Terrorism Futures: Good Concept, Bad P.R.

Just a day after its disclosure, a Pentagon proposal to run a terrorism futures--trading market was shut down after it met with bipartisan derision. A letter sent by Democrats to John Poindexter, the program's architect, said such a market, which would have allowed people to speculate on terrorist strikes, assassinations and coups, was "wasteful and absurd." Poindexter is expected to leave his Pentagon post in the wake of the controversy, but we may not have heard the last of the plan. "The p.r. has been bad," says George Neumann, a University of Iowa economics professor. "But people are going to want to revisit these issues."

Neumann is a director of the university's political stock market, which has been more accurate than polls in predicting elections. Similar markets have been useful in predicting oil prices and ticket sales. The theory is simple: when people have something at stake, they act on their deepest convictions, which generates the most accurate information. The market is restricted to a few hundred experts with a modest investment limit. Allowing CIA, State Department and Pentagon authorities to wager their own money on a terrorist strike would quickly aggregate their wisdom and perhaps provide leads. Meanwhile, there's collateral damage. Sources tell TIME that a prototype market for health officials to wager on a SARS outbreak--to help pinpoint hot spots--lost funding in the process. --By Daniel Kadlec