Holy sh*t, did you hear the one about the Pentagon’s world events betting parlour?

So here’s the deal: There’s this R&D institue the Pentagon employs called DARPA – the Defense Advanced Research Projects Agency. They’ve been tapped by the Pentagon to “investigate the broadest possible set of new ways to prevent terrorist attacks”. That’s not suprising. It’s exactly the sort of thing I would tap DARPA to do if I were the Pentagon.

Well, the boffins at DARPA are and always have been a clever bunch. Ever heard of ARPAnet? ARPA is what they used to call DARPA. ARPAnet is what they used to call the internet, back when ARPA invented it. They’re thinkers, interested in the interface between theory and technology. Thus they are doing good business in this current climate of anti-terrorism madness, when big US agencies are understandably unhappy with the current status of counterespionage techniques, are are willing to shovel their funds waaay into the back of the furnaces of R&D if they think it might stoke up some new ideas. Being theory wonks, DARPA also isn’t so very concerned with political appearances, or ethics and morality for that matter. Being theory wonks with no such concerns, when the Pentagon asked for some assistance, they cooked up a good one.

The theory: bettor’s markets, such as “futures” markets are often the best predictors of what’s gonna happen. These “markets” are a sanctioned booking board in which people get to lay their money on either side of a binary question. Will the price of pigs go up or down? If they bet right, they get the money of the people who guessed wrong. The aggregate opinions expressed by this bidding tends to be a better crystal ball than the opinions of individual experts. You might not know the bettors’ reasons, or what inside knowledge they’re operating on, but you can assume they’ve got ’em or they wouldn’t be putting their money on the line. And this goes on all the time, it’s one of those statistics the marketplace reporter reels off during the radio news broadcast. However, futures markets have generally focused on commodities like wheat and iron.

DARPA’s idea: a project called FutureMAP, or “Futures Markets Applied to Predictions”. In other words, why not get people betting on the future of all kinds of things? You don’t actually have to ask them what they know, just provide a sanctioned system for them to bet money on what will happen and if they have knowledge, they’ll use it to try and win money. You get to pose the questions, and it’s self-correcting in the Adam Smith sense that people will use their best knowledge because they stand to gain and loose ca$h. Those who are most convinced of their knowledge will bet the most. Sweet.

So what kinds of questions does the Pentagon want answered? Well, the obvious ones, obviously. Will Yasser Arafat be assasinated? Will Saddam Hussien be found? Will North Korea launch a nuclear missile? And I’m not making this up folks, these are the questions the Pentagon itself has released as examples. And this wasn’t a theoretical idea either. This system was supposed to be up and running, under Pentagon control, with bettors registered and questions on the board and money changing hands, by Oct 1st. There was already a webpage where you could read about it and get excited.

But it wasn’t to be. Someone in the media clued in to it. By this morning it was in the papers. By this afternoon the whole of congress and the senate were jumping on top of each other to try and get the highest perch to shout about how terrible it is. Thank goodness. Can you imagine? But what a fascinating thing. When else could something like that come so close to actually going online. I can only guess what world reaction would be to the US setting up a government system to bet on wether or not their leader was going to be assasinated or if their country was going to blow up some other country. News reports could be accompanied by the current trading on the outcome of the reported potential crises. And think of the feedback loops. How does it affect the thinking of the Israeli military if they realize that the world more or less expects them to kill Yasser Arafat? How would North Korea feel if they knew people were betting they don’t have the nalgas to blow up one of their bombs? And of course, you could always bet heavily on Saddam Hussein’s demise if you had a good line of sight on him…

Fascinating.