Administration has taken market fundamentalism to an absurd low.
This article discusses the limitations I was referring to, in a previous entry, in a different way. It is very good.
"Under the proposal, which the administration disowned almost as soon as it became public, participants would have been betting, in effect — and perhaps profiting — on such potential events as an attack by North Korea or an assassination of Yasser Arafat.
Of course, no one expected DARPA's John M. Poindexter — notorious for his eventually overturned conviction for lying to Congress about Irangate — to approach the problem from the perspective of economic theory. But what was he thinking? Did he believe there is widespread information about terrorist activity not currently being either captured or appropriately analyzed by the "experts" in the FBI and the CIA? Did he believe that the 1,000 people "selected" for the new futures program would have this information? If so, shouldn't these people be investigated rather than rewarded?
But there are more fundamental problems with the idea. If trading is anonymous, then it could be subject to manipulation, particularly if the market has few participants — providing a false sense of security or an equally dangerous false sense of alarm. If trading is not anonymous, then anyone with information about terrorism would be, understandably, reluctant to trade on it. In that case, the market would not serve its purpose.
Now consider the second function of futures markets — insurance. The Pentagon's proposal would have allowed those with the sophistication and money to "hedge" against the threat of terrorism, financially at least, leaving the rest of Americans fully exposed! Though we have come to expect such inequities from the Bush administration's tax policies, surely the U.S. government should be concerned with the exposure of all Americans to terrorism.
Notice that in proposing this idea, at least the Bushies are recognizing the limitations of the innovative capacity of markets. If this is such a good idea, why haven't the markets created it on their own?
Interestingly, the group promoting the idea, DARPA, had — before Bush took over — a credible record of promoting some important innovations, including an important role in the early days of the Internet.
In its own peculiar way, the administration has once again recognized the limitations of markets — as it did with the airline bailouts, steel tariffs and agriculture subsidies. But once again, the lack of intellectual foundation or a firm grasp of economic principles — or the pursuit of other agendas — has led to a proposal that almost seems a mockery of itself."
"His poll ratings are down, his administration's credibility on Iraq has been challenged and the economy continues to limp along, but everywhere he looked yesterday, President Bush saw reasons for optimism."
Dubya really has no choice. However, Republicans require an unchallenged environment in which their evaluation of the situation is accepted and regurgitated without challenge. This is accomplished internally, with lock-step "ditto-head" precision, and, until recently, with a fairly compliant and complacent mainstream media, was accomplished externally.
A Fox "news" broadcaster the other day, forced by the sheer pressure of media challenges from other outlets, caveated her questions about the White House spin with the remark: "Of course we all trust what the President says".
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