Remember the story of that once-great nation that sacrificed its well-paying manufacturing jobs for low-wage, burger-flipping jobs at the altar of free trade? At one time, that story was a popular rejoinder of manufacturing unions and their apologists to the inconvenient facts that, despite manufacturing employment attrition, the economy was producing an average of 1.84 million net new jobs per year every year between 1983 and 2007, a quarter century during which the real value of U.S. trade increased five-fold and real GDP more than doubled.

The claim that service-sector jobs are uniformly inferior to manufacturing jobs lost credibility, as average wages in the two broad sectors converged in 2005 and have been consistently higher in services ever since. In 2011, the average service sector wage stood at $19.18 per hour, as compared to $18.94 in manufacturing. (But I don’t recall buying any $25-$30 hamburgers last year.)

One reason for U.S. manufacturing wages being higher than services wages in the past is that manufacturing labor unions “succeeded” at winning concessions from management that turned out to be unsustainable. The value of manufacturing labor didn’t justify its exorbitant costs, which encouraged producers to substitute other inputs for labor and to adopt more efficient techniques and technologies.

With the superiority-of-manufacturing-wages argument discredited, new arguments have emerged attempting to make the case that there is something special – even sacred – about the manufacturing sector that should afford it special policy consideration. Many of those arguments, however, conflate the meanings of manufacturing sector employment and manufacturing sector health or they rely on statistics that don’t support their arguments or they become irrelevant by losing sight of the fact that resources are scarce and must be used efficiently. And too often the prescriptions offered would place the economy on the slippery slope that descends into industrial policy.

I recently submitted this rebuttal to this essay by an environmental sciences professor by the name of Vaclav Smil, who commits those errors. (Judging from the tone of his mostly evasive response to my rebuttal, Smil doesn’t seem to have much tolerance for views that differ from his own.) Perhaps most noteworthy among Smil’s slew of questionable arguments is his claim that manufacturing companies, like Boeing, valued at $50 billion, are better for the economy than service companies like Facebook, which is also valued at $50 billion because

[i]n terms of job creation there is no comparison… Boeing employs some 160,000 people, whereas Facebook only employs 2,000.

Granted, Boeing’s operations support more jobs. But is that better for the economy than a company that provides the same value using 1/80th the amount of labor resources? Of course not. We need economic growth in the United States to create wealth and increase living standards. Economic growth and employment are not one and the same thing. In fact, the essence of growth is creating more value with fewer inputs (or at lower input cost). Creating jobs is easy. Instead of bulldozers, mandate shovels; instead of shovels, require spoons. Inefficient production techniques can create more jobs than efficient ones, but they don’t create value, which is the economic goal.

With 2,000 workers producing the same value as 160,000 – one producing the same value as 80 – Facebook is 80 times more productive than Boeing, freeing up 158,000 workers for other more productive endeavors (perhaps 79 more Facebook-type operations). If those companies were individual countries, the per capita GDP in Facebookland would be $25 million, but only $3.125 million in Boeingia. Where would you rather live?

Smil calls my assessment a cruel joke, presumably for its failure to empathize with unemployed and underemployed Americans, by considering value before job creation.  But policies designed to encourage more Boeing’s, as Smil supports (or, in fairness, any businesses that employ at least X number of people or meet this requirement or that) would likely retard the establishment of firms, like Facebook, that produce the goods and services that people want to consume. The provision of goods and services that people want to buy – rather than those that policymakers in Washington think people want to buy (or are happy to force them to buy) – is the essence of value creation.

Thus, policies should incentivize (or, at least not discourage) the kind of innovation and entrepreneurship needed to create more Facebooks? This kind of business formation occurs in environments where the rule of law is clear and abided; where there is greater certainty to the business and political climate; where the specter of asset expropriation is negligible; where physical and administrative infrastructure is in good shape; where the local work force is productive; where skilled foreigners aren’t chased back to their own shores; where there are limited physical, political, and administrative frictions; and so on. In other words, restraining the role of government to its proper functions and nothing more would create the environment most likely to produce more Facebooks in both the manufacturing and services sectors.

Does the U.S. Economy Need More Boeings or More Facebooks? is a post from Cato @ Liberty - Cato Institute Blog

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.

Government Control of Language and Other Protocols is a post from Cato @ Liberty - Cato Institute Blog

Thanks to Denver lawyer Kevin Evans, who filed the Freedom of Information Act Request, we now know that several employees of the Securities and Exchange Commission (SEC) might have missed the financial crisis because their eyes were glued to their computer screens watching porn.

The chart below shows the number of incidents, as reported by the SEC’s Inspector General.  What caught my eye was that the number of porn-viewing incidents shows a massive spike in 2008, when the financial crisis was at its worst.

