US drops `stupid' terror market plan
The Associated Press, 30 July 2003
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THE Pentagon on Tuesday abandoned a plan to establish a futures market that would have allowed traders to profit by correctly predicting assassinations and terrorist strikes in the Middle East. Paul Wolfowitz announced the `unbelievably stupid' plan would be dropped.
The Associated Press, 30 July 2003
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THE Pentagon on Tuesday abandoned a plan to establish a futures market that would have allowed traders to profit by correctly predicting assassinations and terrorist strikes in the Middle East. Paul Wolfowitz announced the `unbelievably stupid' plan would be dropped.
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Facing outraged Democratic senators, Deputy Defense Secretary Paul Wolfowitz said he learned of the program in the newspaper while heading to a Senate Foreign Relations hearing on Iraq.
Facing outraged Democratic senators, Deputy Defense Secretary Paul Wolfowitz said he learned of the program in the newspaper while heading to a Senate Foreign Relations hearing on Iraq.
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"I share your shock at this kind of program," he said. "We'll find out about it, but it is being terminated."
"I share your shock at this kind of program," he said. "We'll find out about it, but it is being terminated."
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Armed Services Committee Chairman John Warner said in an interview that he received assurance from the head of the Pentagon agency overseeing the program that it would "stop all engines on this matter today."
Armed Services Committee Chairman John Warner said in an interview that he received assurance from the head of the Pentagon agency overseeing the program that it would "stop all engines on this matter today."
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Warner spoke by telephone with Tony Tether, head of the Pentagon's Defense Research Projects Agency, after consulting with Intelligence Committee Chairman Pat Roberts and Appropriations Chairman Ted Stevens.
Warner spoke by telephone with Tony Tether, head of the Pentagon's Defense Research Projects Agency, after consulting with Intelligence Committee Chairman Pat Roberts and Appropriations Chairman Ted Stevens.
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The three agreed "that this should be immediately disestablished," Warner said.
The three agreed "that this should be immediately disestablished," Warner said.
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Warner said that DARPA "didn't think through the full ramifications of the program."
Warner said that DARPA "didn't think through the full ramifications of the program."
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The little-publicized Pentagon plan envisioned a potential futures trading market in which speculators would wager with one another on the Internet on the likelihood of various economic or political events in the Middle East, including terrorist attacks or assassinations. A Web site promoting the plan already is available and registration of traders was to begin Friday.
The little-publicized Pentagon plan envisioned a potential futures trading market in which speculators would wager with one another on the Internet on the likelihood of various economic or political events in the Middle East, including terrorist attacks or assassinations. A Web site promoting the plan already is available and registration of traders was to begin Friday.
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When the plan was disclosed Monday by Democratic Senators Ron Wyden of Oregon and Byron Dorgan of North Dakota, the Pentagon defended it as a way to gain intelligence about potential terrorists' plans.
When the plan was disclosed Monday by Democratic Senators Ron Wyden of Oregon and Byron Dorgan of North Dakota, the Pentagon defended it as a way to gain intelligence about potential terrorists' plans.
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Wyden called it "a federal betting parlor on atrocities and terrorism."
Dorgan described it as "unbelievably stupid."
Wyden called it "a federal betting parlor on atrocities and terrorism."
Dorgan described it as "unbelievably stupid."
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Criticism mounted Tuesday when on the Senate floor, Democratic Leader Thomas Daschle of South Dakota denounced the program as "an incentive actually to commit acts of terrorism."
At an Armed Services Committee hearing, Sen. Hillary Rodham Clinton called it "a futures market in death."
Criticism mounted Tuesday when on the Senate floor, Democratic Leader Thomas Daschle of South Dakota denounced the program as "an incentive actually to commit acts of terrorism."
At an Armed Services Committee hearing, Sen. Hillary Rodham Clinton called it "a futures market in death."
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Republicans joined in the criticism: at a news conference, Warner, Stevens and Roberts said they had not been told details of the program and would never have supported it.
"This defies common sense. It's absurd," Roberts said. Warner called it "a rather egregious error of judgment."
Republicans joined in the criticism: at a news conference, Warner, Stevens and Roberts said they had not been told details of the program and would never have supported it.
