Providence Journal-Bulletin (Rhode Island)

August 3, 2003, Sunday All Editions

SECTION: Editorial; Pg. D-08

LENGTH: 466 words

HEADLINE: Betting on mayhem

BODY:
Pundits may or may not have been placing wagers in recent weeks on the political
future of John Poindexter. But most now seem agreed that the retired admiral
would do well to vacate his Pentagon post, as he apparently plans to do.

The retired admiral, formerly President Reagan's national-security adviser, was
brought on board by the Bush administration to help in the fight against
terrorism. He was assigned to the Defense Advanced Research Projects Agency, or
Darpa, a Cold War-era response to the launching of Sputnik. Admiral Poindexter's
first big idea -- broad electronic surveillance of Americans' personal data --
won him few admirers. After drawing harsh criticism from several quarters, the
Total Information Awareness program was scaled back this year by Congress,
though perhaps not enough.

Despite its Big Brother overtones, however, the surveillance program seems
almost reasonable compared with what Admiral Poindexter brought forth next. A
program called the Policy Analysis Market, scheduled to open for registration
last week, would have allowed people to place online bets regarding the
probability of terrorist-related events.

Democratic Senators Byron L. Dorgan, of North Dakota, and Ron Wyden, of Oregon,
revealed the existence of the program at the outset of the week. Condemnation
was swift and nearly universal. Not only was the idea viewed as morally
repellent; it seemed to offer terrorists a new channel (and incentive) for
profiting from their adventures. Stunned senators from both parties rightly
called for the program's extinction.

Still, some wistful economists feel the idea was not given a fair hearing. In
their view, the marketplace cannot be beat for accurately predicting events,
which it does by aggregating the wisdom of many. A popular example is a
University of Iowa system that allows people to bet on election outcomes. The
system reportedly outdoes pollsters at predicting winners.

The problem with a terrorism market, though, is that big payoffs might invite
deadly manipulation (in the form of assassinations, for instance). Payoffs kept
small, to discourage profiting on the unseemly, might limit the number of
investors, thereby lessening the market's "wisdom."

It would be wonderful if U.S. intelligence were better than it now seems to be
at predicting events. Conceivably, it could then prevent the worst of them from
happening, or at least provide better warning. But the futures market is the
wrong approach.

It is distressing that the administration found no particular problem with this
idea until it was revealed. Almost as distressing, it saw no problem with
engaging Mr. Poindexter -- who during the Iran-Contra scandal willingly lied to
Congress, and thus all Americans, about an illegal government plan to sell arms.

LOAD-DATE: August 5, 2003