It should, of course, be noted that the overall level of incidents was small in number, so we shouldn’t draw too many conclusions about the SEC overall.  We should, however, be concerned at at least one of these employees was being paid $222,418 a year.  I might be able to accept someone getting paid $20,000 a year spending their work time watching porn, but not $222,418.  But then at least this employee has an excuse for missing the financial crisis; we are still waiting to hear the excuse for the SEC’s non-porn viewing employees (perhaps they were too busy on Facebook to keep an eye on Wall Street).

SEC Employees Hard at Work during Financial Crisis is a post from Cato @ Liberty - Cato Institute Blog

Rep. Robert Aderholt (R-AL) is the chairman of the House Appropriations Subcommittee on Homeland Security. That’s the subcommittee that makes spending decisions for the Department of Homeland Security and the programs within it, including the REAL ID Act.

Earlier this month, a constituent of his from Fyffe, Alabama posted a question on Mr. Aderholt’s Facebook page:

Rep. Aderholt, I’ve seen reports that the “REAL ID ACT” will be implemented in May of this year, giving the govt the ability to track every person who has a drivers license via encoded GPS. Is this actually the case and if so, what is the House going to do to stop this Orwellian infringement of our Liberty. Also, HOW could this have happened in the first place!

Mr. Aderholt has not replied.

But Right Side News recently reported on a hearing in which DHS Secretary Janet Napolitano presented her agency’s budget request. The DHS has not requested funds for implementing REAL ID. But according to the report, Chairman Aderholt “pointedly reminded” the committee of the need for funding of REAL ID.

It is good of Representative Aderholt to give his constituents a means to contact him and to invite public discussion of the issues. It’s an open question whether he will listen more closely to the voice of his constituents or to influences in Washington, D.C. who would like to see law-abiding American citizens herded into a national ID system.

Does Rep. Aderholt Support or Oppose Having a National ID? is a post from Cato @ Liberty - Cato Institute Blog

Just over a week ago, Politico ran a story noting that Justin Amash, a newly-elected House member from Michigan, had already voted “present” more often than his predecessor had in eight years. The story suggested that Amash was trying to avoid electoral responsibility for tough votes by voting present. In general, the story suggested that his “present” votes were a failure in some way to meet his responsibilities as a representative.

You can read Amash’s take on all this at his Facebook page. Although I have never met Amash, I have followed his political career over the past year or so. In Michigan, he emphasized  transparency and accountability. He reported and explained his votes on his Facebook page. He is continuing to do that here in Washington. Does that sound like a politician trying to avoid accountability?

Politico also reported some of Amash’s reasons for voting “present”: when he does not have “reasonable” time to review the legislation, when called upon to choose “between programs he hasn’t been given time to study,” when he has “procedural or constitutional concerns about a piece of legislation that has desirable ends,” and when he has a “substantial conflict of interest” — a situation that has not yet happened.

Amash sounds like a representative trying to take his obligations seriously. Apparently he feels he owes his constituents his best judgment about bills before the House and, absent enough time, he refuses to delegate his judgment to party elders or to mere caprice. It says something about the culture of the capital that Amash’s sense of fidelity to those who elected him occasions complaint.

The latest from Politico on Justin Amash confirms this impression. Among House GOP freshmen, he is the least likely to vote for the position taken by a majority of his class. That might be cause for concern since the GOP freshmen seem intent on cutting government spending. But I really doubt that Amash has gone native in DC. He is voting with the other GOP freshmen 70 percent of the time. It is possible that the other 30 percent of his votes reflect a concern for liberty or what he sees as the good of his constituents. Sometimes there is a great difference between being a party man and being a friend of liberty and a faithful representative.

More than a few Washington insiders are probably saying Amash is off to a rough start in his congressional career. I disagree. What I have seen so far, including these criticisms of him, confirm what I have thought for some time: Justin Amash is one of the most interesting and potentially important representatives to come to DC in a long time.

Accountability in the New Congress is a post from Cato @ Liberty - Cato Institute Blog

That will be the subject of a Cato on Campus session this afternoon entitled: “The Internet and Social Media: Tools of Freedom or Tools of Oppression?” Watch live online at the link starting at 3:30 p.m., or attend in person. A reception follows.

The delight that so many felt to see protesters in Iran using social media has given way to delight about the use of Facebook to organize for freedom in Egypt. But this serial enthusiasm omits that the “Twitter revolution” in Iran did not succeed. The fiercest skeptics even suggest that the tweeting during Iran’s suppressed uprising was mostly Iranian ex-pats goosing excitable westerners and not any organizing force within Iran itself. Coming to terms with the Internet, dictatorships are learning to use it for surveillance and control, possibly with help from American tech companies.

So is the cause of freedom better off with the Internet? Or is social media a shiny bauble that distracts from the long, heavy slog of liberating the people of the world?

Joining the discussion will be Chris Preble, Director of Foreign Policy Studies at Cato; Alex Howard, Government 2.0 Correspondent for O’Reilly Media; and Tim Karr, Campaign Director at Free Press. More info here.

