Category: economics

Money is information coined

In the general case, you are not anonymous on the interweb, but economically-anonymous, which I propose to label “enonymous”, and that’s not the same thing at all. If you threaten to kill the President, you will be tracked down, and the state will spend the money it takes on it. But if you call Lily Allen a a hereditary celebrity and copyright hypocrite (not my own views, naturally) then it’s not worth the state’s money to track you down. If Lily wants to spend her own money on tracking you down and taking a civil action for libel, then fair enough, that’s the English way of limiting free speech. If the newspapers want to spend their own money on it, fine.

I think this is an interesting approach, bringing friction into the definition. It resonates as related to an information-centric definition of anonymity. If we say that money is information coined, then we bring in Hayek. Which is always good fun.

The explicit introduction of money as a way to measure (a subset of) privacy invasions allows us to think about the erosion of privacy by the addition of technology. We know that the internet makes it easier, and perhaps money is that yardstick. What does it take to track down your property taxes? It’s gone from sending someone to the county records office to having someone with a browser. So Alice’s privacy with respect to Bob is not only lower, it’s no longer related to the cost of travel. We’ve zero’d out a term in the cost equation, and that leads to all sorts of chaos.

Anyone engaged in the NSTIC discussion should read and ponder the line of reasoning that Dave extracts over a long and chaotic set of sources. His post advances the discussion around NSTIC, and raises questions that must be answered if that work is to lead anywhere.

The NSTIC proposal places no value on anonymity; indeed, it evinces an apparent lack of understanding of what anonymity really means. It takes for granted the need for authentication (if we pay in cash, why does a merchant, much less a common carrier or government agency, need to know about us other than that our money isn’t counterfeit?) and confuses a policy that purportedly restricts disclosure of our identity with actual non-knowledge of our identity.
[From Papers, Please! » Blog Archive » Public says “No” to national cyberspace ID proposal]

If we in Europe decide to develop our own kind of European Strategy on Trusted Identites in Cyberspace (ESTIC) then I think it should not only include both conditional and unconditional anonymity but should strive to make it clear that, like pseudonymity, these types of online persona will be the norm, not the exception.

Databases or Arrests?

From Dan Froomkin, “FBI Lab’s Forensic Testing Backlog Traced To Controversial DNA Database,” we see this example of the mis-direction of key funds:

The pressure to feed results into a controversial, expansive DNA database has bogged down the FBI’s DNA lab so badly that there is now a two-year-and-growing backlog for forensic DNA testing needed to solve violent crimes and missing persons cases.

Civil libertarians call the database — which increasingly includes everyone convicted of every federal law, legally innocent people awaiting trial and non-citizens detained in the U.S. for any reason — unnecessary and unconstitutional.

And yet a review by the Department of Justice’s Inspector General released on Monday concludes that the need to analyze and upload some 96,973 or more DNA samples a year into that database is contributing to a backlog of forensic DNA cases that stood at 3,211 in March.

That translates into a delay of about 150 days to over 600 days for law enforcement agencies who need answers right away.

We need to defund the database and use that money for something more useful, like getting that 150 days down to 5 or 10 for active criminal cases.

Via Michael Froomkin, “FBI Prefers Building DNA Database to Solving Crimes

Mobile Money for Haiti: a contest

This is cool:

The Bill & Melinda Gates Foundation is using its financial clout to push the Haitian marketplace toward change by offering $10 million in prizes to the first companies to help Haitians send and receive money with their cell phones…

The fund will offer cash awards to companies that initiate mobile financial services in Haiti. The first company to launch a mobile money service that meets certain criteria in the next six months will receive $2.5 million. The second operator to launch and reach these benchmarks within 12 months will receive $1.5 million. Another $6 million will be awarded as the first 5 million transactions take place, divided accordingly between those operators that contributed to the total number of transactions.

For more details, see the press release.

It's Hard to Nudge

There’s a notion that government can ‘nudge’ people to do the right thing. Big examples include letting people opt-out of organ donorship, rather than opting in (rates of organ donorship go from 10-20% to 80-90%, which is pretty clearly a better thing than putting those organs in the ground or crematoria). Another classic example was participation in 401k retirement accounts, but somehow after the market meltdown, that’s getting less press.

