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Making a killing: The ethics of predicting terrorism with markets

Making a killing: The ethics of predicting terrorism with markets. Dr Dan Weijers Victoria University of Wellington. Cost of 9/11. Up to 42,000 human lives ~3,000 on 9/11 ~3,000 increased road deaths post 9/11 ~3,000 coalition soldiers in Afghanistan ~3,000 civilian deaths in Afghanistan

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Making a killing: The ethics of predicting terrorism with markets

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  1. Making a killing:The ethics of predicting terrorism with markets Dr Dan Weijers Victoria University of Wellington

  2. Cost of 9/11 • Up to 42,000 human lives • ~3,000 on 9/11 • ~3,000 increased road deaths post 9/11 • ~3,000 coalition soldiers in Afghanistan • ~3,000 civilian deaths in Afghanistan • ~30,000 Taliban deaths in Afghanistan • Up to 7trillion US dollars ($7,000,000,000,000) • ~$100,000,000,000 lives & property on 9/11 • ~$2,000,000,000,000 in stocks, tourism etc. ~$5,000,000,000,000 for war in Afghanistan • Psychological costs Dan Weijers 3/12/2012 Introduction 1

  3. What are the chances of a wmd attack? • Total volume >1,300 Lowest = 5% Highest = 59% Current = 12% Dan Weijers 3/12/2012 Introduction 2

  4. Plan of attack Argument Many moral concerns are non-issues or minor issues Manipulation is main worry Potential benefits are huge if it works US gov (or NATO?) should test • Talk Plan • Prediction markets • PAM • Other PMs • Several moral concerns • Betting on death • Wisdom of repugnance? • Ethical assessment Dan Weijers 3/12/2012 Introduction 3

  5. How prediction markets work • http://www.intrade.com/v4/markets/?eventClassId=82 • https://www.ipredict.co.nz/app.php?do=portfolio • Aggregating diverse knowledge • Market aspect captures credence • Pay vs. play Dan Weijers 3/12/2012 Prediction markets 1

  6. prediction markets & Accuracy • Wisdom of the crowd • Marble # • cow weight estimating • Better than polls and “experts” in some domains • Depends on • # of participants • Diversity of participants • Participants access to “new information” Dan Weijers 3/12/2012 Prediction markets 2

  7. Predicting Terrorism • DARPA  fundsFutureMAP includes sub-project PAM Dan Weijers 3/12/2012 PAM 1

  8. The main method of Predicting Terrorism? • Supposedly better than: • Reports • Delphi • Experts • Polls Dan Weijers 3/12/2012 PAM 2

  9. The fallout • Less than positive comments: • “just wrong” • “ridiculous… grotesque,” • “defies common sense” • “absurd… disgusting” • “loopiest manifestation of… belief… markets [can] solve all problems” • “a new level of absurdity” • “despicable… callous… retarded” • “unbelievably stupid” • FutureMAP terminated asap Dan Weijers 3/12/2012 PAM 3

  10. Private groups take over • Future Exchange • Play money • Small • Open to all • Intrade • Unlimited money • Large • Open to most, but not US now • Ipredict • $10,000 net limit on money in • Small/med • For NZers Dan Weijers 3/12/2012 Other PMs 1

  11. Intrade • WMD TERROR ATTACK • Open interest:709 shares • Open price: $1.15 ≈ 11.5% • Life low: $0.50 ≈ 5.0% • Life high: $5.99 ≈ 59.9% • Total volume: 1,314 shares Dan Weijers 3/12/2012 Other PMs 2

  12. It won’t work • “a new level of absurdity... almost seems a mockery of itself.”—Stiglitz • The actual likelihood of the event can be influenced by the market price • E.g. terrorists see the ‘heat is on’ and reschedule their attack • Open question • Assume it works for this talk Dan Weijers 3/12/2012 Several Moral Concerns 1

  13. Funding the wrong thing • “If our intelligence agencies are that incompetent, shouldn’t we be more concerned with improving the intelligence than setting up some goofy-ass online casino?”—Blogger Greg Saunders • Budget for trial of FutureMAP was 1-5 million US$ • This goofy-ass casino might be what improves intelligence • Non-issue Dan Weijers 3/12/2012 Several Moral Concerns 2

  14. Encouraging terrorism • “Most traders try to influence their investments”–Sen. Daschle • Could cause people to commit acts of terror to make a quick buck • Less risky ways to make money • Could make money from stock market anyway • Non-issue Dan Weijers 3/12/2012 Several Moral Concerns 3

