If not DARPA, Ireland

Resilient Markets Department
The Defense Advanced Research Projects Agency (DARPA), in cooperation with outside partners, recently stepped into a political and media firestorm over its plan to offer a prediction-futures market in events like terrorist and rogue-state attacks and middle-east instability. Some politicians even want heads to roll over the plan, now cancelled.

But the core idea is quite old. I recently read The Shockwave Rider, by John Brunner and published in 1975, and it features much the same idea as planned by DARPA.

In Rider, government-run "delphic pools" on an Internet-like network allow mass gambling on all sorts of political/social/economic outcomes.

The pools are used by those in power to both predict developments and measure/shape public opinion, and it is revealed late in the book that the payoffs are sometimes manipulated to mislead the public about actual likelihoods. (Though, compared to all the other levers available to a corrupt government, that could be a mighty expensive means of propaganda, and would constantly enrich those who see through the fake odds.)

Shockwave Rider was explicitly inspired by Alvin Toffler's Future Shock (1970), so perhaps the same idea originally appeared there.

Congressional indignation in this case may stop DARPA from launching such a market... but as with any other ripe concept, it will probably just shift elsewhere. United Kingdom bookies already have a long tradition of offering bets on politics and current events, and other more marginal legal jurisdictions (like the Carribean) love to offer novel internet gambling services.

Already, at an Irish website called TradeSports they're offering markets in futures contracts which will pay off $10 each if...

  • Saddam is "neutralized" by Sep03/Dec03
  • Osama is "neutralized" by Sep03/Dec03
  • WMDs are found in Iraq by Sep03
  • The US "Alert Level" is Red/Orange/Yellow/Blue/Green at the end of Sep03/Dec03
  • Gray Davis is Governor of California at the end of Sep03/Dec03/Mar04
  • Kobe Bryant goes to trial
  • Kobe Bryant is found guilty
This isn't so far from the DARPA idea: if TradeSports were just to offer a few less tasteful contracts naming specific dead leaders and terrorist/revolutionary/aggressive events, it'd be the whole shebang.

Right now, traders are pretty high on Saddam's capture by the end of the year (it costs 60-70 units to win 100), but low on either WMDs being found or Osama being captured soon (it costs less than 30 units to win 100 if these come to pass).

Sentiment is slightly against Gray Davis still being California's governor at the end of 2003 -- with the implied likelihood hovering in the 40-44% range. In other domestic political futures, Kerry is still the favorite to be the 2004 Democratic nominee, Justice Stevens is the favorite to be the next Supreme Court Justice to retire, and Bush is about a 2:1 favorite to win reelection in 2004.

TradeSports is a for-profit enterprise, but evidence from the Iowa Electronic Markets, a non-profit domestic research project allowing real-money bets in similar political questions has, over more than a decade, demonstrated that market mechanisms can predict political outcomes earlier and more reliably than polls and individual experts.

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