Does the Internet Cause Freedom? is a post from Cato @ Liberty - Cato Institute Blog

This weekend, we learned that the U.S. government last month demanded records associated with the Twitter accounts of several supporters of WikiLeaks—including American citizens and an elected member of Iceland’s parliament. As the New York Times observes, the only remarkable thing about the government’s request is that we’re learning about it, thanks to efforts by Twitter’s legal team to have the order unsealed. It seems a virtual certainty that companies like Facebook and Google have received similar demands.

Most news reports are misleadingly describing the order [PDF] as a “subpoena” when in actuality it’s a judicially-authorized order under 18 U.S.C §2703(d), colloquially known (to electronic surveillance geeks) as a “D-order.” Computer security researcher Chris Soghoian has a helpful rundown on the section and what it’s invocation entails, while those who really want to explore the legal labyrinth that is the Stored Communications Act should consult legal scholar Orin Kerr’s excellent 2004 paper on the topic.

As the Times argues in a news analysis today, this is one more reminder that our federal electronic surveillance laws, which date from 1986, are in dire need of an update. Most people assume their online communications enjoy the same Fourth Amendment protection as traditional dead-tree-based correspondence, but the statutory language allows the contents of “electronic communications” to be obtained using those D-orders if they’re older than 180 days or have already been “opened” by the recipient. Unlike traditional search warrants, which require investigators to establish “probable cause,” D-orders are issued on the mere basis of “specific facts” demonstrating that the information sought is “relevant” to a legitimate investigation. Fortunately, an appellate court has recently ruled that part of the law unconstitutional—making it clear that the Fourth Amendment does indeed apply to email… a mere 24 years after the original passage of the law.

The D-order disclosed this weekend does not appear to seek communications content—though some thorny questions might well arise if it had. (Do messages posted to a private or closed Twitter account get the same protection as e-mail?) But the various records and communications “metadata” demanded here can still be incredibly revealing. Unless the user is employing anonymizing technology—which, as Soghoian notes, is fairly likely when we’re talking about such tech-savvy targets—logs of IP addresses used to access a service like Twitter may help reveal the identity of the person posting to an anonymous account, as well as an approximate physical location. The government may also wish to analyze targets’ communication patterns in order to build a “social graph” of WikiLeaks supporters and identify new targets for investigation. (The use of a D-order, as opposed to even less restrictive mechanisms that can be used to obtain basic records, suggests they’re interested in who is talking to whom on the targeted services.) Given the degree of harassment to which known WikiLeaks supporters have been subject, easy access to such records also threatens to chill what the courts have called “expressive association.” But unlike traditional wiretaps, D-order requests for data aren’t even subject to mandatory reporting requirements—which means surveillance geeks may be confident this sort of thing is fairly routine, but the general public lacks any real sense of just how pervasive it is. Whatever your take on WikiLeaks, then, this rare peek behind the curtain is one more reminder that our digital privacy laws are long overdue for an upgrade.

Wikileaks, Twitter, and Our Outdated Electronic Surveillance Laws is a post from Cato @ Liberty - Cato Institute Blog

It might take Facebook awhile to turn identity provision into a revenue opportunity, but if it is a money-maker, it could be a substantial one. Simson Garfinkel has a piece in Technology Review that goes into some of the things Facebook is doing with its “Connect” service.

As security professionals debate whether the Internet needs an “identity layer”—a uniform protocol for authenticating users’ identities—a growing number of websites are voting with their code, adopting “Facebook Connect” as a way for anyone with a Facebook account to log into the site at the click of a button.

It’s a good, relatively short article, worth a read.

As an online identity provider, Facebook could facilitate secure commerce and communication in a way that’s easy and familiar for consumers. That adds value to the Internet ecosystem, and Facebook may be able to extract some of the surplus for itself—perhaps by charging sites and services that are heavy users small amounts per login via Connect. The security challenges of such a system would grow as more sites and services rely on it, of course, and Garfinkel highlights them in an accessible way—accessible as you’re going to get, anyway.

Quibbles are always more interesting, so I’ll note that I cocked my head to one side where Garfinkel asks “whether it’s a good thing for one company to hold such a position of power.” Strange.

Taking “power” in its philosophical sense to mean “a measure of an entity’s ability to control its environment, including the behavior of other entities,” Facebook Connect gives the company very little power. Separate, per-site logins—or a parallel service that might be created by Google, for example—are near at hand and easy to switch to for anyone who doesn’t like Facebook’s offering.

Ironically, Garfinkel refers to these identity services as “Internet driver’s licenses,” inviting a comparison with the power structure in the real-world licensing area. If you want to drive a car legally, there are no alternatives to dealing with the state, so the state can impose onerous conditions on licensing. Drivers’ licenses require one to share a great deal of information, they cost a lot of money (relative to Facebook’s dollar price of “free”), and switching is not an option if the issuer starts to change the bargain and enroll licensees in a national ID system. Garfinkel himself noted how drivers’ licenses enhance state power in a good 1994 Wired article.