  15. Terrorists will use it to trick us • “[T]erroriststhemselves could… make false bets to mislead intelligence authorities.” –Wyden and Dorgan • Prediction markets very resistant to manipulation • But maybe not for terrorist events • Potential major issue • Should be investigated further Dan Weijers 3/12/2012 Several Moral Concerns 4

  16. Funding terrorists • “Would be assassins and terrorists could easily use… clever trading strategies to profit from their planned misdeeds.”–Pearlstein • Paying bad guys for the greater good • Paying informants • Paying ransoms • It’s a big risk for terrorists • They make their chances of getting caught higher… • A minor issue Dan Weijers 3/12/2012 Several Moral Concerns 5

  17. The repugnance of Bettingon death • “[T]he fact that our government is essentially setting up a terrorist bookmaking operation is despicable.”–Blogger Greg Saunders • Betting on death isn’t new • Life insurance • Military spending decisions • Non-issue unless… Dan Weijers 3/12/2012 Betting on Death 1

  18. How would you like it? • Death pool • Imagine a contract: • On your death or assassination • On a WMD attack on your city • On your PM’s assassination? • Depends on if you were already a target Dan Weijers 3/12/2012 Betting on Death 2

  19. Innocently Profiting from terrorism • Anyone profiting from successful acts of terrorism seems wrong… • But many non-terrorists already accidentally profit from terrorism • People who specialise in monitoring/preventing terrorism • Some stocks • Some businesses • Accidental profiting is a non-issue Dan Weijers 3/12/2012 Betting on Death 3

  20. Purposefully Profiting from terrorism • Believing there will be a terrorist attack and deciding to profit from it • Trying to benefit from an immoral act • Analogy: Using Nazi medical research? • Different motives: help others vs. self? • Seems repugnant when done to benefit self • But what is immoral about it? • Who or what is harmed? Dan Weijers 3/12/2012 Betting on Death 4

  21. Wisdom of repugnance? • …Or knee-jerk moralising? • Person-affecting • Desensitised to terrorism  become terrorist? • Some people would find it offensive • Virtue ethics (character-tarnishing) • Analogy: violent computer games? • Disrespect of an important ideal • Life, peace, freedom? • Analogy: blasphemy? “Shallow are the souls that have forgotten how to shudder.”—Leon Kass Dan Weijers 3/12/2012Wisdom of Repugnance? 1

  22. Motivations & moral effects “PAM… should prove as engaging as it is informative.”—Official PAM website Dan Weijers 3/12/2012 Wisdom of Repugnance? 2

  23. The harms of pms on terrorism • So PMs on terrorism could: • Desensitise people to the point they become terrorists • Offend some people • Encourage greed, pride, callousness, schadenfreude/mild sadism, dishonesty, morbid curiosity, and beneficence • Disrespect the ideals of life, peace, and freedom • … just like computer games? Dan Weijers 3/12/2012 Wisdom of Repugnance? 3

  24. Wisdom of repugnance? • So PMs on terrorism could: • Desensitise people to the point they become terrorists • Disrespect the ideals of life, peace, and freedom • Encourage greed, pride, callousness, schadenfreude/mild sadism, Dishonesty, callousness, morbid curiosity, and benificence • … just like computer games? Dan Weijers 4/12/2012 Betting on Death 1

  25. How serious are The harms? • Desensitise people to the point they become terrorists • Very serious but very very unlikely • Disrespect the ideals of life, peace, and freedom • Not very serious (?) but very likely • Encourage greed, pride, callousness, schadenfreude/mild sadism, dishonesty, morbid curiosity, and beneficence • Not very serious (effects on character will be tiny) but very likely • Offending some people • Not very serious but very likely • = Non-issue • = Minor issue • = Minor issue • = Minor issue Dan Weijers 3/12/2012 Wisdom of Repugnance? 4

  26. Ethical issues scorecard Dan Weijers 3/12/2012Ethical Assessment 1

  27. Ethical assessment Dan Weijers 3/12/2012Ethical Assessment 2

  28. Advantages of FutureMAP over other pms • Both (govt. only PM and PAM) • Control over predictions (more useful to prevent terrorism) • Gather other relevant information • No trading or sign up fees necessary (better market conditions) • Aggregation benefits • PAM • Real money (better accuracy) • Can run controlled experiments on manipulation • Less trivialisation (focus on information, not fun) Dan Weijers 3/12/2012Ethical Assessment 3

  29. conclusion • Investigate possibility of manipulation • If some predictions seem robust vs manipulation, then… • Test FutureMAP • Make sure the test is big and international • Diverse ‘new’ knowledge • 100s of terrorist attacks in world per year, but not many in US • Don’t advertise it as “engaging” Dan Weijers 3/12/2012Ethical Assessment 4

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