Alas for DARPA:

It appears that DARPA's plan to create a futures market for speculation on terrorism has died an undeserved death. This is due to a total lack of comprehension on the part of the US Senate, which simply isn't smart enough to understand why this was a remarkable and brilliant idea.

The business of predicting terror attacks is very much like the futures business, as it is like the actuarial business (the people who determine the rates for insurance companies are called Actuaries). A question the government has been considering for some time is this: given that the US has the finest actuaries and futures speculators in the world, how can we tap that knowledge for use in the terror war? The central problem is that the knowledge is out there, but that the government can't really compete with the market for the services of the very best of these guys. The top speculators make millions a year.

DARPA thought of a way to tap them: make a new market, one that rewards them in much the same way as the existing market. The potential value to the terror war was immeasurable. For example, when a terror threat comes in that is against NYC, the country really has no mechanism except to raise the terror alert for the entire country. That means that Cumming, Georgia goes on High (Orange) alert just like Los Angeles and NYC. The US government's resources are likewise spread across many threat-areas. Top actuaries would be able to predict much more accurately what areas are really threatened, allowing a better distribution of resources and a more accurate prediction of terror acts. Futures speculators would likewise bring a new perspective to predictive analysis, and would be better than military men at seeing nontraditional targets that terrorists could hit.

All that for a projected cost to DARPA of five million dollars. For five million bucks, you couldn't hire a handful of the top actuaries and speculators, but DARPA would have tapped potentially all of them. Gentlemen, I salute you--just because the Senate is full of bloviating idiots does not mean that your work is totally unappreciated. Better luck next time.

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