Meeting the Ethical Challenges of Leadership : Casting Light or Shadow 
by Craig E. Johnson 
SAGE Publications; 2nd edition (Paperback - November 10, 2004)

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Case Study 2.2
Chapter End case: Betting on Terrorism

The Defense Advance Research Projects Agency, or DARPA, is probably the most 
creative agency in the federal government.  Founded at the beginning of the 
Cold War, the agency organizes and funds innovative research projects 
designed to strengthen the military and promote science and technology.  The 
group is credited with the development of the Internet, global positioning, 
stealth fighters, and unmanned combat aircraft.  It is currently 
investigating new stimulants to keep soldiers awake for a week, computers 
that correct users' mistakes, land-based combat robots, and bombs that can 
hit moving targets.  

At times the creativity of DARPA scientists and engineers outweighs their 
moral good sense.  The agency was criticized for proposing the Total 
Information Awareness system, a gigantic computer database that would have 
collected and analyzed data on all Americans.  However, DARPA leaders came 
under the most fired for the Policy Analysis Market.  This innocent-sounding 
program was designed to encourage traders to "bet" on the likelihood of acts 
of terrorism or assassinations in the Middle East.  For example, 
participants could buy future contracts on the likelihood of a biological 
weapons attack on Israel and the assassination of Palestinian leader Yasser 
Arafat.  Developers of the program believed that this terrorist futures 
market would provide more accurate predictions that more traditional 
intelligence-gathering methods.

Ethics was apparently not part of the script that DARPA officials followed 
when designing the Policy Analysis Market.  Their ethical insensitivity drew 
attacks from senators of both parties (once they realized that the program 
was not a hoax).  Democratic Minority Leader Tom Daschle called the 
terrorist futures market a "plan to trade in death."  Senator Barbara Boxer 
(D-California) commented that she thought there is something very sick about 
it and that the careers of whoever thought that up should be ended.  She 
pointed out that terrorists, knowing they were planning an attack, could 
have bet on the attack and collected a lot of money.  Republican Majority 
Leader Bill Frist of Tennessee couldn't conceive of any reason why the U.S. 
government should be involved in a project of this nature.  

The Senate called for immediate hearings on the program and eliminated its 
funding.  Yet the agency itself continues to enjoy congressional support.  
Only one top DARPA official, John Poindexter, was forced to resign as a 
result of the scheme, and some economists continue to defend the idea of 
using the market-place to anticipate future crises.  

Discussion Probes
1. Do you see any merit at all in the idea of a terrorism futures market?
2. Was DARPA punished severely enough for its decision to fund the terrorism 
futures project?
3. What should DARPA do to ensure that ethical considerations are part of 
the script that members follow when designing future programs?
4. What suggestions would you make to DARPA to foster a health moral 
imagination?  Would you make the same suggestions to other groups and 
organizations?
5. What leadership lessons do you draw from this case?

. that would have collected and analyzed data on all Americans. However, 
DARPA leaders came under the most fire for the Policy Analysis Market. This 
innocent-sounding program was designed to encourage traders to “bet” on the 
likelihood of acts of terrorism or assassinations in ..."