"This defies common sense. It's absurd," Roberts said. Warner called it "a rather egregious error of judgment."
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At the Foreign Relations hearing, Wolfowitz defended DARPA, saying "it is brilliantly imaginative in places where we want them to be imaginative. It sounds like maybe they got too imaginative," he said, smiling.
At the Foreign Relations hearing, Wolfowitz defended DARPA, saying "it is brilliantly imaginative in places where we want them to be imaginative. It sounds like maybe they got too imaginative," he said, smiling.
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Sen. Barbara Boxer, a Democrat, told Wolfowitz "I don't think we can laugh off that program,"
"There is something very sick about it," she said, "and if it's going to end, I think you ought to end the careers of whoever it was thought that up. Because terrorists knowing they were planning an attack could have bet on the attack and collected a lot of money. It's a sick idea."
DARPA has been criticized by Congress for its Terrorism Information Awareness program, a computerized surveillance program that has raised privacy concerns.
Sen. Barbara Boxer, a Democrat, told Wolfowitz "I don't think we can laugh off that program,"
"There is something very sick about it," she said, "and if it's going to end, I think you ought to end the careers of whoever it was thought that up. Because terrorists knowing they were planning an attack could have bet on the attack and collected a lot of money. It's a sick idea."
DARPA has been criticized by Congress for its Terrorism Information Awareness program, a computerized surveillance program that has raised privacy concerns.
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Wyden said the Policy Analysis Market is under the supervision of retired Admiral John Poindexter, the head of the Terrorism Information Awareness program and, in the 1980s, national security adviser to President Reagan.
Wyden said the Policy Analysis Market is under the supervision of retired Admiral John Poindexter, the head of the Terrorism Information Awareness program and, in the 1980s, national security adviser to President Reagan.
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Warner said Poindexter and Tether had personally reviewed the program.
Warner said Poindexter and Tether had personally reviewed the program.
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Warner, Roberts and Stevens declined to say whether the two men should be fired. Tether was to meet with lawmakers later Tuesday.
Warner, Roberts and Stevens declined to say whether the two men should be fired. Tether was to meet with lawmakers later Tuesday.
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The program is called the Policy Analysis Market. DARPA said it was part of a research effort "to investigate the broadest possible set of new ways to prevent terrorist attacks."
The program is called the Policy Analysis Market. DARPA said it was part of a research effort "to investigate the broadest possible set of new ways to prevent terrorist attacks."
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Traders would have bought and sold futures contracts - just like energy traders do now in betting on the future price of oil.
Traders would have bought and sold futures contracts - just like energy traders do now in betting on the future price of oil.
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But the contracts in this case would have been based on what might happen in the Middle East in terms of economics, civil and military affairs or specific events, such as terrorist attacks.
Holders of a futures contract that came true would have collected the proceeds of traders who put money into the market but predicted wrong.
But the contracts in this case would have been based on what might happen in the Middle East in terms of economics, civil and military affairs or specific events, such as terrorist attacks.
Holders of a futures contract that came true would have collected the proceeds of traders who put money into the market but predicted wrong.
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A graphic on the market's Web page Monday 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.
A graphic on the market's Web page Monday 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.
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Although the Web site described the Policy Analysis Market as Middle East market, the graphic also included the possibility of a North Korea missile attack. The graphic was later removed from the Web site.
In a statement Monday, DARPA said markets could reveal "dispersed and even hidden information.
Although the Web site described the Policy Analysis Market as Middle East market, the graphic also included the possibility of a North Korea missile attack. The graphic was later removed from the Web site.
In a statement Monday, DARPA said markets could reveal "dispersed and even hidden information.
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"Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions."
"Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions."
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According to its Web site, the Policy Analysis Market would be a joint program of DARPA and two private companies, Net Exchange, a market technologies company, and the Economist Intelligence Unit, the business information arm of the publisher of The Economist magazine.
Trading was to begin Oct. 1. The market would have been open to at least 10,000 investors by Jan. 1.
According to its Web site, the Policy Analysis Market would be a joint program of DARPA and two private companies, Net Exchange, a market technologies company, and the Economist Intelligence Unit, the business information arm of the publisher of The Economist magazine.