In sum, the upsides of an identity marketplace are there, for both consumers and for Facebook. The downsides are relatively small. The “power” exercised by any provider in a marketplace for identity provision is small compared to the alternative of using states as identity providers.

Facebook as Identity Provider is a post from Cato @ Liberty - Cato Institute Blog

There are a number of ways for you to stay connected to the Cato Institute on the web, outside of our main website (Cato.org), this blog (Cato@Liberty), our Spanish language site (El Cato), our political theorists’ digital round table (Cato | Unbound), or our hub for high school and college students (Cato on Campus). As we have grown since our founding in 1977, so have we grown online in recent years, in an effort to provide more opportunities to interact with our research and experts.

We appreciate your interest in our work and we encourage you to leverage any and all of our information resources–both at our main website, on this blog, and across the reaches of new media space. We have recently made many of our multimedia resources available for embed to bloggers, and we are looking continuously at ways to try to connect you to our projects. After the fold, check out a sampling of ways you can connect to Cato online and for ways you can use our multimedia resources.

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Be sure to check the calendar–we stream some of our events over the web in real time, and we try to provide opportunities to web participants to submit questions, especially in our student forums.

Check back with us often in the coming weeks and months–as we said, we are always looking for new ways to connect with you, and we are proud to be able to offer these resources to you online.

Cato 2.0 is a post from Cato @ Liberty - Cato Institute Blog

Before I can write a blog post, I must lift my hands to type.

I say so because the default setting in life is privacy. Staying in bed maintains privacy pretty well.

Clay Shirky gives privacy a contrary treatment on the New York Times‘ Room for Debate blog. We are both discussants there of the question whether the government should intervene to solve privacy issues with Facebook.

Shirky, a teacher in the Interactive Telecommunications Program at N.Y.U., writes:

There are two principal effects of the Internet on privacy. The first is to shrink personal expression to a dichotomy: public or private. Prior to the rise of digital social life, much of what we said and did was in a public environment — on the street, in a park, at a party — but was not actually public, in the sense of being widely broadcast or persistently available.

This enormous swath of personal life, as we used to call it, existed on a spectrum between public and private, and the sheer inconvenience of collecting and collating theoretically observable but practically unobserved actions was enough to keep those actions out of the public sphere.

That spectrum has now collapsed — data is either public or private, and the idea of personal utterances being observable but unobserved is becoming as quaint as an ice cream social.

“[I]t is keeping things private that requires effort,” he writes.

I think Shirky has inadvertently overstated the effects of the Internet on privacy. The dynamics he describes are definitely in play, but they exist almost exclusively in digital social life. For the rest of life, it’s still the other way around. Privacy is easy. You can just stay in bed. Pursuing publicity takes effort.

When you go out into the world, making effort to give publicity to yourself in pursuit of your wants and needs, you must trade some personal information for interaction, yes. That’s physics: photons and sound waves doing what they do. Nobody considers this a privacy problem because of our long experience with it and acculturation to it.

The online environment has similar information demands—when you go online, giving publicity to yourself in pursuit of your wants and needs, you must trade some personal information for interaction—but it has different properties: information is easier to record. Again, though, the rise of the Internet didn’t change privacy on the street, in parks, and at parties, except in the still rare instance when someone is recording and uploading information.

If we were to conduct all of life online, maybe it would be fair to say that protecting privacy takes effort. But even as a digital denizen, the majority of my experience—certainly the most important and valuable of it—is offline, face-to-face interactions with friends and loved ones or time alone.

Here, privacy is the default. Nobody knows my thoughts unless I tell them. Almost never is anyone capturing the conversation in a digital format. Rarely is anyone uploading images. Facebook isn’t hoovering up the information. Doing these things would take effort that nobody is expending.

The Internet didn’t foreclose the use of real space for the conduct of life as Shirky implies by talking about offline living in the past tense. It expanded our freedom by giving us another space—a new option to use as we see fit. Declining to use that space is as normal, natural, and necessary as eating breakfast (which is impossible to do online, by the way). Maybe some of the digerati conduct their love-lives online, but this should be a disqualification for discussing the social impact of the medium for failure to understand how it fits into most people’s lives.

Privacy debates premised on the omnipresence of digital media are interesting and fun, but I don’t think they’re grounded in people’s actual experience of the world (exception!), and they tend to overstate the significance of online privacy problems.

Privacy as the Default Setting is a post from Cato @ Liberty - Cato Institute Blog

Amid the hullaballoo about Facebook and privacy, it’s easy to forget the most powerful privacy setting.

In my 2004 Policy Analysis, “Understanding Privacy—and the Real Threats to It,” I wrote about the “privacy-protecting decisions that millions of consumers make in billions of daily actions, inactions, transactions, and refusals.”

Inactions and refusals. Declining to engage in activities that emit personal information protects privacy. Not broadcasting oneself on Facebook protects privacy. Not going online protects privacy.

