senators from the need to admit they 
spoke out about something they didn't have much, if any, comprehension of.

 
 All of the criticism seems based on the betting on events, not on the
 use of conditional markets for developing policy.  Wonder what they'll say
 when they figure that bit out
 
 On Mon, 28 Jul 2003, Robin Hanson wrote:
 
  FYI, our DARPA project (www.policyanalysismarket.com) has just been denounced
  by two senators: http://wyden.senate.gov/media/2003/07282003_terrormarket.html
  
  
  Robin Hanson  [EMAIL PROTECTED]  http://hanson.gmu.edu
  Assistant Professor of Economics, George Mason University
  MSN 1D3, Carow Hall, Fairfax VA 22030-
  703-993-2326  FAX: 703-993-2323 
  
  
  
  
 
 
 




[Fwd: [wta-talk] Futures Market to Predict Terror Canned by Pentagon]

2003-07-29 Thread Christopher Rasch
Hmmm...seems like like DARPA's going to kill the project. 

 Original Message 
Subject:[wta-talk] Futures Market to Predict Terror Canned by Pentagon
Date:   Tue, 29 Jul 2003 12:13:32 -0400
From:   Hughes, James [EMAIL PROTECTED]
Reply-To:   [EMAIL PROTECTED]
To: [EMAIL PROTECTED]
CC: [EMAIL PROTECTED], [EMAIL PROTECTED]


WTAer/Extropian and GMU economist Robin Hanson was involved in this
project. Looks like it was seriously misunderstood. - J.




http://www.nytimes.com/2003/07/29/politics/29WIRE-PENT.html



July 29, 2003



Pentagon Said to Abandon Plan for Futures Market on Terror



By THE ASSOCIATED PRESS



WASHINGTON -- The Pentagon will abandon a plan to establish a futures
market to help predict terrorist strikes, the chairman of the Senate
Armed Services Committee said Tuesday.


Sen. John Warner, R-Va., said he spoke by phone with the program's
director, and we mutually agreed that this thing should be stopped.


Warner announced the decision not long after Senate Democratic Leader
Thomas Daschle took to the floor to denounce the program as an
incentive actually to commit acts of terrorism.


Warner made the announcement during a confirmation hearing for retired
Gen. Peter J. Schoomaker, nominated to be Army chief of staff.





Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread Sampo Syreeni
On 2003-07-28, Robin Hanson uttered:

FYI, our DARPA project (www.policyanalysismarket.com) has just been
denounced by two senators:
http://wyden.senate.gov/media/2003/07282003_terrormarket.html

It's still a nice plan. Much like Brunner's delphi pools in Shockwave
Rider. (BTW, if anybody ever tried to patent artificial markets like
these, it'd be highly interesting to know whether sufficiently exacting
scifi qualifies as prior art.)

What I'm wondering, though, is asymmetric information. General contingent
markets are basically complicated markets in risk, and the claims traded a
form of insurance based on risk sharing. So the same problems apply to
them that do to insurance. If we're betting on diffuse, difficult to
influence risks, there's no problem. But if we bet on something individual
market participants can change, we have to consider things like moral
hazard and adverse selection. I mean, because of the efficient market
hypothesis, the ideal contingent market only allows profits to someone
bringing in new information. That's why betting on whether someone will be
assassinated will give an unreasonable edge in information to an assassin,
and will actually spawn assassinations. (Assassinations are probably
cheaper than defending against them if true anonymity is present.)
That's also why the market could turn into a twisted incarnation of
Assassination Politics (http://jya.com/ap.htm).

Furthermore -- unlike the original AP proposal -- these are futures
markets where you can speculate and win without pulling the trigger.
Rational bubbles can form, and those will in case turn the bet on an
assassination into a self-fulfilling prophecy (early investors will have
an incentive to rig the wheel, so to speak). When this happens, the ill
effects of moral hazard will be amplified, and we can't rely on the
resulting assassinations being reasonable even to the degree we can with
garden variety AP.

To someone with a penchant for conspiracy theories, then, all this would
probably count as one of DARPA's tacit aims.
-- 
Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111
student/math+cs/helsinki university, http://www.iki.fi/~decoy/front
openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2



Re: California Recall

2003-07-29 Thread Fred Foldvary
Schwartzeneger will not run, so Riordan, a Republican 2002 primary-election
candidate, will run, and is most likely to win the plurality race. 
Negative ads knocked him off the general election in 2002, but will not
work so easily this time.

 What's the predicted outcome? 
 Fabio 


=
[EMAIL PROTECTED]



Re: Senators Denounce Policy Analysis Markets

2003-07-29 Thread Robin Hanson
That sure looks like the likely outcome.  We never really got a chance to 
correct misconceptions about the project.  (For example, it was never 
intended to forecast specific terrorist attacks, but only overall 
trends.)  They didn't want to hear.

At 01:10 PM 7/29/2003 -0400, [EMAIL PROTECTED]:
More likely than not they'll say nothing and the story will quietly go 
away... conveniently relieving people like reporters and senators from the 
need to admit they spoke out about something they didn't have much, if 
any, comprehension of.

 All of the criticism seems based on the betting on events, not on the
 use of conditional markets for developing policy.  Wonder what they'll say
 when they figure that bit out

  FYI, our DARPA project (www.policyanalysismarket.com) has just been 
denounced
  by two senators: 
http://wyden.senate.gov/media/2003/07282003_terrormarket.html


Robin Hanson  [EMAIL PROTECTED]  http://hanson.gmu.edu
Assistant Professor of Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-
703-993-2326  FAX: 703-993-2323