Stranger than fiction....

WASHINGTON, July 29 - The Pentagon office that proposed spying electronically on Americans to monitor potential terrorists has quickly abandoned an idea in which anonymous speculators would have bet on forecasting terrorist attacks, assassinations and coups in an online futures market.

[...]

Under the discarded plan, traders bullish on a biological attack on Israel, say, or bearish on the chances of a North Korean missile strike would have had the opportunity to bet on the likelihood of such events on a new Internet site established by the Defense Advanced Research Projects Agency.

The Pentagon called its latest idea a new way of predicting events and part of its search for the ``broadest possible set of new ways to prevent terrorist attacks.'' But two Democratic senators who disclosed the plan on Monday called it morally repugnant and grotesque. The senators said the program fell under the control of Adm. John M. Poindexter, President Ronald Reagan's national security adviser.

One of the two senators, Byron L. Dorgan of North Dakota, said the idea seemed so preposterous that he had trouble persuading people it was not a hoax. ``Can you imagine,'' Mr. Dorgan asked, ``if another country set up a betting parlor so that people could go in - and is sponsored by the government itself - people could go in and bet on the assassination of an American political figure?''

After Mr. Dorgan and his fellow critic, Ron Wyden of Oregon, spoke out, the Pentagon sought to play down the importance of a program for which the Bush administration has sought $8 million through 2005. The White House also altered the Web site so that the potential events to be considered by the market that were visible earlier in the day at www.policyanalysismarket.org could no longer be seen.

Oddly enough, the principle behind this actually works. Markets have been amazingly successful at predicting seemingly random events, because they are effective tools at collecting dispersed and even hidden information on a grand scale.

That said, betting on the potential assassination of a foreign leader or the likelihood of a deadly hijacking is, to say the least, ethically questionable and morally offensive. I don't know how the White House or the Pentagon could have thought this program, euphemistically called the "Policy Analysis Market," and intended to start registering traders on Friday--would fly politically. Especially with John Poindexter, of Iran-Contra infamy, in charge!

Complete story here.