The horror, some may think, of not having access to the wonders of the online world. Actually, many people live full and complete lives without it, enjoying the perfect online privacy default. The irony is a little too rich when avid users of Facebook—which is little more than a publicity tool—complain about its privacy problems.

Facebook does have some work to do on rationalizing and communicating the privacy protections its offers its publicity-seeking users. But people will always have the privacy protecting option of not using Facebook.

Not so for government-sponsored incursions on privacy, like the national ID system proposed by Senator Chuck Schumer (D-NY). Inaction and refusal of his national ID system would not be a practical option if Senator Schumer has his way. The irony isn’t just rich, it’s curdled and reeking when Senator Schumer leads the attack on Facebook for its privacy practices.

The Most Powerful Privacy Setting is a post from Cato @ Liberty - Cato Institute Blog

The secrecy surrounding government surveillance is a constant source of frustration to privacy activists and scholars: It’s hard to have a serious discussion about policy when it’s like pulling teeth to get the most elementary statistics about the scope of state information gathering, let alone any more detailed information. Even when reporting is statutorily required, government agencies tend to drag their heels making statistics available to Congress — and it can take even longer to make the information more widely accessible. Phone and Internet companies, even when they join the fight against excessive demands for information, are typically just as reluctant to talk publicly about just how much of their customers’ information they’re required to disclose. That’s why I’m so pleased at the news that Google has launched their Government Requests transparency tool.  It shows a global map on which users can see how many governmental demands for user information or content removal have been made to Google’s ever-growing empire of sites — now including Blogger, YouTube, and Gmail — starting with the last six months.

So far, the information up there is both somewhat limited and lacking context.  For instance, it might seem odd that Brazil tops the list of governmental information hounds until you bear in mind that Google’s Orkut social network, while little-used by Americans, is the Brazilian equivalent of Facebook.

There are also huge gaps in the data: The United States comes in second with 3,580 requests from law enforcement at all levels, but that doesn’t include intelligence requests, so National Security Letters (tens of thousands of which are issued every year) and FISA warrants or “metadata” orders (which dwarf ordinary federal wiretaps in number) aren’t part of the tally. And since China considers all such government information requests to be state secrets — whether for criminal or intelligence investigations — no data from the People’s Republic is included.

Neither is there any detail about the requests they have counted — how many are demands for basic subscriber information, how many for communications metadata, and how many for actual e-mail or chat contents. The data on censorship is similarly limited: They’re counting governmental but not civil requests, such as takedown notices under the Digital Millennium Copyright Act.

For all those limits — and the company will be striving to provide some more detail, within the limits of the law — this is a great step toward bringing vital transparency to the shadowy world of government surveillance, and some nourishment to the data-starved wretches who seek to study it. We cannot have a meaningful conversation about whether censorship or invasion of privacy in the name of security have gone too far if we do not know, at a minimum, what the government is doing. So, for a bit of perspective, we know that U.S. courts reported a combined total of 1,793 (criminal, not intel) wiretaps sought by both federal and state authorities. Almost none of these (less than 1 percent) were for electronic interception.

This may sound surprising, unless you keep in mind that federal law establishes a very high standard for the “live” interception of communications over a wire, but makes it substantially easier — under some circumstances rather terrifyingly easy — to get stored communications records. So there’s very little reason for police to jump through all the hoops imposed on wiretap orders when they want to read a target’s e-mails.

If and when Google were to break down that information about requests — to show how many were “full content” as opposed to metadata requests — we would begin to have a far more accurate picture of the true scope of governmental spying. Should other major players like Yahoo and Facebook be inspired to follow Google’s admirable lead here, it would be better still.  Already, though, that one data point from a single company — showing more than twice as many data requests as the total number of phone wiretaps reported for the entire country — suggests that there is vastly more actual surveillance going on than one might infer from official wiretap numbers.

How Much Government Snooping? Google It Up! is a post from Cato @ Liberty - Cato Institute Blog

Yesterday the D.C. Circuit ruled that Congress hadn’t given the Federal Communications Commission power to regulate the Internet and the FCC couldn’t bootstrap that power from other authority. It was a rare but welcome affirmation that the rule of law might actually pertain in the regulatory area.

But the Open Internet Coalition put out a release containing threat exaggeration to make Dick Cheney blush:

“Today’s DC Circuit decision . . . creates a dangerous situation, one where the health and openness of broadband Internet is being held hostage by the behavior of the major telco and cable providers.”

That’s right. It’s a hostage-taking when consumers and businesses—and not government—hammer out the terms and conditions of Internet access. Inferentially, the organization representing Google, Facebook, eBay, and Twitter believes that Internet users are too stupid and supine to choose the Internet service they want.

What these content companies are really after, of course, is government support in their tug-of-war with the companies that transport Internet content. It’s hard to know which produces the value of the Internet and which should gain the lion’s share of the rewards. Let the market—not lobbying—decide what reward content and transport deserve for their roles in the Internet ecosystem.

