Adam Thierer's Blog, page 127

Libertarianism & Antitrust: A Brief Comment

Over at his blog, our old TLF colleague Tim Lee has been discussing the AT&T – T-Mobile merger and the ways libertarians should think about antitrust more generally.  In his latest post, he pushes back against a brief comment I posted on a previous essay. You can head over to his site and read that exchange and then see my latest comment. But I thought I would also post it here for those interested.

____________

Tim… My thinking on antitrust is very much shaped by the choice between ex ante vs. ex post regulation. How much faith should we place in sector-specific regulators to get things right through preemptive, prophylactic regulation versus allowing things to play out and then — on the rare occasions when intolerable monopolies over essential goods develop — letting antitrust regulators devise a remedy?

More than any other economic value, I care about experimentation. I am completely under the sway of the Austrian School of thinking about markets and competition as an ongoing experiment, an evolutionary journey, a discovery process.  How are we to know if intolerable monopolies over essential goods will actually develop unless we let things play out?

As I argued in my critiques of the Lessig/Zittrain/Wu school of thinking, we need to be a bit more humble and have a little faith that ongoing experimentation and discovery will help us evolve into a better equilibrium. It's during what some regard as a market's darkest hour when some of the most exciting forms of disruptive technologies and innovation are developing. [I've elaborated more on this point in this lengthy discussion about Gary Reback's recent book on antitrust.]

Viewed in that light, opting for ex post antitrust regulation, therefore, is an easy choice compared to the misguided micro-management associated with preemptive regulatory strikes.  The entire history of FCC common carriage regulation and "public interest" mandates teach us that. It also teaches how bureaucracies become hopeless entrenched, inefficient, and prone to capture.

Now, having said all that, it must be noted that antitrust law itself is a form of economic regulation and has its own set of problems. And you're correct to note that there "has long been a tension in the libertarian approach to antitrust law." I can appreciate many of the arguments made by antitrust abolitionists. (There's a certain madness to antitrust law best captured by R.W. Grant's classic story, "Tom Smith and His Incredible Bread Machine.") Nonetheless, it's important to be realistic and acknowledge that antitrust likely isn't going away and that perhaps it shouldn't if it's existence can help us avoid what I regard as the nightmare scenario I described above: preemptive, sectoral, technology-specific, command-and-control oriented regulation.

Of course, some antitrust law can be preemptive without having all that baggage.  And that's essentially what I think you are endorsing here for AT&T – T-Mobile.  You want the feds to "just say No" and be done with it. You're assuming that's sensible and efficient solution when I wouldn't regard either of those things as a given.  Again, I'd like to let experimentation continue and see how things turn out.

I also do not understand your conclusion that "The federal government has a responsibility to clean up its own messes, as it did with the Ma Bell breakup in 1984, and it will hopefully do by blocking the AT&T/T-Mobile merger."  These two situations are completely unique. As I noted in that old history of how the original AT&T monopoly came about, there was nothing "natural" about it. It was government guided at almost every junction. Not so for the new AT&T. While we don't have a perfectly free market in communications services today, AT&T competes more aggressively — and is generally more antagonistic toward government intervention — than it ever has been before.  Moreover, having lived through the tail end of the old Bell System, I can remember the days of having to use a crappy rotary dial phone in just one color and being told to be happy about it.  Today, by contrast, competition is robust and innovation is thriving. I've never used an AT&T phone and I don't plan to because of the many excellent smartphone alternatives at my disposal.

It's a new world and one that keeps getting better regardless of who owns what.  Have a little faith, my friend.

But give me a call if things get bad. You have my Skype number after all!

 

Larry Downes on IP enforcement online

On this week's podcast, Larry Downes, who writes for CNet, blogs at Forbes.com and the Technology Liberation Front, and is the author of several books, including most recently, The Laws of Disruption, discusses enforcement of intellectual property rights online. Downes talks about the Protect IP Act, a bill recently introduced into Congress that aims to curtail infringement of intellectual property rights online by so-called rogue websites. Downes argues that forcing intermediaries to blacklist domain names has the potential to "break the internet." He discusses how the rogue website problem could better be addressed and how the proposed bill could be improved.

