Mideast 'Futures' System Set

[madape]

Mideast 'Futures' System Set
Pentagon Project Would Use Market to Seek Information
By Ken Guggenheim
Associated Press
Tuesday, July 29, 2003; Page A15


The Pentagon is setting up a commodity-market style trading system in which investors would be able to bet on political and economic events in the Middle East -- including the likelihood of assassinations and terrorist attacks.

Two Democratic senators said yesterday they want the project stopped before investors begin registering this week.

The Pentagon office overseeing the program said it is part of a research effort "to investigate the broadest possible set of new ways to prevent terrorist attacks." It said there will be a reevaluation before more money is committed.

The Policy Analysis Market (PAM) is intended to help the Pentagon predict events in the Middle East based on investors' information or analyses.

A graphic on the market's Web page showed hypothetical futures contracts in which investors could trade on the likelihood that Palestinian leader Yasser Arafat would be assassinated or Jordanian King Abdullah would be overthrown.

Although the Web site described PAM as "a market in the future of the Middle East," the graphic also included the possibility of a North Korean missile attack.

That graphic was apparently removed from the Web hours after the news conference held by Sens. Ron Wyden (D-Ore.) and Byron L. Dorgan (D-N.D.). "The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," Wyden said.

Dorgan said, "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?"

According to its Web site, PAM is a joint program of the Pentagon's Defense Advanced Research Projects Agency (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.

DARPA has received strong criticism from Congress for its Terrorism Information Awareness program, a computerized surveillance program that has raised privacy concerns. Wyden said PAM is under John M. Poindexter, a key figure of the 1980s Iran-contra scandal.

DARPA said yesterday that markets offer effective and timely methods for collecting "dispersed and even hidden information. Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions."

According to the plan for PAM, contracts will 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. They also will be available on "global economic and conflict indicators" and specific events.

Traders who believe an event will occur can buy a futures contract. Those who believe the event is unlikely can try to sell a contract.

Registration is scheduled to begin Friday, with trading beginning Oct. 1. The market would initially be limited to 1,000 traders, increasing to at least 10,000 by Jan. 1.

The Web site says government agencies will not be allowed to participate and will not have access to the identities or funds of traders.

Wyden said $600,000 has been spent on the program so far and the Pentagon plans to spend an additional $149,000 this year. The Pentagon has requested $3 million for the program for next year. Wyden said the Senate version of next year's defense spending bill would cut off money for the program, but the House version would fund it. The two versions will have to be reconciled.