As I said of the Open Internet Coalition’s membership on a saltier, but still relentlessly charming, day: “[T]hese companies are losing their way. The leadership of these companies should fire their government relations staffs, disband their contrived advocacy organization, and get back to innovating and competing.”

Consumers in the Driver’s Seat—Oh, the Humanity! is a post from Cato @ Liberty - Cato Institute Blog

Political repression is old news.   Thuggish regimes have been holding their citizens prisoner for centuries.  But Iran’s government now is borrowing an innovative Soviet and Nazi tactic:  targeting family members of dissenters, even those living in the U.S.

Reports the Wall Street Journal:

His first impulse was to dismiss the ominous email as a prank, says a young Iranian-American named Koosha. It warned the 29-year-old engineering student that his relatives in Tehran would be harmed if he didn’t stop criticizing Iran on Facebook.

Two days later, his mom called. Security agents had arrested his father in his home in Tehran and threatened him by saying his son could no longer safely return to Iran.

“When they arrested my father, I realized the email was no joke,” said Koosha, who asked that his full name not be used.

Tehran’s leadership faces its biggest crisis since it first came to power in 1979, as Iranians at home and abroad attack its legitimacy in the wake of June’s allegedly rigged presidential vote. An opposition effort, the “Green Movement,” is gaining a global following of regular Iranians who say they never previously considered themselves activists.

The regime has been cracking down hard at home. And now, a Wall Street Journal investigation shows, it is extending that crackdown to Iranians abroad as well.

In recent months, Iran has been conducting a campaign of harassing and intimidating members of its diaspora world-wide — not just prominent dissidents — who criticize the regime, according to former Iranian lawmakers and former members of Iran’s elite security force, the Revolutionary Guard, with knowledge of the program.

Unfortunately, there is little the West can do.  Despite the seemingly common belief in hawkish circles that Washington merely need speak the word and other nations will obey,  there is no magic wand that President Obama can wave to democratize Iran.  And refusing to engage Iran over its nuclear program would do nothing to aid human rights activists while losing the admittedly faint hope of resolving the issue diplomatically.

However, there is reason for hope.  The crackdown bespeaks desperation.  The militarized regime continues to lose credibility, including religious backing.  Reports the New York Times:

Iran’s most senior cleric denounced the role of the volunteer militia force known as the Basij in the crackdown against protesters, saying the force’s actions were against religion and “in the path of Satan.”

The cleric, Grand Ayatollah Hossein Ali Montazeri, condemned the force in a statement posted on an opposition Web site, mowjcamp.com, decreeing that “the assailants have acted against religion and must pay blood money” to those who were wounded or to their families.

Ultimately, the Iranian people can count only on themselves to achieve freedom.  But people of good will around the world should offer their support in the continuing battle against tyranny.

Iranian Thugs Take Crackdown Worldwide is a post from Cato @ Liberty - Cato Institute Blog

Some of the most prominent Internet companies sent a letter yesterday asking for protection from market forces. Among them: Facebook, Google, Amazon, and Twitter.

A Washington Post story summarizes their concerns: “[W]ithout a strong anti-discrimination policy, companies like theirs may not get a fair shot on the Internet because carriers could decide to block them from ever reaching consumers.”

No ISP could block access to these popular services and survive, of course. What they could do is try to charge the most popular services a higher tariff to get their services through. Thus, weep the helpless, multi-billion-dollar Internet behemoths, we need a “fair shot”!

Plain and simple, these companies want regulation to ensure that ISPs can’t capture a larger share of the profits that the Internet generates. They want it all for themselves. Phrased another way, the goal is to create a subsidy for content creators by blocking ISPs from getting a piece of the action.

It’s all very reminiscent of disputes between coal mines and railroads. The coal mines “produced the coal” and believed that the profitability of the coal-energy ecosystem should accrue only to themselves, with railroads earning the barest minimum. But where is it written that digging coal out of the ground is what creates the value, and getting it where it’s used creates none? Transport may be as valuable as “production” of both commodities and content. The market should decide, not the industry with the best lobbyists.

What happens if ISPs can’t capture the value of providing transport? Of course, less investment flows to transport and we have less of it. Consumers will have to pay more of their dollars out of pocket for broadband, while Facebook’s boy CEO draws an excessive salary from atop a pile of overpriced stock holdings. The irony is thick when opponents of high executive compensation support “net neutrality” regulation.

Another reason why these Internet companies’ concerns are bogus is their size and popularity. They have a direct line to consumers and more than enough capability to convince consumers that any given ISP is wrongly degrading access to their services. As Tim Lee pointed out in his excellent paper, “The Durable Internet,” ownership of a network service does not equate to control. ISPs can be quickly reined in by the public, as has already happened.