Related Links


"Leahy's Protect IP bill even worse than COICA," by Downes
"Leahy's Protect IP Act: Why Internet content wars will never end," by Downes
"Internet Researchers Decry DNS-Filtering Legislation," Wired
"Son of COICA: New Copyright Bill Introduced," Center for Democracy & Technology

To keep the conversation around this episode in one place, we'd like to ask you to comment at the web page for this episode on Surprisingly Free. Also, why not subscribe to the podcast on iTunes?

Book Review: Eli Pariser's "Filter Bubble"

In my latest weekly Forbes column is entitled "The Internet Isn't Killing Our Culture or Democracy" and it's a short review of the new book, The Filter Bubble: What the Internet is Hiding from You, by MoveOn.org board president Eli Pariser. As I note in my essay, Pariser's book covers some very familiar ground already plowed by others in the burgeoning Internet pessimism movement:

[The Filter Bubble] restates a thesis developed a decade ago in both Cass Sunstein's Republic.com and Andrew L. Shapiro's The Control Revolution, that increased personalization is breeding a dangerous new creature—Anti-Democratic Man. "Democracy requires citizens to see things from one another's point of view," Pariser notes, "but instead we're more and more enclosed in our own bubbles."  Pariser worries that personalized digital "filters" like Facebook, Google, Twitter, Pandora, and Netflix are narrowing our horizons about news and culture and leaving "less room for the chance encounters that bring insights and learning." "Technology designed to give us more control over our lives is actually taking control away," he fears.

Pariser joins a growing brigade of Internet pessimists. Almost every year for the past decade a new book has been published warning that the Internet is making us stupid, debasing our culture, or destroying social interaction.  Many of these Net pessimists—whose ranks include Andrew Keen (The Cult of the Amateur), Lee Siegel (Against the Machine), Jaron Lanier (You Are Not a Gadget) and Nicholas Carr (The Shallows)—lament the rise of "The Daily Me," or the rise of hyper-personalized news, culture, and information. They claim increased information and media customization will lead to close-mindedness, corporate brainwashing, an online echo-chamber, or even the death of deliberative democracy.

If you've read anything I've written on this topic in recent years, you will not be surprised to hear that I disagree with Pariser and these other Net pessimists when it comes to fears about hyper-personalization and user customization. As I noted in my recent book chapter, " The Case for Internet Optimism, Part 1 – Saving the Net From Its Detractors":

Their claim that the "Daily Me" and information specialization will lead to a variety of ills is also somewhat overblown.  It's particularly hard to accept Sunstein and Carr's claims that increased personalization is breeding "extremism," "fanaticism" and "radicalization." A recent study by Matthew Gentzkow and Jesse M. Shapiro of the University of Chicago Booth School of Business lent credibility to this, finding "no evidence that the Internet is becoming more segregated over time" or leading to increased polarization as Sunstein and other pessimists fear. Instead, their findings show that the Net has encouraged more ideological integration and is actually driving us to experience new, unanticipated viewpoints.
While it's true the Internet has given some extremists a new soapbox to stand on and spew their hatred and stupidity, the fact is that such voices and viewpoints have always existed.  The difference today is that the Internet and digital platforms have given us a platform to counter such societal extremism.  As the old saying goes, the answer to bad speech is more speech—not a crackdown on the underlying technologies used to convey speech.  It should not be forgotten that, throughout history, most extremist, totalitarian movements rose to power by taking over the scarce, centralized media platforms that existed in their countries.  The decentralization of media makes such a take-over far less plausible to imagine. 

Some historical context is essential in these debates.  Many critics seem to subscribe to a revisionist history of the age of mass media when we were supposedly more unified and our democracy was more deliberative. In reality, as I noted in the Forbes essay:

The good ol' days weren't so great. By most measures we're more informed and interactive than ever before. Here's a simple test that works particularly well for anyone over the age of 35: Did you have more serendipitous encounters with alternative viewpoints before or after the rise of the Internet?

Most of us had very limited interactions with people and ideas beyond our communities before the Net. Even as modern technology has allowed increased user-customization, it has also opened our eyes to a world of new ideas, perspectives, and culture. The Digital Age is more personalized but also more participatory. It promotes greater cultural heterogeneity and gives everyone a better chance to be heard.

