And another thing: what if the loser doesn’t pay up? Do we set up another futures share, say, on the over/under of days remaining of the welch?
Sailor: It’s interesting that you would invoke Hayek to discredit this idea, because I was thinking of Hayek when I thought it would be a good idea.
Now obviously, there are flaws with a system like this if you think that all we’re doing is wagering on discrete events without information. Having a market try to predict who will win the lottery is ridiculous.
However, what a market can do is aggregate information that describes conditions favorable to terrorist attacks. Information not readily collectible. I’m thinking more along the lines of aggregating information about preparedness of critical facilities, suspicious activity noticed by low-level functionaries, information about levels of resentment in small cultural subgroups that might be picked up by people like Collounsbury. Diffuse, individually inconsequential pieces of information which, when brought together in a directed fashion, contain remarkable amounts of information.
Now granted, this system may have some serious flaws. I don’t know. I do know this - the guys at DARPA are not idiots. They have spent a lot of time on this idea. Don’t you think these ‘obvious’ flaws occured to them? Wouldn’t you like to hear their ideas before discounting them out of hand? Is the idea so ridiculous on its face that you can claim that the people behind this are all drooling idiots who collectively missed the huge gaping flaws that you spotted within minutes of hearing of the idea?
Except that, as has been said, you do not gain information about terrorist acts from the public at large because the public at large does not have this information. Now, Suppose I bet 50 million dollars that there will not be a terrorist attack in NYC. I have, in fact, just placed a 50 Million dollar reward for someone who does commit the terrorist attack. Do you think this is a good idea? The CIA would be investigating me like crazy. Suppose someone comes in and bets 50 million that it will happen. Wow, it seems it may be the terrorist preparing to cash in later. Do you really think the terrorists are going to go to the Pentagon ahead of time?
The whole thing is idiotic.
I’ll admit I didn’t go thru all the posts, but I’m surprised how few posters recognize this as potentially a good idea. I like the non-traditional thinking this represents. Lots of details to work out, but I don’t see any moral issues in mining for knowledge wherever we can get it. I also assume that this would be one more piece of info to add to the total. Some posters seem to imply that this would be the only or at least the main source of info. I doubt that.
Then again, it might just be a big sting operation after all!
they fooled me and the rest of the world.
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They have spent a lot of time on this idea. Don’t you think these ‘obvious’ flaws occured to them? Wouldn’t you like to hear their ideas before discounting them out of hand? Is the idea so ridiculous on its face that you can claim that the people behind this are all drooling idiots who collectively missed the huge gaping flaws that you spotted within minutes of hearing of the idea?
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I have heard what they have said and that is what I am judging. Maybe it is a great idea badly presented. Maybe it turns out what they really meant to present was a great recipe for tapioca pudding and it was all a mixup.
The fact is that they have presented their idea to the world and it floated with the bouyancy of a lead balloon. believe me, I know bouyancy when i see it.
Their example was that it would predict things like the assasination of Arafat. That was their example. Now suppose there is a bet of 50 million that Arafat will not be assasinated. That, right there, is a reward for his assasination. The Pentagon would not say who bet, just that the money is bet. How do we know it is not the US government offering a reward for offing Arafat? The scheme more than collect information was a way to influence events. Nobody except the conspirators know of plans to kill Arafat but by betting on it you are affecting the odds and encouraging things to happen one way or another.
yes, I do believe the people who did this were utterly stupid.
‘A bet of 50 million on Arafat being assassinated’? Do you think that’s the way it works?
My thinking is that the ‘Arafat assassination future’ would be worth $26.09, which represents the price that thousands of people are willing to pay. Tomorrow, the price goes up to $29. A week later, it’s at $37. At that price, futures are still being traded. Might there not be information in that price movement? If not, why?
If you read my previous posts you’ll see that I’m in the camp of those who say it won’t work. I was just illustrating what the moral justification was for allowing people to bet on terrorists acts.
