Pentagon may start market for wagers on world events ; Fans say it'll help predict turmoil; foes call it crass 29 July 2003 The Seattle Times A1 The war on terror has come to this: The Pentagon is setting up a commodity-style market to use real investors putting down real money to help its generals predict terrorist attacks, coups d'etat and other turmoil around the globe. Under the program, revealed yesterday by two of its critics in the Senate, investors with knowledge of the Middle East and other hot spots would be lured by the prospect of making money into using their expertise to buy and sell futures contracts on world events. The Pentagon then would be able to study the collective wisdom of the free market on such questions as the effect of U.S. involvement in Iraq and the stability of the monarchy in Jordan. Defense officials said using such a betting method has been successful in predicting elections, monetary-policy decisions and movie box-office receipts. But two Democratic senators yesterday called for an end to the program before investors start registering Friday, saying the proposal was "ridiculous and grotesque." Democratic Sens. Ron Wyden of Oregon and Byron Dorgan of North Dakota said at a news conference that the Pentagon should scrap the program immediately. "Make-believe markets trading in possibilities that turn the stomach hardly seem like a sensible next step to take with taxpayer money in the war on terror," said Wyden, noting that $600,000 has been spent on the program. The Defense Department has requested $3 million for the program next year and $5 million for the following year. Said Dorgan: "This is an appalling waste of taxpayers' money. We need to focus our resources on responsible intelligence gathering, on real terrorist threats. What on Earth were they thinking?" The Policy Analysis Market is the brainchild of the Pentagon's Defense Advanced Research Projects Agency (DARPA) and is directed by retired Vice Adm. John Poindexter, a key figure in the Iran-contra scandal in the 1980s. Another project of Poindexter's, the computerized Terrorism Information Awareness program, has raised privacy concerns on Capitol Hill. That data-mining project would employ "virtual bloodhounds" capable of compiling records of a person's financial, travel, credit-card and health history. The Policy Analysis Market is intended to help officials predict events and replace "today's approach of discussion and consensus among experts," a proposal from the Pentagon said. Investors would buy and sell futures contracts essentially a series of predictions about what they believe might happen in the Middle East or elsewhere. Holders of a futures contract that came true would collect the proceeds of investors who put money into the market but predicted wrong. A graphic on the market's Web page, www.policyanalysismark- et.org, showed hypothetical futures contracts in which investors could trade on the likelihood that Palestinian leader Yasser Arafat would be assassinated or Jordanian King Abdullah II would be overthrown. Registration would begin Friday with trading beginning Oct. 1. The market would be limited to 1,000 traders, increasing to 10,000 by Jan. 1. Contracts would be available based on economic health, civil stability, military disposition and U.S. economic and military involvement in Egypt, Iran, Iraq, Israel, Jordan, Saudi Arabia, Syria and Turkey. The Web site does not say how much money could be invested. Government agencies would not be allowed to participate and would not have access to the identities or money of traders. Wyden said that could allow terrorists to make profits by "betting" on attacks they had not yet launched. At the news conference, Dorgan asked, "Can you imagine if another country set up a betting parlor so that people could go in and bet on the assassination of an American political figure or the overthrow of this institution or that institution?" Both senators called for an "immediate end" to the program in a letter to Poindexter. "Spending taxpayer dollars to create terrorism betting parlors is as wasteful as it is repugnant," the senators said. "The American people want the federal government to use its resources enhancing our security, not gambling on it." DARPA said yesterday there would be a re-evaluation before more money was committed. In the 1980s, Poindexter was President Reagan's national security adviser when the administration sold arms to Iran in exchange for the release of American hostages in Lebanon, then illegally diverted the proceeds to the contra guerrillas in Nicaragua. He was convicted of lying to Congress, but his conviction was overturned. The Pentagon had no immediate comment on whether the program would go ahead as scheduled. DARPA released a statement saying the program "is currently a small research program that faces a number of major technical challenges and uncertainties." Compiled from reports by the Los Angeles Times, the Baltimore Sun and The Associated Press. IMAGES Byron Dorgan (0393323552) Ron Wyden (0393323561) Copyright [copyright] Seattle Times Company, All Rights Reserved. You must get permission before you reproduce any part of this material. photo; Caption: Byron Dorgan (0393323552); Caption: Ron Wyden (0393323561)