Bet on Current Events

Jul 30, 2003

Although the Senate has already pulled the plug, I couldn’t help but raise an interested eyebrow at DARPA’s latest proposal. For a second there, it looked like everyone would be able to bet on the likelihood of events in the Middle East. The best part was that bookie would be the US government.

The Defense Advanced Research Projects Agency recently proposed a project that would have set up a futures, or idea, market on future events. It’s like any other market, stock or otherwise, except that, in this case, the stocks aren’t anything tangible and we get to talk about Saddam’s head.

Is this funny idea totally out of the question?

Sure, morally this is problematic. It’s like an advanced version of a celebrity death pool. The democrats were quick to point this out. “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque,” cried Senator Ron Wyden. I can’t disagree.

Politically, it could be a nightmare. I’m sure it would make those late night telephone conversations with the president interesting. Wouldn’t the king of Jordan just love to know the current odds on his assassination? No, no sir. That doesn’t really mean we think you’re screwed. Really.

But what was lost in the very quick and public effort to brush this under the rug was a real analysis of its virtues. After all, a futures market is hardly a new idea. This Wired articles points out a few of them out. The Iowa Electronic Market is used to predict election results. The Hollywood Stock Exchange gives us a peek into the Oscars. These exchanges can produce interesting, if not useful, results.

Discounting the simple dabblers into the dark arts of political betting, serious investors would put their confidence and sources into such a market. It could tell us what people are thinking. More importantly, it could tell us what the money of people is thinking, something with far more weight.

For all my enthusiasm, I’m not convinced it could ever yield any substantial results. It’s much more likely to be a political tool – a running poll, if you will – than an instrument of divination. The potential for misuse is just too great. There’s more than enough red tape floating about the hallowed halls of Washington DC. We need not add the flash of Las Vegas to the parade of government abuse.

It would, however, fascinate the darker fantasies of the public. Hey mom, I’ve got $40 on an unconditional surrender by France.

Update: Here’s a good article on the Slate that takes more of an analytical view, rather than an emotional one. It makes a couple of good points, including one described quite well in the quote below:

The more it succeeded on policy, the more it would fail as a market, and the sooner it would collapse.
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