A smaller example is how telling people they’re using more power than others, their power consumption declined. Awesomeness, right? Conservation is the easiest, freest power you can get. Remember that a 150 watt lightbulb consumes twice as much power as your laptop. And most of that goes to waste heat, but I digress. Let’s go back to that nudge study, described in this Slate article:

In a study evaluating the program’s effectiveness, Opower researchers compared power use before and after the HERs began arriving, and further compared this change with a group of control households that never received the reports. On average, the HER households reduced their consumption in the months that followed by a little less than 2 percent. Not bad, but probably not enough to save the planet.

and also:

One problem with this approach is that we all define “better” differently, as a new study emphasizes. UCLA economists Dora Costa and Matthew Kahn analyzed the impact of an energy-conservation program in California that informed households about how their energy use compared with that of their neighbors. While the program succeeded in encouraging Democrats and environmentalists to lower their consumption, Republicans had the opposite reaction. When told of their relative thrift, they started cranking up the thermostat and leaving the lights on more often. … One explanation is that many conservatives don’t believe that burning energy harms the planet, so when they learn that they’re better than average, they become less vigilant about turning the lights off. That is, they’re simply moving closer to what they now know is the norm.

People are complex. It’s hard to know what matters to people, and it’s hard to know what additional information will do to a market. As Hayek pointed out, this is why central planning fails. The planners can’t know all.

And when we start nudging people, lots more chaos will emerge. Planners don’t become better by giving people opt-outs from their planning. And while nudging is better than authoritarianism, it’s still worse than a government which does only what it needs to do.

In the case of energy consumption, a market is emerging to help people see what drives their energy consumption and environmental impact. Better to let a thousand startups bloom, and let the creativity of engineers and those who care deeply help people drive down their electricity use. Everyone else will pay for their long-burning lights, and if electricity is fairly priced, then that’s their choice.

The paper is at “Energy Conservation “Nudges” and Environmentalist Ideology: Evidence from a Randomized Residential Electricity Field Experiment,” National Bureau of Economic Research.

Women In Security

Today is Ada Lovelace Day, an international day of blogging to celebrate the achievements of women in technology and science.

For Lady Ada Day, I wanted to call out the inspiring work of Aleecia McDonald. In a privacy world full of platonic talk of the value of notice and consent, Aleecia did something very simple: she figured out how long it would take for consumers to do what the Direct Marketing Association recommends: read privacy policies.

She then multiplied that by an estimate of how much it would cost, and demonstrated pretty conclusively what we all intuitively knew: the current scheme is a massive wealth transfer because of transaction costs. (I’m interpreting her results here; I believe she would be more conservative in the interpretation.)

Her work also prefigures Cormac Herley‘s recent work “So Long, and No Thanks for the Externalities: the Rational Rejection of Security Advice by Users.”

So Aleecia McDonald is my choice for a woman in science and technology who’s inspiring me to think about the economics of security and privacy in new ways.

PS: I have an another choice over at The New School blog. Hey, two blogs, two choices.

Some Chaotic Thoughts on Healthcare

Passage of this bill is too big for my little brain, and therefore I’ll share some small comments. I’m going to leave out the many anecdotes which orient me around stupid red tape conflicts in the US, how much better my health care was in Canada (and how some Canadian friends flew to the US for optional procedures), etc.

I am glad that some of the worst elements of the American health care system are getting reined in. I can think of few worse ways to accomplish that goal, and many better ones. People thinking as I do are why the system perpetuated in the form that it did.

I am pessimistic that the system proposed will achieve its broader goals. The Massachusetts model is cumbersome and ineffective. Optimistic ideas about how prices would fall in a regulated market did not come to pass. The likely next step is a government run health system with supplemental insurance available. I expect this will come to pass in 10-20 years. Medicare seems reasonably well run for an American government program.

The Republican failure to push a coherent and principled alternative will haunt them. Going into the next election cycles, 32 million people will have some idea that the Democrats gave them bread and circuses health care. David Frum describes it as a Waterloo. I’m hopeful but not optimistic that the Tea Bagger Party will follow in the tradition of the Know Nothings and just fade away. I used to be hopeful that the Libertarians would split from the Republicans, but they’ve failed to. I would not be surprised to see the Republican minority shrink in 2010 and 2012, and I think some (but not all) of the shrillness I hear is people who fear that outcome is now inevitable.

I do expect that removing the health care impediment to entrepreneurship will be very positive for smaller companies. I wish we’d apply that same thinking to health care, enable people to make choices for themselves, and let the government own the residual risks, as it does today. But no one offered a credible way to un-couple employment and insurance that would let people keep their doctors, short of nationalization.

