Schneier on Security

quincunx • October 18, 2006 6:52 PM

“We are rapidly turning into a society where our intimate conversations can be saved and made public later.”

Is there an anti-social institution in our society that is accelerating and encouraging this process? I contend that the answer is yes.

“This represents an enormous loss of freedom and liberty, and the only way to solve the problem is through legislation.”

The only way to solve this problem is to remove PREVIOUS legislation, for example: 95% of government that is not constitutional would be a good start.

This in a way is very funny to me, because it has been precisely the role of legislation to STRIP away your freedom and liberty, and designedly so.

Whether or not there was such an intention in certain cases, means nothing. The fact is that once power is assigned to government, it can later be used by politicians, bureaucrats, and intellectuals against the very purposes it was designed. Or such an enactment goes against economic law – in which case the actual OUTCOME of the legislation has the very opposite result of its intentions.

“Of course, organized crime bosses worried about phone taps and room bugs, but that was the exception. Privacy was the default assumption.”

Organized crime exists to the extent that legislation hampers free trade. Remove prohibitions, quota, price controls, etc. and there will be no organized crime, just trade.

“We trust our ISPs, employers and cellphone companies with our privacy, but again and again they’ve proven they can’t be trusted. ”

They disclosed personal info to the government. Wow, big shocker there.

They are guilty of basically having to yield to the threat of violence from the state – be it either imprisonment of their heads, a large fine, or being regulated out of any profits.

Sure they goofed security and have allowed criminals to gain access to your info, but again the guilty party are the criminals.

Government agents can’t catch the criminals because they are bumbling idiots, who get paid either way, in fact, even more if they fail.

“But as technology makes our conversations less ephemeral, we need laws to step in and safeguard our privacy. ”

Sure, sounds great, unless you know politics.

“We need a comprehensive data privacy law, protecting our data and communications regardless of where it is stored or how it is processed. We need laws forcing companies to keep it private and to delete it as soon as it is no longer needed.”

Bruce, let me break it down for you:

There are places that have such laws, like Bermuda, Cayman Islands, Panama.

And yet the general trend has been for US hegemony to control all financial transactions going in/out of the US.

Precisely how do you expect to create “privacy laws” in the US, when the US does not respect international privacy laws?

I’m sorry, but a more practical, and may I even say “less radical” solution would be to have the US respect privacy laws of OTHER nations FIRST. Good luck.

“The world becomes one giant market-research study, where we are all life-long subjects.”

Intersting, but I think you are a little too late. The first CENSUS was conducted in the US in 1790 and economic planning has been expanded ever since. If the reams of gov stats that come out each year is not market-research I don’t know what is.

“I don’t think I am. I very much believe in the innovative power of capitalism. If you set the playing field correctly, capitalism will — by its very nature — solve the problems. If you don’t set the playing field correctly, capitalism can’t hope to solve the problems. Legislation is just a way of setting the playing field.”

If you set the playing field “correctly” from the use of monopolitic force you are no longer dealing with capitalism, but statism.

Think about it. Precisely what method should one employ for setting the playing field correctly?

You suggest violence, I suggest markets.

capitalism does not need the state, nor did it ever need one.

quincunx • October 19, 2006 2:41 PM

@ X the Unknown

“Protection Rackets, Numbers Running, etc., are organized crime, which will exist regardless of trade laws. ”

How is the state police not a protection racket?

The major work of police (the profitable kind) is not fighting crime or ameliorating civil conflagrations, it is handing out tickets for crimes against the state, not that of person.

Because the state arrogates a virtual monopoly of police protection, it restricts and prices out most competition that would mitigate the private protection rackets.

That is private police forces exist but are unaffordable to combat private criminals – especially on public streets.

I’m sorry to tell you, but that is not free trade, that is intervention. Because most people grew up with it (plus all the implicit propaganda inculcated over the ages), they accept it as if it was legitimate and necessary.

In case you do not know, the same effect of court monopolization has resulted in a large movement to private arbitration. Such an innovation, always springs up (historically) when the state fails to enforce justice at a reasonable cost.

I very much disagree that private protection rackets can flourish when everyone is able to provide for their own level of protection – at a competitive price, and not be subject to the random and political allocation of police resources (which like anything else, is scarce).

Your example of Numbers Running is extremely hilarious. Why is the state allowed to monopolize lotteries?

