At Casino America: the house must win

By Jackson Murphy
web posted August 4, 2003

You might have to start thinking about America as the biggest
Casino on the Las Vegas Strip. The one with the most slot
machines and the best all you can eat buffet. If we are in essence
"Casino America", you don't want people like Osama or
Saddam coming in playing black jack for a few hours, sipping on
free drinks, then walking away with all our money. If America is
the house, America must always win.

Last week, the press had a field day with the news that the U.S.
Department of Defense was planning a futures market for those
who wanted to bet on wars, terror, and assassination. The idea
was that by taking wagers on such events the Pentagon could get
a better sense of where people thought the future was heading.
Knowing the best case scenario answers to questions such as,
will Saddam be captured or will Hamas really give up its terrorist
ways might help us prepare for the future.

These questions are tough even with hindsight but by using the
power of a futures market to figure out the answers certainly
doesn't seem like a gross overreach by the government
resources.

Fortune magazine makes a pretty sound case that this system
delivers results. "Betting pools on election results have proven
more accurate than polls, and options markets are better
predictors of future stock prices than the price targets set by
individual equity research analysts. The reason, economists say,
is that markets are extremely efficient at aggregating information
from all investors—including inside information."

The brainchild of all this was Robin Hanson, a economic
professor at the George Mason University. He explains that,
"Our policy-makers and media rely too much on the 'expert'
advice of a self-interested insider's club of pundits and big-shot
academics. These pundits are rewarded too much for telling
good stories, and for supporting each other, rather than for being
‘right'. Instead, let us create betting markets on most
controversial questions, and treat the current market odds as our
best expert consensus. The real experts (maybe you), would
then be rewarded for their contributions, while clueless pundits
would learn to stay away."

And on a cost basis, a paltry $8 million to set up, the market
might have more bang for the buck than the resources spent on
current intelligence gathering.

Perhaps the reason this idea received such a tepid reception is
that the front man for the plan was Admiral John Poindexter.
You might best remember Poindexter for his role in last year's
creepy and ill-fated internet snooping program and his
involvement in the Iran-Contra scandal where he was later
convicted of lying to congress.

What remains is a simple fact. Book makers more often than not,
win. Like a Vegas casino, sooner or later the house wins and
that is the ultimate outcome we want in the war on terror,
victory. So failing to capitalize on this resource seems like a
colossal failure in itself.

And in politics and current events bookies certainly could do no
worse than the miserable track record of political pundits. In
comparison to the intelligence failures that have been the talk of
the town lately, this, clearly, out-of-the-box thinking is almost
refreshing in its honesty and creativeness.

"The point is that for all its defects, the political futures market
was an interesting, unconventional idea for capturing information
that's ‘on the street,'" wrote David Ignatius in The Washington
Post. "The subtle tips and clues that ordinary people know but
that are often lost to our intelligence agencies. My response to
critics would be: Okay, if this approach is wrong, what's a better
idea? But I doubt any brave soul will be funding a similar project
soon."

Some lawmakers were outraged over the possibility that
terrorists could profit on such a market, and that investors could
be rewarded for predicting outcomes involving such macabre
things. Sen. Barbara Boxer (D-Calif) suggested that there was
something, "very sick about it." And Senate Democratic Leader
Tom Daschle added, "I must say this is perhaps the most
irresponsible, outrageous and poorly thought-out of anything that
I have heard the administration propose to date."

But the political posturing of the Senators who helped to shut this
project down has done more harm than good.

Before 9/11 there were plenty of people sounding warnings bells
and suggesting all the various terrible things and methods
terrorists and rogue states could employ. And yet the intelligence
agencies could not conceive or defend against what happened
that fateful day. Perhaps it is time to roll the dice on something
new.

Jackson Murphy is a commentator from Vancouver, Canada.
He a senior writer at Enter Stage Right and the editor of
"Dispatches" a website that serves up political commentary 24-7.
You can contact him at jacksonmurphy@telus.net.

Enter Stage Right -- http://www.enterstageright.com