I don't think I have much more to add to this as it relates to Pariser's Filter Bubble since he doesn't really add much to the 'Net-is-destroying-democracy' debate. The only new wrinkle he brings in is an attempt to marry these old fears to newer fears about online privacy. He suggests that customized advertising is not just "creepy" but also abetting the over-personalization of online content / activity. The flip side of this, which Pariser never considers, is that the critics complained endlessly in the past about mass market advertising and the way it treated consumers as an amorphous, undifferentiated blob! Now that advertising is less "spammy," people like Pariser have found a new complaint.  He never tells us how to strike the right balance but presumably he'd be happier with big banner ads and annoying pop-up interstitial ads.

.

What I find most interesting about Pariser's book and those of other pessimists is how they typically don't offer much of a blueprint regarding how they'd like to change things. As I note in my Forbes column, "That's unsurprising since the logical conclusion to draw from his thesis is that someone should be doing more to de-personalize the Net and force us to consume more information that they think is good for us."  I conclude:

The problem with this "eat your greens" approach—besides being somewhat elitist—is that it just isn't practical. People will continue to want, and get, a more personalized web experience. But that doesn't mean deliberative democracy is dying. As the existence of MoveOn.org and countless groups like it proves, vigorous debate and political activism have never been stronger.

But the lugubrious lamentations of Pariser and the other Net pessimists likely won't dissipate anytime soon. After all, bad news sells–even when it's not true.

Government Control of Language and Other Protocols

It might be tempting to laugh at France's ban on words like "Facebook" and Twitter" in the media. France's Conseil Supérieur de l'Audiovisuel recently ruled that specific references to these sites (in stories not about them) would violate a 1992 law banning "secret" advertising. The council was created in 1989 to ensure fairness in French audiovisual communications, such as in allocation of television time to political candidates, and to protect children from some types of programming.

Sure, laugh at the French. But not for too long. The United States has similarly busy-bodied regulators, who, for example, have primly regulated such advertising themselves. American regulators carefully oversee non-secret advertising, too. Our government nannies equal the French in usurping parents' decisions about children's access to media. And the Federal Communications Commission endlessly plays footsie with speech regulation.

In the United States, banning words seems too blatant an affront to our First Amendment, but the United States has a fairly lively "English only" movement. Somehow, regulating an entire communications protocol doesn't have the same censorious stink.

So it is that our Federal Communications Commission asserts a right to regulate the delivery of Internet service. The protocols on which the Internet runs are communications protocols, remember. Withdraw private control of them and you've got a more thoroughgoing and insidious form of speech control: it may look like speech rights remain with the people, but government controls the medium over which the speech travels.

The government has sought to control protocols in the past and will continue to do so in the future. The "crypto wars," in which government tried to control secure communications protocols, merely presage struggles of the future. Perhaps the next battle will be over BitCoin, an online currency that is resistant to surveillance and confiscation. In BitCoin, communications and value transfer are melded together. To protect us from the scourge of illegal drugs and the recently manufactured crime of "money laundering," governments will almost certainly seek to bar us from trading with one another and transferring our wealth securely and privately.

So laugh at France. But don't laugh too hard. Leave the smugness to them.

Bitcoin, Silk Road, and Lulzsec oh my!

Earlier this week, Adrian Chen wrote a great exclusive for Gawker about the online market for illicit drugs Silk Road. I strongly commend the piece to you. The site is only accessible via the anonymizing router network TOR, although it is viewable using tor2web. Transactions are made using bitcoins, the virtual digital currency I've previously written about, and which I explain in a new video for Reason.tv (below), also out this week.

After his piece was published, Chen added the following addendum:

Update: Jeff Garzik, a member of the Bitcoin core development team, says in an email that bitcoin is not as anonymous as the denizens of Silk Road would like to believe. He explains that because all Bitcoin transactions are recorded in a public log, though the identities of all the parties are anonymous, law enforcement could use sophisticated network analysis techniques to parse the transaction flow and track down individual Bitcoin users.

"Attempting major illicit transactions with bitcoin, given existing statistical analysis techniques deployed in the field by law enforcement, is pretty damned dumb," he says.

