Jewish World Review August 6, 2003 / 8 Menachem-Av, 5763

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An attack on progressive thought | The Pentagon caved in to Democratic criticism last week and pulled the plug on a program called the Policy Analysis Market, which would have allowed traders to speculate in an artificial market on economic and political events in the Middle East, including assassinations and terrorist attacks. Retired Admiral John Poindexter, who ran the market, is now expected to resign within the next few weeks.

Sen. Ron Wyden, D-Ore., called the program "repugnant" and "morally wrong," Sen. Byron Dorgan, D-N.D., described it as useless, offensive and "unbelievably stupid." The New York Times piled on with an editorial calling on the Pentagon to fire Poindexter.

There is a minor problem with all these condemnations of the Policy Analysis Market: It just might have been the most accurate predictor of terrorist activity available to us in the war against terrorism.

As it turns out, markets like these are actually very successful at predicting non-financial outcomes and events. The best-known example is the Iowa Electronic Markets, a system set up in 1988 at the University of Iowa as a way to predict elections. Since its inception, the system has successfully predicted the outcome of every presidential election.

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Similar markets have been successful in other areas. Using the price of frozen orange juice futures, professor Richard Roll predicted the weather in Florida more accurately than published meteorological forecasts. And an artificial market at Hewlett Packard, which compiled sales estimates of select employees, beat the company's official sales forecast 15 out of 16 times.

Opponents of the Policy Analysis Market, including Senate Minority Leader Tom Daschle, D-N.D., complained that it would produce undesired side effects, saying the market would be an incentive to commit acts of terrorism. Even by Daschle's standards that rhetoric is hyperbolic nonsense. In reality, the scale and size of this market was such that it would be highly unlikely that traders would attempt to sway outcomes.

"(Daschle) has the magnitudes wrong," said Eric Zitzewitz, an assistant professor of economics at the Stanford Graduate School of Business. "My guess is that you'd be hard-pressed to make more than $1,000 playing that sort of game, and I have no idea what the going rate for an assassination is, but my guess is it's quite a bit above that."

Sen. Jeff Bingaman, D-N.M., called for the resignation of Poindexter. And in an exceptional display of narrow-minded, hidebound thinking, Sen. Barbara Boxer, D-Calif., proclaimed, "If it's going to end, I think you ought to end the careers of whoever it was who thought that up."

Left-wing conformity, anyone?

And what about the right wing? I thought that Donald Rumsfeld liked out-of-the-box thinking, but Deputy Secretary of Defense Paul Wolfowitz couldn't disavow the program fast enough.

We will never know if the Policy Analysis Market would have been successful. But if there was even a small chance that it could have been a useful tool, there should have been further discussion of the idea. This is, after all, not a matter of partisan politics, but one of national security. And forcing the resignations of those involved is a strong deterrent to progressive thinking, of which we have no surplus.

William O. Douglas, the former Supreme Court justice and Securities and Exchange commissioner once said, "The great and invigorating influences in American life have been the unorthodox: the people who challenge an existing institution or way of life, or say and do things that make people think."

Thinking isn't always the strong suit of either the left or the right. And thinking is our best weapon in the war on terror.

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