Trading was to begin Oct. 1. The market would have been open to at least 10,000 investors by Jan. 1.
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The Web site says government agencies will not be allowed to participate and will not have access to the identities or funds of traders.
The Web site says government agencies will not be allowed to participate and will not have access to the identities or funds of traders.
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The Policy Analysis Market is part of a DARPA project called FutureMAP, or "Futures Markets Applied to Prediction."
The Policy Analysis Market is part of a DARPA project called FutureMAP, or "Futures Markets Applied to Prediction."
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FutureMAP is run by Poindexter's division of DARPA, the Information Awareness Office, and the products of FutureMAP were to be given to the Terrorism Information Awareness project, another one of Poindexter's programs, for evaluation.
FutureMAP is run by Poindexter's division of DARPA, the Information Awareness Office, and the products of FutureMAP were to be given to the Terrorism Information Awareness project, another one of Poindexter's programs, for evaluation.
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Copyright © 2001 The Associated Press Reprinted for Fair Use Only.
Copyright © 2001 The Associated Press Reprinted for Fair Use Only.
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Pentagon scraps terror betting plans
Mark Tran and agencies
Tuesday July 29, 2003
Guardian UnlimitedThe Pentagon today said it would abandon plans to create a futures trading market to help predict terrorist attacks and assassinations in the Middle East, after fierce criticism by politicians.
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The initiative, called the Policy Analysis Market (Pam), was to allow traders to place money on an online market to back their hunches on, for example, a coup in Jordan or a biological attack on Israel.
The initiative, called the Policy Analysis Market (Pam), was to allow traders to place money on an online market to back their hunches on, for example, a coup in Jordan or a biological attack on Israel.
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After details of the plan were disclosed yesterday, Senate Democratic Leader Thomas Daschle condemned the scheme as "an incentive actually to commit acts of terrorism".
After details of the plan were disclosed yesterday, Senate Democratic Leader Thomas Daschle condemned the scheme as "an incentive actually to commit acts of terrorism".
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Today, the chairman of the Senate armed services committee, Republican Senator John Warner, said he spoke by phone with the programme's director, "and we mutually agreed that this thing should be stopped".
Today, the chairman of the Senate armed services committee, Republican Senator John Warner, said he spoke by phone with the programme's director, "and we mutually agreed that this thing should be stopped".
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Mr Warner said he also consulted with Senate intelligence committee chairman Pat Roberts and appropriations committee chairman Senator Ted Stevens, both Republicans, and they agreed "that this should be immediately disestablished".
Mr Warner said he also consulted with Senate intelligence committee chairman Pat Roberts and appropriations committee chairman Senator Ted Stevens, both Republicans, and they agreed "that this should be immediately disestablished".
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They said they would recommend that the Pentagon freezes spending on the programme and would officially pull the plug on it during government budget negotiations later this year.
They said they would recommend that the Pentagon freezes spending on the programme and would officially pull the plug on it during government budget negotiations later this year.
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Pam was a joint project of the Pentagon's defence advanced research projects agency and two private companies: Net Exchange, a market technologies company, and the Economist Intelligence Unit, part of the Economist magazine. It was widely condemned after it was revealed yesterday by two Democrat senators.
Pam was a joint project of the Pentagon's defence advanced research projects agency and two private companies: Net Exchange, a market technologies company, and the Economist Intelligence Unit, part of the Economist magazine. It was widely condemned after it was revealed yesterday by two Democrat senators.
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One of them, Byron Dorgan, a Democratic senator from North Dakota, called the concept a "sick idea".
One of them, Byron Dorgan, a Democratic senator from North Dakota, called the concept a "sick idea".
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"I think this is unbelievably stupid," he told reporters. "It combines the worst of all our instincts. It is a tragic waste of taxpayers' money, it will be offensive to almost everyone. Can you imagine if another country set up a betting parlour 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."
"I think this is unbelievably stupid," he told reporters. "It combines the worst of all our instincts. It is a tragic waste of taxpayers' money, it will be offensive to almost everyone. Can you imagine if another country set up a betting parlour 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."
