Palm Beach Post (Florida)

                      August 1, 2003 Friday FINAL EDITION

SECTION OPINION, Pg. 14A

LENGTH 395 words

HEADLINE GOING LONG ON LUNACY

BODY

   Darn. The Pentagon closed down its terrorism futures market before we got a
bet down that the market wouldn't last 24 hours after Congress found out about
it.

   That's the kind of prediction the Policy Analysis Market was invented to
attract. The Pentagon hoped that market players would speculate on when North
Korea will launch nuclear attacks, the outcome of Israeli elections or whether
Yasser Arafat will be assassinated. The market was set to open Oct. 1 with 1,000
players and grow to 10,000 speculators early next year. Then some senators found
out about the bidding for death and mayhem futures, and quicker than you can say
"betting on American deaths," the Pentagon shut it down.

   The Pentagon thought it had the germ of an idea. "Research," the Defense
Department said, "indicates markets are extremely efficient, effective and
timely aggregators of dispersed and even hidden information." Further research
would show they aren't perfect; see Enron. But if the smart money says Arafat's
a goner, the Pentagon should know it. The government relies on spies and
academicians to assess such possibilities. If the assessors have money at risk,
their assessments may be more focused than if they are providing only what the
client wants to hear.

   Speculators would deposit money in an account and then buy futures contracts
on coming events. If many speculators foresaw an early demise for Mr. Arafat,
the value of the contracts on his death would rise. One problem was that if
Osama bin Laden played the market, he'd have ways of making sure his bets paid
off. A good terrorist could bankroll his killing with killings in the futures
market. The Defense Department conceded that was a problem that needed work.

   The department spent $750,000 to set up the market with two private companies
and wanted $8 million to keep it going. Retired Adm. John Poindexter was in
charge. He created the now-canceled Total Information Awareness program, in
which Americans would spy on each other, and shipped illegal arms to Iran in the
1980s. Senators, however, realized that market players also could speculate for
profit on how many Americans will be killed in Iraq.

   Now, no one is taking credit for the idea, and even Deputy Secretary of
Defense Paul Wolfowitz expressed "shock" at hearing of it. So the market is
closed. That germ in the idea was deadly.

TYPE EDITORIAL