Pat Buchanan

Question: If a veterinarian visiting a Montana ranch should conclude the dead cattle there had died of mad cow disease, who would know first: Congress, or the cattle futures market?

Answer: In hours, word of how the cows died would panic the trading pits. Argentine cattle futures would soar, U.S. cattle futures sink. The impact would be instant on the stock prices of McDonald's, Burger King and Outback.

Investors in futures markets are acutely attuned to anything that affects the price of the commodities they buy and sell by the hour. One credible meteorologist warning of a long, cold winter or summer drought can create havoc in wheat and corn futures.

Over at the Pentagon, until last week, imaginative people were trying to harness that predictive power of futures markets to help us anticipate and prevent acts of terrorism against Americans.

Their arresting idea, however -- of a futures market where the most brilliant anti-terror experts wager on where and how the next strike will come -- thus giving policy-makers instant and constant access to the best consensus judgment -- was mocked to death.

The day the story broke, Oregon Sen. Ron Wyden ranted, "The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque." North Dakota Sen. Byron Dorgan ridiculed the betting pool as "incredibly stupid."

Well, as Forrest Gump used to say, Senator, "Stupid is as stupid does."

The principle on which DARPA, the Defense Advanced Research Projects Agency, was improvising and building is an undeniable one: Markets are far superior to bureaucracies in predicting the future.

Markets will ferret out secrets before keepers want them known. When Martha Stewart learned ImClone's stock was falling, she knew something was wrong. She called Sam Wacksal, the president of ImClone. Sam did not return the call. Martha then called her broker, who told her Sam and his family were all selling shares of their own company. Alerted, Martha dumped her shares.

What was the hidden secret? The FDA was about to announce that ImClone's application for approval of a drug the company had invented had been rejected. Though insider trading was being done, the market was correctly signaling imminent bad news for ImClone.

Consider the greatest strategic disasters to befall America last century and how a bettors' market might have predicted them.

Pat Buchanan

Pat Buchanan is a founding editor of The American Conservative magazine, and the author of many books including State of Emergency: The Third World Invasion and Conquest of America .
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