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The Pentagon had argued that analysts often use prices from various markets as indicators of potential events. A website promoting the plan said: "Pam refines this approach by trading futures contracts that deal with underlying fundamentals of relevance to the Middle East initially."
The Pentagon had argued that analysts often use prices from various markets as indicators of potential events. A website promoting the plan said: "Pam refines this approach by trading futures contracts that deal with underlying fundamentals of relevance to the Middle East initially."
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In the section about becoming a Pam trader, the website said: "Whatever a prospective trader's interest in Pam, involvement in this group prediction process should prove engaging and may prove profitable."
In the section about becoming a Pam trader, the website said: "Whatever a prospective trader's interest in Pam, involvement in this group prediction process should prove engaging and may prove profitable."
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More generally, the Pentagon said Pam formed part of its search for the broadest possible set of new ways to prevent terrorist attacks.
More generally, the Pentagon said Pam formed part of its search for the broadest possible set of new ways to prevent terrorist attacks.
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"Research indicates that markets are extremely efficient, effective and timely aggregators of dispersed and even hidden information," the defence department said. "Futures markets have proved themselves to be good at predicting such things as elections results; they are often better than expert opinions."
"Research indicates that markets are extremely efficient, effective and timely aggregators of dispersed and even hidden information," the defence department said. "Futures markets have proved themselves to be good at predicting such things as elections results; they are often better than expert opinions."
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Live trading was scheduled to start in October, with registration limited initially to 1,000 traders, rising to at least 10,000 by January next year. Traders would have been asked to deposit money into an account and win or lose money depending on how well they predicted events.
Live trading was scheduled to start in October, with registration limited initially to 1,000 traders, rising to at least 10,000 by January next year. Traders would have been asked to deposit money into an account and win or lose money depending on how well they predicted events.
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The Pam trading system would ensure that the prices for a futures contract on a particular issue - such as the fall of the Jordan monarchy during the Iraq war - added up to $1. Thus the price for a contract would also be a prediction, with 35 cents equalling a 35% prediction of the monarchy's downfall. If that occured, the person who has paid 35 cents would have made 65 cents profit.
The Pam trading system would ensure that the prices for a futures contract on a particular issue - such as the fall of the Jordan monarchy during the Iraq war - added up to $1. Thus the price for a contract would also be a prediction, with 35 cents equalling a 35% prediction of the monarchy's downfall. If that occured, the person who has paid 35 cents would have made 65 cents profit.
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Critics of the idea pointed out the scope for abuse as terrorists could take part because the traders' identities would have been unknown.
Critics of the idea pointed out the scope for abuse as terrorists could take part because the traders' identities would have been unknown.
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"This appears to encourage terrorists to participate, either to profit from their terrorist activities or to bet against them in order to mislead US intelligence authorities," said Mr Dorgan and a fellow critic, Senator Ron Wyden, a Democrat from Oregon.
"This appears to encourage terrorists to participate, either to profit from their terrorist activities or to bet against them in order to mislead US intelligence authorities," said Mr Dorgan and a fellow critic, Senator Ron Wyden, a Democrat from Oregon.
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So far $750,000 (£461,000) has been spent on the project and the Pentagon wanted another $8m for the internet programme.
So far $750,000 (£461,000) has been spent on the project and the Pentagon wanted another $8m for the internet programme.
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Opponents said that Pam originated from the same Pentagon office that proposed spying electronically on Americans as an anti-terrorist measure, the terrorism information awareness office, led by Admiral John Poindexter.
Opponents said that Pam originated from the same Pentagon office that proposed spying electronically on Americans as an anti-terrorist measure, the terrorism information awareness office, led by Admiral John Poindexter.
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The national security adviser under President Ronald Reagan, Mr Poindexter resigned over the Iran-Contra scandal, when he and Oliver North, a marine colonel, set up a plan to sell arms secretly to Iran and funnel the receipts to Nicaraguan rebels.
The national security adviser under President Ronald Reagan, Mr Poindexter resigned over the Iran-Contra scandal, when he and Oliver North, a marine colonel, set up a plan to sell arms secretly to Iran and funnel the receipts to Nicaraguan rebels.
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