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  • Homeland Terror: What Are the Odds?

    Posted by Jonathan on September 8th, 2004 (All posts by )

    Beslan seems to have raised a lot of consciousness (as lefties might put it). Until a few weeks ago most of us didn’t seriously consider the possibility that such an attack could happen here. I think that a lot more people now realize that it could easily happen. Lex is right on all points.

    What would happen if it happened? I thought we might not handle it well the first time, and I still think that’s likely to be the case. Matthew Heidt comes to a similar conclusion from a much-better-informed perspective. I agree with Lex and Dave Kopel about the value of armed teachers (and why not parents too), but the PC grip on our educational system is so strong that I suspect many deaths will occur before such common-sense protective measures become accepted. (Links via Instapundit and Hugh Hewitt.)

    But what are the odds something like this will happen? It’s hard to know, but data are available. One quantitative indicator of terror-attack risk is Intrade’s Homeland Security terror-alert contract. The contract’s price level indicates the current, real-money odds that the official Homeland Security threat situation will be at a particular color level at the end of the contract month. There are multiple contracts reflecting various Homeland Security threat levels and expiration months. For the Intrade quote board in the right margin of this blog, I generally select for display the red-alert contract that expires at the end of the current month. I think that contract is probably a good proxy for the best current estimate of near-term terror attack risk.

    For several months the prices on these contracts were usually in a range of 1 bid at 5 offered (1/5), where the numbers represent percentage probabilities. Actual transactions typically occurred at prices around 3. Some contracts that expired later in the year, but before the U.S. election, traded at higher rates, typically around 4 or 5. (The December contract is too illiquid to generalize about.)

    What’s interesting is that the price levels in the liquid contracts have been creeping up, starting before the Beslan attack. The market in the September contract is 7/11.8 as I write this, with the last trade at 8. While the risk of a terror attack is still relatively low, that risk has more than doubled from where it was recently, and looks like it may go higher. And while these numbers don’t predict the future, they do discount the available information and probably are good estimates of actual risk. It does not take much imagination to see that only a modest additional increment of risk — say, an increase from 8% to 16% — is required to raise the perceived danger of attack to a level that would pop onto a lot of people’s radars.

    What would happen then? For example, at what level of apparent risk do parents insist on the right to set up voluntary armed patrols in their children’s schools? At what level do civic organizations put observers on street corners in busy downtown areas to keep an eye out for suspicious trucks? That level of risk might not be much higher than what we’re dealing with now. The main obstacles to doing something about it are probably going to be the political correctness and hostility to citizen empowerment of various bureaucracies, rather than the attitudes of citizens themselves.

    I hope that as a society we pay attention to warnings and get serious about domestic self-defense. Better to appear a little overcautious than to wait until we’re attacked.

     

    2 Responses to “Homeland Terror: What Are the Odds?”

    1. Andy D. Says:

      How is it possible to see the price history for a contract? Thanks.

    2. Jonathan Says:

      Go to Intrade.com. Click on TRADING CATEGORIES>Current Events>Homeland Security US. Then click on the name of a particular contract.