Organized crime, as far as I know, never really had a problem of not paying up their obligations to the winner. When it did, then it is perfectly legitimate to charge them with fraud.

Repeat after me: Private Lotteries are not a real crime – there are NO victims, as long as participation is voluntary. It is only a crime against the state, and a threat to it’s own monopoly institutions.

“Furthermore, classic monopolistic behavior is arguably very organized crime, whether it is actually illegal by statute or not.”

There is always monopolistic behavior, but there are no monopolies unless the law is structured to foster them. As in the case of lotteries – where the state sets up a pseudo-private corporation (heavily regulated) that monopolizes the industry and then spews out propaganda that only gambling with the state is ethical, moral, and just.

Don’t fall for the naked crimes of the state.

The economics of prohibition explains where black markets emerge.

The economics of state dereliction of duty and simultaneous prohibition of competition in providing said duty explains the same.

quincunx • October 19, 2006 5:47 PM

@Benny

‘Yeah, we get it, you think “state == bad!!!”‘

If that was all I said, I would understand your frustration. But I think I’ve gone a little further and elaborated why it is the case.

BTW, State != Bad, in the view of certain groups of people, i.e. the members of the State and their corporate welfare clients. The question is, should we let them get away with crimes against civil society?

‘IIRC, you’ve already been asked not to spew your anti-state angst in every topic that’s even remotely government-related. ‘

Why, all I have done is gone a little further than Bruce. He is anti-current-state, in case that wasn’t obvious.

‘ If you’re going to ignore that, the least you could do is add something new, like maybe an actual viable transition plan from the current state of affairs to the free-market utopia you won’t shut up about.’

Fascinating argument.

The actual transition must be grounded in thought and good arguments, something I’m trying to present. THAT is the only way to sustain an actual transition. My attempt is to get people talking and thinking about real security issues.

You’re request to shut me up (it’s a pretty naked request at that) and then ask for practical ‘solutions’ or ‘plan’ is contradictory. I don’t know all the solutions, I only know that problem exists, their source (via historic record, economic theory, and empirical evidence), and if more attention is paid to it, it can be resolved.

Transition to ‘free-market utopia’ whatever the hell that means, can not be a single concrete ‘plan’ spun from the minds of a few bright people, especially one person.

BTW, utopias are centrally planned societies. In fact the concept of a limited state (a product of strict non-market construction), as the historic record reveals, is such a utopian concept. Therefore I am not a utopian. My critics are.

quincunx • October 24, 2006 6:49 PM

Thank you very much Benny for giving me a reasonable and well thought out response.

“I think the people currently in charge have made a mess of things, but that doesn’t necessarily mean the system itself is completely broken.”

What about the people in charge previously? What about people in charge elsewhere?

Is there something inherent in the act of being in charge that creates a broken system?

Yes. Indeed it does. Whenever force is applied to solve problems, in it’s very act it creates unintended consequences because people do not go along with it. As long as some freedom remains, progress will flow in the path of least resistance, i.e. around the fist. The effects of systematic violence are of course slow and marginal, and unfortunately nearly undetectable to the untrained eye, but they are cumulative in their effects.

Think of all the civilizations in history. What happened? Why do you think that ours is different?

For example: Why has the rate of growth of the US government exceeded the rate of growth of the economy?

Simple: Every violent intervention in the market place created chaos, when this chaos is finally recognized by the bulk of the people, another round of intervention is necessary to cure the last one. Usually the ‘market’ is blamed, since it’s so convenient and very few actually understand it (a product, btw, of the public education system, and the pseudo-private media). This process goes on and on as long as people believe it will work this time, or that the gov should ‘do something’ until the public sector (more aptly: the parasitic class) consume the bulk of production and the society begins to retrogress.

Any appearance of retrogression or domestic policy failure will be projected on an outside vilified group, be it terrorists, barbarians (a Roman smear term for Germanic peoples – which apparently were not at all barbaric in relation to the Romans), foreigners, other states, or the merchants. War will ensue, price controls, debasement of coin or fiat currency issue and central economic control will be used to conceal the true costs of war. Capital flight will ensue, people will start voting with their feet to their best extent, revenues from taxation (theft) will plummet and the state will subsume itself, The violent disintegration will pave the way for ambitious power seekers to take over the apparatus the state left behind. A new regime will take over and start anew.

