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| Bubble bursts on Pentagon IT start-up | |
Things move fast in the Information Technology arena, but the
last 24 hours have been a blur for some geeks at the Pentagon. They launched a
bet-on-terrorism site which was to enable people to make bets with each other
about terrorist actions. Then they abandoned the site after being shouted down
by the left. Presumably these geeks got to talking to free-market types, and
realized that markets predict world events better than panels of peer-reviewing
experts, and thought the
best way to evaluate risks was by looking at the market price of risk. Why does this work? Basically because every grubby government-funded expert is
miniature politician. They are
experts in making predictions, giving advice, and (when they are demonstrated
wrong) explaining why they were really right because of other factors which
couldn't have reasonably accounted for. On the other hand every stock market investor has to make a genuine assessment
of risk. If they are wrong, they can't just bluff about how they were really
right - their bank account tells the story, and all they can do is lick their
wounds, and try to get it right next time, or get out of the game. The successful investor is one who has made good decisions about where to move
investment capital. The successful government analyst is expert merely at
getting air-time at executive meetings. Hence, people who make good predictions about world events would make a lot of
money from the bet-on-terrorism site, while people who made poor predictions
would lose money. And as with markets generally - over time, those who make
good decisions end up with more capital to bet, and the predictions get even
better. But collectivism
hates rewarding talent. The leftist politicians instantly produced the
predictable hysterical slogans "federal betting parlor on atrocities",
"a plan to trade in death" and "ridiculous and grotesque". This was a plan which was destined to fail - it just challenged too many
leftist beliefs - in particular, beliefs about insider trading. Rene Rivkin recently did goal time for Insider trading (if only
for a day), and people consider it to be an evil thing. But insider trading on
a terrorism future is likely to be a good thing - the price change is likely to
alert people to the real risk. As it could in many other situations: - How many US generals in the Cold War would have seriously bet that the
USSR had a more efficient fighting force than it actually did. Overstating communist muscle may have
helped their careers, but their personal greeds and insider knowledge would
have bid the price down.
- How many pro-asylum
seekers would have actually bet that Ali Baktiari was from Afghanistan?
- What would the market price on children overboard have been in the lead-up
to the previous election? (It would have been interesting to see John Howard's
bids too).
But less than a day after the site was launched, the protests and squealing
achieved their purpose, and it was taken down. And once again those who were
good at getting air-time got their way, and managed to drown out those
who actually believe in their own judgment. The smart money in this
round would have always been on the collectivists.
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