You’ve outlined one of the biggest pitfalls of the system. In order for information to be useful it has to be relatively specific. The more specific the contract the less liquidity it will attract thus making the information less reliable.
You may be confused by my using 10% as both the intel communities guesstimate and the initial trading price of the contract. The intel community doesn’t need to participate in the trading (and probably wouldnt). My point was is that if internal CIA analysts think the likelihood of an attack is 10% but that same scenario is trading for 75 cents on the dollar on the TFE (Terrorism Futures Exchange :P) , the CIA might take steps to see if they’ve missed something in their analysis.
Your comment about the terrorist watching for leaks of his own information is another reason that this concept wouldn’t work in practice.
I agree that liquidity would possibly be a problem, but I don’t know enough about this specific proposal to know if it would in fact be illiquid. Do you? For all I know, they planned to have hundreds of thousands of traders.
Really, that’s my big beef with this thread - It’s an intriguing idea, very short on specific details. Without knowing the details, I don’t see how anyone can just dismiss the idea out of hand.
Sure, Sam, if the idea of making money on the suffering of others doesn’t bother you…
Like undertakers? Medical researchers?
I also doubt it was a well-formed programme, but I am shocked at the amount of people on this Board who openly declare that they don’t understand it but they’ve already made up their minds.
Who has said this? Who has said “I don’t understand it but I oppose it”? I think it can be a valid position. I think the concept is flawed but I can understand someone who declares he does not understand well how it would work or not work but would oppose it on ther grounds, like moral grounds for instance. At any rate, who has said this here?
Not so much in this thread, sailor. It’s been fine. More in the two Pit threads here and here. I should have made that clear.
I think there’s a bit of a difference between providing a service and waiting expectantly for calamity to strike so one can cash in, don’t you? At the very least, any undertaker who says “Hooray! Twenty people were killed in that pileup this afternoon! More business for me!” needs serious help, IMO.
What about waiting expectantly for El Nino to wreck devastation on Columbian Coffee futures? You’d cash in on the misery of thousands of farmers. What difference am I missing?
I definately understand your frustration at the kneejerk moralists who can’t see the larger picture. You probably know more about the specific proposal than I do but, imo, no amount of detail can save it. Even markets with a solid hedging element have trouble reaching a critical mass that allows them to become self-sustaining. That doesn’t mean I think the idea should be scrapped, but on the futures bet “5 years from inception the DoD will regard this project as a failure” my market is currently 85-90.
Well, I wouldn’t… 
I don’t believe that folks who trade in Columbian Coffee futures are solely dependent upon disasters to make their fortunes, am I correct? After all, a sudden increase in demand from China, or a mass-denunciation of Starbucks from Seattle, would also alter the prices.
Whereas dealing with “terrorism futures,” as I understand it, requires crimes to be committed and lives to be endangered before anyone gets paid.
You know, my granddad on my father’s side made the money that allowed him to buy the land for his farm by doing almost precisely the above: he lived in a town where he was one of the few literate people, and he read in the paper about how there was a frost in Brazil doing in the coffee crop. So he bought up all the coffee in town after borrowing the money from my great granddad on my mother’s side (it was a small town, of course). Made a killing. He repaid my great granddad, and also paid the people he bought the coffee from a compensating sum. Then he bought the land.
Like I said before, that’s life. People have always and will always make money from disasters/misfortunes. It’s immature and naive to think otherwise.
After reading all the above analysis, it doesn’t sound like this was a well thought out plan. Oh well. But judging it on morality is just silly.
You’re a good man/woman rjung.
The same could be said of stock investors. The majority benefit from increasing valuation of the company (Enron aside). There are ways to benefit from the failure of companies through shorting. The company collapses/lays off people and the shorters benefit from the crash.
I’m not really familiar with the futures market but I believe that profit could be made by removing yourself from the contracts once the perceived threat diminishes (in the traders eyes). Actual death and destruction need not actually take place for people to profit.
My latest issue with this idea (and I do like it) is that the pool of people allowed into this “market” would be too small to provide useful information.