SHOW All Things Considered (900 PM ET) - NPR

                             July 29, 2003 Tuesday

LENGTH 838 words

HEADLINE How the Policy Analysis Market would have worked

ANCHORS ROBERT SIEGEL

REPORTERS LARRY ABRAMSON

BODY

   ROBERT SIEGEL, host

   NPR's Larry Abramson has been trying to make sense of this proposed futures
market, which, Larry, sounds like about the worst-received idea in the Senate
that we've heard about in a long time.

   LARRY ABRAMSON reporting

   I think you could say it was badly packaged, Robert...

   SIEGEL Wow.

   ABRAMSON ...as they would say in the PR world.

   SIEGEL Well, let's open up the package now.  And the program has been killed
already, but assuming it actually had worked, what was it supposed to do?

   ABRAMSON Well, you know, there actually are a whole bunch of academics out
there who spend their lives studying these kinds of markets, and it's actually
not as uncommon to have markets on things that you haven't heard of before. You
're familiar, of course, with markets in the future price of pork bellies or
even of orange juice and things like that.  Well, people have analyzed markets,
say, in orange juice and said, you know, you can predict the weather if you
watch the futures price of orange juice.  Now if you take that and transfer it
over to the likelihood of certain political events, there's a feeling that you
might be able to glean a certain amount of information--not a prediction, but a
certain amount of information over the likelihood of, say, will Hamas join the
peace process in Israel or will the Jordanian monarchy be overthrown during the
war in Iraq?  And that if you assign a value to the bets, to the wagers that
people place, it gives them an incentive to use their best guesses.

   SIEGEL And I'll let that pass for the time being, but assuming that this
actually happened, who would have placed the bets?  Who could have done it?
Anyone?

   ABRAMSON Well, that wasn't really specified, and that would make a really
big difference.  And I talked with one of the contractors who was trying to
design this.  He was upset that people hadn't come up with the specifics that he
would have insisted on, namely that only experts in the Middle East would have
been allowed to play in this game.  In other words, maybe people from the State
Department or from The Brookings Institution would have been able to say, 'I
think there's this likelihood of this political event going on.' So instead of
having a whole bunch of people trying to make money, you would have experts who
would say what they think is going to happen, and they wouldn't make money on it
necessarily.  They could be rewarded with, say, a couple thousand bucks for
their research grant.

   SIEGEL But this market would, in effect, quantify expert opinion in that
model if it's applied to quantify...

   ABRAMSON That's right.

   SIEGEL What is the Defense Department doing in futures trading, and would
the Defense Department actually make money from this in some way?

   ABRAMSON No, they wouldn't.  I think they were supposed to be the staging
ground.  They were supposed to be the incubator for this kind of idea.  And
remember, this is DARPA, the Defense Advanced Research Projects Agency.  They
are supposed to push the envelope.  They came up with the Internet.  They did
research on advanced energy beams for missile defense.  A lot of these ideas die
because the technology doesn't work.  Some of them, like the Internet, turn into
things that nobody envisioned them ever being, but were really great at. Some
people say, 'Well, this idea is going to die for another reason.  It was just
too out there.'

   SIEGEL But this wasn't a high-tech idea.  This was just a cutting-edge idea,
as they saw it?

   ABRAMSON That's true, although there is an information technology aspect to
it, because it would have to be traded online, and you'd have to have a way of
assigning values to all of these different commodities of information.

   SIEGEL And the individual associated with this over at DARPA, or at least
the head of DARPA, is Admiral Poindexter.

   ABRAMSON The lightning rod, you could say, for all of this, the person who
everybody is following around to see what he's doing, to see which program they
want to kill next, is John Poindexter, national security adviser under Ronald
Reagan, who was indicted, but then had his conviction overturned for lying to
Congress.  However, Congress does not have a warm place in their heart for him
because of that.  He was also, as you recall, head of the Total Information or
Terror Information Awareness project, and so he has been pushing DARPA into
these areas that can predict terror and defense issues, and obviously, he's
pushed them beyond the envelope but maybe over the edge this time.

   SIEGEL From what we heard from those senators in David Welna's piece, it
sounds like what little warmth there is for Admiral Poindexter didn't heat up at
all today.

   ABRAMSON There are quite a few calls for his resignation.

   SIEGEL Thank you.  NPR's Larry Abramson talking with us about the proposal
today rescinded for a futures market in predictions of terrorist events in the
Middle East.

   You're listening to ALL THINGS CONSIDERED from NPR News.