I've been asked by several folks about this: just how anonymous is bitcoin? My answer is that we don't exactly know yet. Yes, all transactions are recorded in the public ledger that is the bitcoin network, but all that means is that you can see how many bitcoins were transferred from one account on the network to another account. This tells you nothing about the identity of the persons behind the accounts. Theoretically, you could identify just one person on the network and ask them (or coerce them) to identify the persons from whom they received payments, then go to those persons in turn and ask them who they accepted payment from, etc., until you've identified everyone, or just a person of interest. But you can imagine all the reasons this is impractical. More likely, a bitcoin user will be revealed through identifying information inadvertently revealed in the course of a transaction.

That all said, it seems that this week has also brought us a "natural experiment" that might settle the issue. LulzSec, the hacker group responsible for the recent PBS hack, this week announced that it has compromised the personal information of over a million Sony user accounts and has released a batch of 150,000. Here's the thing: LulzSec is accepting donations via Bitcoin and say they have received over $100 so far. The group's bitcoin receiving address is 176LRX4WRWD5LWDMbhr94ptb2MW9varCZP. Also, while in control of PBS.org, the group offered vanity subdomains (e.g. techliberation.pbs.org) for 2 BTC each.

So, here's a high-profile group the FBI and Secret Service are no doubt itching to get their hands on. A bitcoin receiving address for them is public. I guess we'll find out how anonymous it is.

Guest Post: The Case against Taxing Cell Phones

[The following essay is a guest post from Dan Rothschild, Managing Director of the State and Local Policy Project at the Mercatus Center at George Mason University.]

As cell phone ownership has tripled in the United States over the last decade, policymakers have increasingly seen mobile devices as a cash cow. In some states, consumers now pay as much as a quarter of their cell phone bills in taxes. And while state revenues are beginning to tick back up from their low point during the recession, Medicaid costs are fast on their tails. So it's likely that over the coming years, states will be looking to find taxes to hike or new taxes to create — all without calling them tax hikes, of course.

Policy makers may be tempted to hike taxes on cell phones, or to create (or "equalize") taxes on untaxed (or "under taxed") parts of wireless telephony, such as cell phone data plans or e-readers with cellular connections. As I argue in a recent issue of Mercatus on Policy, this is a bad idea for a number of reasons.

First, it's bad economics. Having special taxes on cell phone violates the well-established principle of tax neutrality, which holds that taxes should treat all economic activities similarly. The purpose of taxes is to raise funds for necessary government services; when taxes treat different activities unequally, it distorts consumer behavior. Empirical evidence suggests that, at the margin, consumer spending on wireless service is elastic. This makes it a particularly poor choice for excise taxation.

There are two economic justifications for a tax that singles out a particular good or service for a higher tax: if it's something that policymakers deem "sinful" (a so-called "sin tax"), or if it causes negative externalities that the tax corrects (a Pigouvian tax). In both of these cases, policymakers enact these taxes explicitly to discourage the use of the object of the tax; think cigarettes and alcohol. Neither of these rationales apply to cell phones, and (hopefully) no policymaker believes it's a worthy policy to reduce consumer access to this technology. Nobody seriously argues that cell phones are sinful, nor that cell phones create net negative externalities.

Second, it runs counter to a number of other policy goals. On the national level, politicians are tripping over themselves to extoll the virtues of broadband internet access and its almost magical effects on everything from health outcomes to urban entrepreneurship. But taxing wireless service, which is frequently bundled with wireless broadband, runs counter to that goal (as would any attempts to "equalize" taxes between the voice and data sections of a bill by applying voice tariffs to data services). Similarly, the FCC's universal service fund is meant to, inter alia, support telephone access in low-income and rural households. The most efficient way to increase take-up of telephony in these households is to lower the price rather than relying on notoriously inefficient subsidies.

Third, it's a regressive tax. In all likelihood, cell phones are taxed at a higher rate because not so long ago they were seen as toys of the wealthy. This is obviously no longer the case. The marginal consumers today are largely lower-income, and high taxes keep them from adopting technologies.

On the federal level, the Wireless Tax Fairness Act would prohibit states and localities from "imposing a new discriminatory tax on cell phone services, providers, or property." This is probably a step in the right direction, though it still leaves (from my reading) loopholes for states. For instance, states could argue that they are not imposing a new tax if they applied the same taxes on wireless voice products to wireless data products. This could allow them to easily slap monthly fees on Kindles, iPads, and other devices that use cellular networks. In many ways, this would be more pernicious than raising taxes on voice products.