A “net neutrality” subsidy for small start-up services is also unnecessary: They have no profits to share with ISPs. What about mid-size services—heading to profitability, but not there yet? Can ISPs choke them off? Absolutely not.

Large, established companies are not known for being ahead of trends, for one thing, and the anti-authoritarian culture of the Internet is the perfect place to play “beleaguered upstart” against the giant, evil ISP. There could be no greater PR gift than for a small service to have access to it degraded by an ISP.

The Internet companies’ plea for regulation is bogus, and these companies are losing their way. The leadership of these companies should fire their government relations staffs, disband their contrived advocacy organization, and get back to innovating and competing.

Internet Companies’ Bogus Plea for Regulation is a post from Cato @ Liberty - Cato Institute Blog

My colleague Jim Harper and I have been having a friendly internal argument about Internet privacy regulation that strikes me as having potential implications for other contexts, so I thought I might as well pick it up here in case it’s of interest to anyone else. Unsurprisingly, neither of us are particularly sanguine about elaborate regulatory schemes—and I’m sympathetic to the general tenor of his recent post on the topic. But unlike Jim, as I recently wrote here, I can think of two rules that might be appropriate: A notice requirement that says third-party trackers must provide a link to an ordinary-language explanation of what information is being collected, and for what purpose, combined with a clear rule making those stated privacy policies enforceable in court. Jim regards this as paternalistic meddling with online markets; I regard it as establishing the conditions for the smooth functioning of a market. What do those differences come down to?

First, a question of expectations. Jim thinks it’s unreasonable for people to expect any privacy in information they “release” publicly—and when he’s talking about messages posted to public fora or Facebook pages, that’s certainly right. But it’s not always right, and as we navigate the Internet our computers can be coaxed into “releasing” information in ways that are far from transparent to the ordinary user. Consider this analogy. You go to the mall to buy some jeans; you’re out in public and clearly in plain view of many other people—most of whom, in this day and age, are probably carrying cameras built into their cell phones. You can hardly complain about being observed, and possibly caught on camera, as you make your way to the store. But what about when you make your way to the changing room at The Gap to try on those jeans? If the management has placed an unobtrusive camera behind a mirror to catch shoplifters, can the law require that the store post a sign informing you that you’re being taped in a location and context where—even though it’s someone else’s property—most people would expect privacy? Current U.S. law does, and really it’s just one special case of the law laying down default rules to stabilize expectations.  I think Jim sees the reasonable expectation in the online context as “everything is potentially monitored and archived all the time, unless you’ve explicitly been warned otherwise.” Empirically, this is not what most people expect—though they might begin to as a result of a notice requirement.

Now, as Jim well knows, there are many cases in which the law sets defaults to stabilize expectations. Under the common law doctrine of implied warranty, when you go out and buy a toaster, you do not explicitly write out a contract in which it’s stipulated that the thing will turn on when you get home and plug it in, that it will toast bread without bursting into flames, and so on. Markets would not function terribly well if you did have to do this constantly. Rather, it’s understood that there are some minimal expectations built into the transaction—toasters toast bread!—unless the seller provides explicit notice that this is an “as is” sale. This brings us to a second point of divergence: Like Jim, I think the evolutionary mechanism of the common law is generally the best way to establish these market-structuring defaults. Unlike Jim, I think sometimes it’s appropriate to resort to statute instead. This story from Techdirt should suggest why:

It’s still not entirely clear what online agreements are actually enforceable and which aren’t. We’ve seen cases go both ways, with a recent ruling even noting that terms that are a hyperlink away, rather than on the agreement page itself, may be enforceable. But the latest case, involving online retailer Overstock went in the other direction. A court found that Overstock’s arbitration requirement was unenforceable, because, as “browserwrap,” the user was not adequately notified. Eventually, it seems that someone’s going to have to make it clear what sorts of online terms are actually enforceable (if any). Until then, we’re going to see a lot more lawsuits like this one.

Evolutionary mechanisms are great, but they’re also slow, incremental, and in the case of the common law typically parasitic on the parallel evolution of broader social norms and expectations. That makes it an uneasy fit with novel and rapidly changing technological platforms for interaction. The tradeoff is that, while it’s slow, the discovery process tends to settle on efficient rules. But sometimes having a clear rule is actually more important—maybe significantly more important—than getting the rule just right. These features seem to me to weigh in favor of allowing Congress, not to say what standards of privacy must look like, but to step in and lay down public default rules that provide a stable basis for informed consumers and sellers to reach their own mutually beneficial agreements.

Finally, there’s the question of whether it’s constitutionally appropriate for federal legislators, rather than courts, to make that kind of decision. I scruple to say how “the Founders intended” the Constitution to apply to e-commerce, but even on a very narrow reading of the Commerce Clause, this seems to fall safely within the purview of a power to “make regular” commerce between the several states by establishing uniform rules for transactions across a network that pays no heed to state boundaries. A patchwork of divergent standards imposed by judges and state legislators does not strike me as an especially market-friendly response to people’s online privacy concerns, but that appears to be the alternative. If there’s a way to address those concerns that’s both constitutionally appropriate and works by enabling informed choice and contract rather than nannying consumers or micromanaging business practices, then it seems to me that it makes sense for supporters of limited government to point that solution out.

