Assassination Politics

[grarpamp]

> http://www.nbcnews.com/id/3072985/  PAM Futures

https://slate.com/news-and-politics/2003/07/save-the-pentagon-futures-market.html
http://www.policyanalysismarket.org/

Hey, Wait A Minute
Damn the Slam PAM Plan!
Canceling the Pentagon’s futures market is cowardly and dumb.
By James Surowiecki
July 30, 2003 6:39 PM

If you go to the Policy Analysis Market, or PAM, Web site, you’ll find
nothing but a blank page. You don’t even get one of those “This page
cannot be found” screens. Thanks to the publicity firestorm started by
Sens. Byron Dorgan and Ron Wyden on Monday, the Defense Department’s
plan to run an experimental futures market to forecast conditions in
the Middle East is dead. And we’re all worse off as a result.

That may be hard to believe, given the unanimity with which PAM has
been denounced. In that Monday press conference, Wyden and Dorgan
called the plan “harebrained,” “offensive,” and “useless.” The press
generally followed their lead, acting astonished that anyone could
ever have imagined that such a ridiculous scheme would work. But for
all the grandstanding and moral posturing, the most important question
has been absent from the discussion: Would the market have worked? In
other words, would it have improved American intelligence capabilities
and enhanced national security?

All the evidence suggests that it would have. As Daniel Gross and
Brendan Koerner mentioned in their Slate pieces yesterday, similar
markets have proven surprisingly good at predicting the outcome of
presidential elections, box-office results, and even the fall of
Saddam Hussein. We now have more than a decade of empirical results to
back up the idea that “decision markets” can work, in addition to the
reams of data on the efficacy of traditional futures markets, such as
those for corn or interest rates. (There’s evidence, for instance,
that orange-juice futures do a better job of predicting the weather in
Florida than traditional weather forecasts do.)

Even when traders are not necessarily experts, their collective
judgment is often remarkably accurate because markets are efficient at
uncovering and aggregating diverse pieces of information. And it
doesn’t seem to matter much what markets are being used to predict.
Whether the outcome depends on irrational actors (box-office results),
animal behavior (horse races), a blend of irrational and rational
motives (elections), or a seemingly random interaction between weather
and soil (orange-juice crops), market predictions often outperform
those of even the best-informed expert. Given that, it’s reasonable to
think a prediction market might add something to our understanding of
the future of the Middle East.

PAM might also have been effective because traders in a market have no
incentive other than making the right prediction—that is, there are no
bureaucratic or political factors influencing their decisions—so they
eliminate many of the hurdles that limit the flow of information
within organizations. That’s especially important in the case of the
intelligence community because we know that, for example, in the case
of 9/11 there was lots of valuable and relevant information available
before the attack took place. What was missing was a mechanism for
aggregating that information in a single place. A well-designed market
might have served as that mechanism.

Sen. Wyden dismissed PAM as a “fairy tale” and suggested that DARPA
would be better off putting its money into “real world” intelligence.
But the dichotomy here is a false one. No one has suggested replacing
traditional intelligence-gathering with a market. PAM was intended to
be simply another way of collecting information. And in any case, all
the information that traders would be trading on would presumably be
from the “real world.” Otherwise it’d be hard to see how they could
make accurate bets.

Of course, the real attack on PAM had nothing to do with how effective
it would or would not be. The real problem with it, Wyden and Dorgan
made clear, was that it was “offensive” and “morally wrong” to wager
on potential catastrophes. Let’s admit there’s something ghoulish
about betting on an assassination attempt. But let’s also admit that
U.S. government analysts ask themselves every day the exact same
questions that PAM traders would have been asking: How stable is the
government of Jordan? How likely is it the House of Saud will fall?
Will Mahmoud Abbas still be head of the P.A. in 2004? How many more
casualties will the United States take in Iraq? If it isn’t immoral
for the U.S. government to be asking these questions, it’s hard to see
how it’s immoral for people outside the U.S. government to ask them.
Especially since the point of having traders ask the questions was to
gather information to prevent catastrophes from happening.

Perhaps what’s immoral, though, is that PAM would allow people to make
money from predicting catastrophe. But CIA analysts don’t volunteer
their services. We pay them to predict catastrophes. Is that morally
wrong? We also pay informants—like the guy who turned in Odai and
Qusai—for valuable information. Again, are we wrong to do so?

Or consider our regular economy. The entire business of a
life-insurance company is based on betting on when people are going to
die (with a traditional life-insurance policy, the company is betting
you’ll die later than you think you will, while with an annuity it’s
betting you’ll die sooner). There may be something viscerally
unappealing about this, but most of us understand that it’s necessary.
This is, in some sense, what markets often do: harness amorality to
improve the collective good. If the price of getting better
intelligence is having our sensibilities bruised, we should be willing
to pay it. Wyden suggested that getting involved in an “academic
discourse” about whether prediction markets were accurate was missing
the point because it was just “morally wrong” to use them. But surely
if PAM would have made America’s national security stronger, it’d be
morally wrong not to use it.

There were, to be sure, problems that PAM would have had to overcome.
As Daniel Gross pointed out yesterday, if the market was accurate, and
the Defense Department acted on its predictions to stop, say, the
assassination of the king of Jordan, it would make the traders’
predictions false and thereby destroy the incentives to make good
predictions. A well-designed market would probably have to account for
such U.S. interventions, presumably by making the wagers conditional
on U.S. action (or, alternatively, traders would start to factor the
possibility of U.S. action into their prices). But of course this
would be a problem only if the market was in fact making good
predictions. Had PAM ever become a fully liquid market, it would also
have probably had the same problems other markets sometimes have, like
bubbles and gaming. But you don’t have to believe that markets work
perfectly to believe that they work well.

As for the much-bruited idea that PAM would have allowed terrorists to
bet on themselves, thereby letting them profit from their own
misdeeds, this was a pure red herring. A terrorist betting on his own
impending action would, in effect, be informing on himself. This seems
unlikely at best. But, if it did happen, it would be a good thing,
since intelligence agencies generally welcome informants. Would we
prefer it if the would-be terrorist kept the knowledge of his future
actions secret?

In any case, for all the hype about “terrorism futures,” the vast
majority of the “wagers” that PAM traders would have been making would
have been on more mundane questions, like the future economic growth
of Jordan or how strong Syria’s military was. At its core, PAM was not
meant to tell us what Hamas was going to do next week. It was meant to
give us a better sense of the economic health, civil stability, and
military readiness of Middle Eastern nations, with an eye on what that
might mean for U.S. interests in the region. That seems like something
about which the aggregated judgment of policy analysts and would-be
Middle Eastern experts (the kind of people who would likely have been
trading on PAM) would have had something valuable to say. Wyden and
Dorgan scornfully compared the Policy Analysis Market to a “betting
parlor.” It’s a telling (and troubling) comparison, because we know
one thing about betting markets: They’re eerily good at predicting the
future.