Hats off to Pacific Bell Internet Services for taking the Recording Industry Association of America to task for its efforts to track down online music sharers. ...

Poindexter's DARPA Casino, redux: Still digging out from under from all the messages I've been getting about  John Poindexter's DARPA Casino. Here's another interesting perspective that crossed my desk yesterday.

The funny thing is I think this is an even worse idea that most people realize.

If a terrorism-futures market is run at full value (i.e. correctly predicting a disaster pays an amount of money commensurate with the dollar-cost of the event) then market becomes a re-insurance market (which there already are a lot of, like the Lloyds exchange, which has had a pretty spotty history).  The funny thing about markets is always the arbitrage opportunities and external effects (i.e. if you pay out on a disaster, you might help prevent it; if you collect, you might help cause it, again much like how insurance works).  The problem is terrorism is the classic "asymmetric situation"; defense is far more expensive than attack, so the big money play would always be to find targets the market says are safe (i.e. is willing to insure) and think of some new way to be nasty to them.  This would be a NASDAQ for funding innovation in terrorism.  The market is a lottery for terrorists (people love lotteries) and an inverse lottery for defenders (but running an inverse lottery is only profitable when you can massively rig the odds, like the states do).

If the terrorism-futures market is run at "funny money" values (fame or small payouts) then it becomes a knowledge synthesizer (not producer).  In fact it likely becomes a market of leaks.  People abuse inside status to make informed bets.  I guess Poindexter's hope is the leaks would come from the terrorists, but terrorist organizations typically have a cell structure, so the people leaking would be ratting out themselves.  More likely the leaks would come from the U.S. government itself and be publishing weaknesses out to the market.  For example, when Prudence's request for additional embassy defense was rejected, someone with insider knowledge of this could short U.S. embassies, leaking out a market signal that embassy security sucks (without anyone in the market having to know of the report).  My guess is that the FBI would be true to its track record and be the biggest source of leaks to the market.  Each leaker would think they are making money without any risk to anyone else ("heck I didn't say anything, I just placed a bet"), but inferring trends from seemingly opaque bets is what these markets do (as you noted they don't predict).

John Mount

Off topic: POINDEXTER TO HEAD DEPT. OF BAD IDEAS (Thanks Barry)

What's Poindexter's next great idea going to be? Tell me at John Paczkowski