Anyway, there’s my negative 8 cents on the bill.

Please keep comments civil.

"We can’t circumvent our way around internet censorship."

That’s the key message of Ethan Zuckerman’s post “Internet Freedom: Beyond Circumvention.” I’ll repeat it: “We can’t circumvent our way around internet censorship.”

It’s a long, complex post, and very much worth reading. It starts from the economics of running an ISP that can provide circumvention to all of China, goes to the side effects of such a thing (like spammers using it), and then continues to ask why we want circumvention anyway.

Take some time and go read “Internet Freedom: Beyond Circumvention.”

Ignorance of the 4 new laws a day is no excuse

Code-of-Hammurabi.jpgThe lead of this story caught my eye:

(CNN) — Legislatures in all 50 states, the District of Columbia, Guam, the Virgin Islands and Puerto Rico met in 2009, leading to the enactment of 40,697 laws, many of which take effect January 1.

That’s an average of 753 laws passed in each of those jurisdictions. At 200 working days in a year, which is normal for you and me, that’s nearly 4 laws per day.

Now, there’s a longstanding principle of law, which is that ignorance of the law is no excuse. That goes back to the day when laws, like the code of Hammurabi, were inscribed at a rate of about 4 letters per day. The laws were posted in the city center where both of the literate people could read them.

Joking aside, at what point does knowledge of the law become an unreasonable demand on the citizenry? Civil rights lawyer Harvey Silvergate has a new book, “Three Felonies a Day: How the Feds Target the Innocent. I haven’t read it, but as I understand, it’s largely about the proliferation of vague laws, not the sheer numbers.

A few years back, Aleecia McDonald and Lorrie Cranor calculated the cost of reading and understanding the privacy policies of the sites you visit. It was $365 billion. It might be interesting to apply the same approach to the work of legislatures.

768-bit RSA key factored

The paper is here.

The very sane opening paragraph is:

On December 12, 2009, we factored the 768-bit, 232-digit number RSA-768 by the number field sieve (NFS, [19]). The number RSA-768 was taken from the now obsolete RSA Challenge list [37] as a representative 768-bit RSA modulus (cf. [36]). This result is a record for factoring general integers. Factoring a 1024-bit RSA modulus would be about a thousand times harder, and a 768-bit RSA modulus is several thousands times harder to factor than a 512-bit one. Because the first factorization of a 512-bit RSA modulus was reported only a decade ago (cf. [7]) it is not unreasonable to expect that 1024-bit RSA moduli can be factored well within the next decade by an academic effort such as ours or the one in [7]. Thus, it would be prudent to phase out usage of 1024-bit RSA within the next three to four years.

It’s an interesting read if factoring fascinates you.

Some thoughts on the Olympics, Chicago and Obama

So the 2016 Olympics will be in Rio de Janeiro. Some people think this was a loss for Obama, but Obama was in a no-win situation. His ability to devote time to trying to influence the Olympics is strongly curtailed by other, more appropriate priorities. If he hadn’t gone to Copenhagen, he would have been blamed for not caring. If he went, he’s blamed anyway. In reality, he does have some control over what happened. He could have fixed the “harrowing experience” we show the world under the ironic words “Welcome to the United States:”

In the official question-and-answer session following the Chicago presentation, Syed Shahid Ali, an I.O.C. member from Pakistan, asked the toughest question. He wondered how smooth it would be for foreigners to enter the United States for the Games because doing so can sometimes, he said, be “a rather harrowing experience.” (New York Times, “Rio Wins“)

Ironically, the President has experienced harrowing nonsense at borders, see “US Senators Detained In Russia.” He should put someone on fixing the Customs and Immigration service before it costs us even more.

However, it’s really unclear if the “loss” is a loss. “No Games Chicago” was a citizens group advocating against destroying Chicago’s parks and budget for the Olympics, and according to CNN, 45% of the city’s residents didn’t want the games. And as the AP documents in “Olympics Aren’t Necessarily an Economic Bonanza,” the outlandish “economic benefit” numbers that Olympic advocates usually throw around are based on a “multiplier effect” of around 3. Me, I know what an Olympics event costs–Montreal taxpayers paid off the ’76 Olympics in 2006.

So congratulations, Rio. I hope you don’t bulldoze the less waelthy neighborhoods, and I hope you’re all paid off by 2030 or so.

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