Online Privacy and Regulation by Default is a post from Cato @ Liberty - Cato Institute Blog

Page one of today’s Washington Times—above the fold—has a fascinating story indicting the White House for failing to disclose that it will collect and retain material posted by visitors to its pages on social networking sites like Facebook and YouTube. The story is fascinating because so much attention is being paid to it. (It was first reported, as an aside at least, by Major Garrett on Fox News a month ago.)

The question here is not over the niceties of the Presidential Records Act, which may or may not require collection and storage of the data. It’s over people’s expectations when they use the Internet.

Marc Rotenberg, president of the Electronic Privacy Information Center, said the White House signaled that it would insist on open dealings with Internet users and, in fact, should feel obliged to disclose that it is collecting such information.

Of course, the White House is free to disclose or announce anything it wants. It might be nice to disclose this particular data practice. But is it really a breach of privacy—and, through failure to notify, transparency—if there isn’t a distinct disclosure about this particular data collection?

Let’s talk about what people expect when they use the Internet and social networking sites. Though the Internet is a gigantic copying machine, some may not know that data is collected online. They may imagine that, in the absence of notice, the data they post will not be warehoused and redistributed, even though that’s exactly what the Internet does.

There can be special problems when it is the government collecting the information. The White House’s “flag@whitehouse.gov” tip line was concerning because it asked Americans to submit information about others. There is a history of presidents amassing “enemies” lists. But this is not the complaint with White House tracking of data posted on its social networking sites.

People typically post things online because they want publicity for those things—often they want publicity for the fact that they are the ones posting, too. When they write letters, they give publicity to the information in the letter and the fact of having sent it. When they hold up signs, they seek publicity for the information on the signs, and their own role in publicizing it.

How strange that taking note of the things people publicize is taken as a violation of their privacy. And failing to notify them of the fact they will be observed and recorded is a failure of transparency.

America, for most of what you do, you do not get “notice” of the consequences. Instead, in the real world and online, you grown-ups are “on notice” that information you put online can be copied, stored, retransmitted, and reused in countless ways. Aside from uses that harm you, you have little recourse against that after you have made the decision to release information about yourself.

The White House is not in the wrong here. If there’s a lesson, it’s that people are responsible for their own privacy and need to be aware of how information moves in the online environment.

A Bizarre Privacy Indictment is a post from Cato @ Liberty - Cato Institute Blog

Why is a U.S. senator’s extramarital affair on the front page of The Washington Post this morning?

Don’t get me wrong, I like a juicy sex scandal as well as the next guy. And I’m amused at my friend and former colleague Radley Balko’s Facebook comment (or was it a tweet? who can keep up with the new media?) that ”sadly, growing public acceptance for gay marriage has given yet another conservative politician no choice but to cheat on his wife.”   But this affair fit Bill Kristol’s definition of good Republican behavior:  “Republicans have old-fashioned extramarital affairs with other adults.” No prostitution, no underage interns, no public toilets.

So why is it front-page news?

Meanwhile, you know what’s not on the front page, today or any day so far? President Obama’s firing of the AmeriCorps inspector general, in apparent violation of a law that Senator Obama voted for, perhaps in retaliation for the IG’s investigation of Sacramento mayor Kevin Johnson, an Obama supporter. It’s an interesting story. As a Wall Street Journal lead editorial explained:

In April 2008 the Corporation [for National and Community Service] asked Mr. Walpin to investigate reports of irregularities at St. HOPE, a California nonprofit run by former NBA star and Obama supporter Kevin Johnson. St. HOPE had received an $850,000 AmeriCorps grant, which was supposed to go for three purposes: tutoring for Sacramento-area students; the redevelopment of several buildings; and theater and art programs.

Mr. Walpin’s investigators discovered that the money had been used instead to pad staff salaries, meddle politically in a school-board election, and have AmeriCorps members perform personal services for Mr. Johnson, including washing his car.

Other papers have been on the story, notably the Washington Examiner. But as even The Washington Post‘s ombudsman notes, not a word in the Post (until a small story on page A19 today, featuring the Obama administration’s spin on the issue). The Post is, however, ahead of The New York Times, which has apparently not run a word on the story, even online, though it did have room for the senatorial affair. 

And I have to wonder: If George W. Bush had fired an inspector general who had alleged fraud by a key Bush supporter, would the Post and the Times have covered the story?

My Morning Tabloid is a post from Cato @ Liberty - Cato Institute Blog

So when China blocked social networking sites for the 20th anniversary of the Tiananmen square massacre, were they successful?

Not entirely.

Breaking through the Great Firewall of China is a post from Cato @ Liberty - Cato Institute Blog