Friday, September 12, 2003

Terror Marketplace

A while ago a couple guys - one a liberal, techie, friend of mine - were gloating that Admiral Poindexter got in trouble over his proposal to try to glean terrorist intentions by using market methods (His proposal was that people would essentially "buy shares" in the likelihood of one or another terrorist events happening, thereby raising prices on certain scenarios, which, in turn, might give security people a clue about what to prevent.) I told my friend I thought Poindexter's idea was a good one, that was at least worth exploring. He surprised me by agreeing. In fact he thought Poindexter's plan was a great idea. Furthermore, he said it has already been successfull in other areas. Now I was really confused. I pressed him and it turns out that he just doesn't like Poindexter.

Anyway, one of the objections to Poindexter's plan was that terrorists might buy shares in this terror marketplace and thereby not just destroy things and kill people, but also make money off of it. While that shouldn't be a difficult problem to overcome - just take their names - the project is now dead.

Or is it?

Why would terrorists need a special terror-marketplace? If they were going to bomb an oil refinery, why not just short the oil company's stock? Or if they're going to do more evil things to an airline, why not just short the airline's stock?

This in turn suggests that a fair proxy for Poindexter's terror-marketplace is the New York Stock Exchange. So I hope the Department of Homeland Security and Securities and Exchange Commission are keeping a close eye on short selling. If someone starts beating heavily that an airline's stock is going to drop, that should be a big, fat red flag.

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