This has been the general rule of thumb – with very few exceptions. Living in the peak of empire can be very deceiving. Things may seem alright, like prosperity will just keep coming as though it was inevitable. Nope, that is not the case. No matter what the ‘technology will change everything’ crowd says.

‘One objection commonly cited against completely abolishing government in favor of a true free-market system is the formation of monopolies. You’ve said repeatedly that in a true free-market system monopolies cannot occur, but I do not see why this is so.’

First of all, I have to point out that the definition of a State is a monopoly institution of violence in a given geographic region. Only such an institution therefore can sanction more monopolies, be they other States (look what happened to the British Empire), or corporations. In fact corporations, originally a voluntary free market full-liability institution, not unlike mutual societies, or insurance companies, have been subsummed by state law and corrupted beyond its original purpose, not unlike all merchant law, admiralty law, and obviously common law.

There are two ways of viewing monopoly:

1) Presence of legal barriers to entry. Market share is irrelevant. This has been the classic understanding for centuries, if not to some extent, millenia.

2) The criterian formulated by State regulators, fawning intellectuals, and economists in the 1920s and 1930s as a post-hoc rationale for why the government was ALREADY regulating the industry and thus CARTELIZING companies and establishing pseudo-corporate monopolies in the telephone, railroad, electricity, telegraph, water, sewage, road, garbage, etc. industries.

This model was based on some interesting NON-REALISTIC assumptions: Many small firms, costless exit and entry, perfect symmetric knowledge.

When one makes parallel world models that never exist, it is easy to condemn the market for not conforming to it.

Can you think of some natural monopolies that did not arise from state intervention? Ones that were actually able to charge a monopoly price (a price in the inelastic part of a demand schedule curve, where an incentive to restrict output and raise prices could occur)?

And can you think of any that lasted for any substantial time, and made monopoly profits consistently through out that time?

I challenge you to come up with one, I will do my best to show you how the gov did intervene.

‘Do you assume that most people will recognize the formation of a monopoly, and vote against it with their dollars?’

Well, certainly Open Source users are doing exactly that. I prefer Open Source for technical reasons, but luckily the effect of mitigating a potential monopoly is a nice side effect. When I say ‘potential’ I mean that MS can and most likely will, just like Google, at some point in the future collude with the state, either voluntarily or initially against its will, either way the profits will rake in, competition be reduced, and innovation stymied.

Think about this: what kind of an effect did the gov (then a 1.5 trillion dollar organization) have on MS when it decided to make the .doc format an internal and external (contractors) the standard? This is exactly the kind of corporate subsidy that is inherent in gov operation (the act of taxation and disbursement) and only helps to foster monoplies.

The problem with free market monopolies is the same problem of why one-size-fits all solutions do not work for everyone.

No humans, or group of humans have all the power to innovate, alternate solutions are always sought, and as long as there is no legal force (physical force) you can not stop someone else from creating new inventions and stealing your customers.

There was a big ‘market’ push for conglomerates in the 50’s and 60’s, when a period of inflation (the effect of a gov monopoly on the issue of money) had produced a seemingly constantly profitable environment (as it always does, just look at the dot-com boom). These conglomerates absorbed many publicly traded firms, and in so doing, removed the process by which the market can determine the price of that stock, and all the imputed factors of its operation. The result was calculational chaos, the conglomerates could not tell if they made profits, how much, and whether or not they were competing against themselves. To make a long story short, most of them had to break up, and they did voluntarily, though not painlessly. Those that did not, suffered the most, and crippled the businesses that they had subsumed. Those who got out early made the big bucks, which ultimately force the others to do the same.

A big company that extends itself through artificial means (cheap credit brought about by gov issued debt – inflation), just like a government, creates a situation where internal operation becomes chaotic and impractical. The market freeback mechanism of price indication is unavailable, thus what happens is sooner or later said company consumes its own capital, and whithers away, unless it disintegrates into manageable pieces, with coherent price indicators brought about stock buying/selling.

‘This rests on the implicit assumption that most people are rational actors who will do things in their long-term interest, rather than short-term interest, the majority of the time.’

People do things for the short term and long term, it is a decision borne by everyone. We know people think about the long term because the interest rate is determined by the extent of people’s time preference, that is the degree to which people prefer current goods over future goods. If people did not have any preference for the future, there would no savings, no capitalism, there would in fact be no future because we would simply consume all the capital we have made – and then we can go back to tribal communism. We know that is not true by the simple fact that we are having this conversation.