The bottom line is that taxes on cell phones are inefficient, inequitable, and run counter to other public policies. They likely cost more in lost consumer welfare than they collect in revenues. There's no reason for them, and states looking to improve their tax structure could do well by eliminating them altogether.

Read the whole thing here.

In town for CFP? Check out these GMU "cyber" conferences

Jim posted earlier today about the Computers, Freedom and Privacy conference June 14th to 16th, which I'm very much looking forward to attending. If you're in town for that, though, I'd like to bring to your attention two other related conferences being put on by the Center for Infrastructure Protection and Homeland Security at George Mason University.

The first is the The Tenth Workshop on Economics of Information Security, the leading forum for interdisciplinary scholarship on information security, combining expertise from the fields of economics, social science, business, law, policy and computer science. Prior workshops have explored the role of incentives between attackers and defenders, identified market failures dogging Internet security, and assessed investments in cyber-defense. It starts on June 13th and the program is here.

More relevant to my interests is the Workshop on Cybersecurity Incentives to be held June 16th, and featuring a keynote by Bruce Schneier. The program is here. The workshop will look at how scholarship in law, economics and other fields within the behavioral sciences inform stakeholders about how markets, incentives and legal rules affect each other and shed light on determinations of liability and responsibility.

Super-Injunction Dysfunction & Information Control Follies

My latest Forbes column is entitled "With Freedom of Speech, The Technological Genie Is Out of the Bottle," and it's a look back at the amazing events that unfolded over the past week in the U.K. regarding privacy, free speech, and Twitter. I'm speaking, of course, about the "super-injunction" mess. I relate this episode to the ongoing research Jerry Brito and I are doing examining the increasing challenges of information control.

I begin by noting that:

When it comes to freedom of speech in the age of Twitter, for better or worse, the genie is out of the bottle. Controlling information flows on the Internet has always been challenging, but new communications technologies and media platforms make it increasingly difficult for governments to crack down on speech and data dissemination now that the masses are empowered. The most recent exhibit in the information control follies comes from the United Kingdom, where in the span of just one week the country's enhanced libel law procedure was rendered a farce.

I go on to explain how Britain's super-injunction regulatory regime unraveled so quickly and why it's unlikely to be effectively enforceable in the future. Read the entire essay over at Forbes and then also check out Jerry's Time TechLand editorial from last week, "Twitter's Super-Duper U.K. Censorship Trouble." I also just saw this piece by British defamation expect John Maher: "Law Playing Catch-up with New Media." It's worth a read.

Be Sure to Attend CFP

The Computers, Freedom and Privacy conference—the original privacy conference—is June 14th through 16th at the Georgetown University Law School here in D.C.

It has a neat layout this year, with a focus on each of the topics—computers, freedom, and privacy—on each of its three days. I've always found that it's a rollicking conference at which the newest ideas and problems get aired. It's got some big draws if you're into that kind of thing: Senator Patrick Leahy (D-VT) will speak on Thursday. But there really is something for everyone. TLFer's Ryan Radia and Berin Szoka will join yours truly and other experts on a panel entitled "Do Not Track: Yaaay or Boooh?", which should be fun.

Check out the agenda, then register.

Konstantinos Stylianou on technological determinism and privacy

On the podcast this week, Konstantinos Stylianou, a former Fulbright Scholar now working on a PhD in law at Penn Law School, and author of the provocative new essay, "Hasta La Vista Privacy, or How Technology Terminated Privacy," discusses technological determinism and privacy. Stylianou's thesis is that the evolution of technology is eliminating privacy; therefore, lawmakers should switch emphasis from regulating the collection of information, which he claims is inevitable, to regulating the use of that information. Stylianou discusses why digital networks specifically make it difficult to keep information private, differences between hard and soft technological determinism, and when he thinks people will realize about their private information what the recording industry has finally realized about digital music.

Related Links


"Hasta La Vista Privacy, or How Technology Terminated Privacy," by Stylianou
"Why Your Personal Information Wants to Be Free," by Jerry Brito
"Mark Zuckerberg: Facebook users eventually get over privacy anxiety," ZDNet
"(your) information wants to be free," Ben Adida

To keep the conversation around this episode in one place, we'd like to ask you to comment at the web page for this episode on Surprisingly Free. Also, why not subscribe to the podcast on iTunes?