David R. Henderson  

Bet on Terrorist Incident

PRINT
Ancestry and Long-Run Growth R... My Future of Freedom Foundatio...

On Monday, I attended an excellent event at the Hoover Institution on the work and influence of the late Robert Conquest. Recall that he was the person who, with his 1968 book, The Great Terror, "outed" Joseph Stalin as a mass murderer. I took my autographed copy of his book and showed one of Bob's grandsons how weather worn the binding was compared to the front cover because it had been exposed to the sun since I bought the book in--1968.

In a discussion with one of the other participants during a break, I said that the Pacific Ocean is awfully handy as a protection against a Chinese attack on the mainland. She pointed out that terrorists, Chinese or otherwise, could carry out a terrorist attack within the United States without an invasion. I agreed, but said that would be unlikely.

Immediately, she proposed a bet. I loved that because I'm almost always the one who proposes a bet and this time I didn't have to.

She has given me permission to state our bet but she said that it's a private matter between us and so she doesn't want me to use her name. I agreed.

Here's her side of the bet:

By January 25, 2021, there will be a terrorist attack in the United States (including the continental United States, Hawaii, and Alaska) that kills at least 3,000 people.

We've bet even odds for $100.

Of course, she and I both hope I win.


Comments and Sharing






COMMENTS (17 to date)
Eric Hanneken writes:

Don't tell Byron Dorgan or Ron Wyden about this bet.

Ryan Singer writes:

Her side is an excellent hedge.

ThaomasH writes:

I think the content of the bet is indicative of just how insignificant the terrorist threat is to the United States. Even if we added the threats to US citizens and assets abroad I still think it is minuscule. A proper cost benefit analysis would be hard to do, but my strong impression is that federal and local spending to prevent terrorist attacks are far out of proportion to the harm such attacks can cause. To me the clearest excess cost (not necessarily the largest) is the nationalization of the airport security industry. Surely it would be more efficient for each airport to to balance the risks and costs of avoiding risk.

RPLong writes:

I share David's optimism in this matter.

@ Eric - Maybe we can tell them about the bet if we also inform Jason Brennan and Peter Jaworski. ;) It might make for an interesting discussion, at least.

Matt Moore writes:

Seems like the '3000' piece is the key variable.

That is pretty ambitious for any terrorist.

I would offer the bet at 100 people.

ChacoKevy writes:

Pardon the grisliness of the question, but does the fatality have to occur in the immediate aftermath of the attack? I'm thinking along the lines of responders who could possibly be exposed to contaminants that could claim them second-hand years later.

ThaomasH writes:

I agree that the bet would be better stated as cumulative fatalities over a period.

Art Carden writes:

This is an interesting bet, and the last sentence says something important, I think, about Sandel's criticism of information markets: your opponent has a stake in a bad outcome, yes, but she still wants to lose the bet.

I just read Brennan and Jaworski's book, so my understanding of Sandel's argument is secondhand (his book is on my Kindle, don't worry, I'll read it). Like them, I don't see how information markets are fundamentally any more blameworthy than insurance.

Jesse C writes:

I see nothing wrong with the $100 bet, but if the stake was, say, $1 trillion, I would start to worry about moral hazard.

Similar situation: Trader A takes enormous long position in crude futures, Trader B takes opposing short position. (Suppose Trader A will make $1 trillion profit if the price rises $10/barrel.) It may be far easier for A to disrupt supply than for B to try to police it.

This does/should not happen in financial derivatives markets, as long as attempts at "manipulation" are kept in the bounds of the free market - both parties have equal/opposing incentives, which should negate each other. But it seems like it is a natural thing for some prediction markets when the event is can be manipulated and the stakes are high. Am I wrong?

Alex writes:

3000 people is a lot, how low were you willing to take that number and still bet?

David R. Henderson writes:

@Alex,
3000 people is a lot, how low were you willing to take that number and still bet?
I don’t know. Make me an offer.

Hugh writes:
By January 25, 2021, there will be a terrorist attack in the United States (including the continental United States, Hawaii, and Alaska) that kills at least 3,000 people.

I would say that the attacks of 9/11/2001 meet the criteria: time to pay up.

David R. Henderson writes:

@Hugh,
I would say that the attacks of 9/11/2001 meet the criteria: time to pay up.
We were, of course, talking about an event that happens between January 25, 2016 and January 25, 2021, as I’m guessing you know.

Nathan W writes:

Highly doubt it.

Micke writes:

Quick googling found this link: Worst terrorist strikes in the United States

If this list is reasonably complete, it suggests a massive, massive advantage for David, with an expected break-even point at ~50, far less than I would have guessed.

I would personally take this bet at around 200 people. Not conicidentally, that is roughly how many people a single suicide bomber at a crowded shopping mall could expect to kill. Doing more than that is, as the list shows, really hard.

Rick Bohan writes:

I'm still trying to figure out how the possibility of a terrorist attack in the US was used as a rebuttal for the argument that the Pacific Ocean has always reduced the potential for attach from China.

Yaakov writes:

@Micke

Israel sadly has quite a bit of experience with suicide attacks. I do not remember them ever going above 40 casualties, even those with 2-3 suicide bombers. I realize that in other countries the numbers are higher, but I would assume that is because they are either much more crowded or that terrorists have easier access to large amounts of explosives. I would assume in that respect the US is more similar to Israel.

I would assume the person involved in the bet is thinking of nuclear or a new type of attack we are not expecting (as 9/11 was).

Comments for this entry have been closed
Return to top