It is improper to say what the correct ratio of time preference one should have, that is a voluntary decision on everyone’s part. The government of course can and does alter it by its very operation via taxation, borrowing, and inflating. But the explanation for this is too long to explain.

We also know that when people have private property rights, they tend to enhance the value of their property, because they have a financial incentive in doing so.

You can compare people who rent their house, versus the people who own their house. Owners tend be far more concerned than temporary caretakers in regard to their property. People repair and improve their house to attempt to reap higher values when sold. There is a market test to reward people for excersising their interests.

The problem with your argument, is that if that is the case, then why do you implicitly assume that politicians and bureaucrats are not subject to the same problem? Do they not belong to the human race that makes them fallible in the same way? I would argue that it’s even worse, precisely because they are temporary caretakers, have no accountability, no incentive to preserve the value of anything, and use other people’s money for their consumptive waste.

‘I believe the real world abounds with examples that demonstrate this is not the case.’

We are not attempting to demonstrate human free will and all the possible actions of its enactment. We only seek to contrast the incentives fostered in different types of societies, those of status and those of contract.

‘However, if you wish to propose the free-market system as a realistic alternative to governments, you must be able to convince the audience that there is at least a reasonable chance to get from here to there in a practical manner.’

Well certainly the first thing to be done is to stop going in the wrong direction, regardless of whether the ultimate goal is reached. Because time & energy is scarce, it is a waste of human resources to engage in activities that are counter-productive to their own goal. That is why instead of seaking special legislation, we should all be seeking ways to REPEAL the old laws that have creeped in over the ages that have culminated in the need to even have this discussion.

Why must I convince the audience that it is possible?

No one has proven successful that the outcome of a given government program will work to fulfill its promise. Rather history and economics reveals the complete opposite.

In other words, SHOW ME that legislative actions in security protection, alone, without removal of the property rights violations inherent in all government operation, will somehow create an abundance of security or at least fend off potential worse security threats.

I have not seen the socially scientific proof for this, although everyone here seems to support it – as if it was a fact that the power to create laws magically solves problems.

@ Clive Robinson

‘For the first time in the past 200 years or so we are actually getting to the point where technology might just make a real democracy possible if the politicians alow it (and people want it).’

Democracy still involves politics (the use of regularized violence), only direct democracy (what you suggest is some sort of technological march into the light) exacerbates this scope even further and truly creates an environment where every man controls some aliquot share of another man’s wealth. This is not a conflict solving system, but a conflict raising state that eventually leads to tyranny of the worst form. It invites everyone to vote for their own share of the public till, and to set the level of this till by invasion of property. It is the most perfect example of exploitation of man by man. It is in short the Hobbesian jungle. A war of all against all. That is the nature of democracy, but especially direct democracy.

@ rover

“It is a market place where the rich outbid the poor.”

No, it is not a market place. Rather it is a systematic apparatus for stealing the wealth of the masses and distributing it to the favorite clientele of the state (be they members or closest contractors). It may not be obvious, there is a lot of intermixed redistribution among all classes, but in net terms the above happens to be the case. The state has no funds other than what it robs, or stealthily redistributes by fiat currency machinations. No market here, just the result of growing government intervention.

@ J.

“The first multinational corporation and first company to issue stocks was a monopoly granted by the country where it was founded.”

The Dutch East India Company was not the first company to issue stocks. It was the first monopoly grant to issue stock. It was in effect one of the first instances of the State taking over corporate law, which originally was privately created and enforced by merchants.

quincunx • October 25, 2006 1:41 AM

“Please tell me if there is an error in this analysis, as it would make me happier to not have to be so cynical.”

There are several errors.

“If I am in a free market, and I can choose between having 50% of a $10M market, and having 90% of a $9M market, which would a free agent choose?”

A free agent of which you describe never faces such a choice that he can readily accomplish by the magic snapping of his fingers. He needs to provide quality and service to his customers, he needs to convince investors to loan him money, etc. In short there can’t be any model building outside of concrete human action in a world of uncertainty.

“Capitalism is not a good thing, it is not a bad thing; it is a machine that may be give us good or bad things, depending on the incentives.”

Capitalism is not a machine.

“The participants may be relied upon to maximize their own share of the market, regardless of the overall outcome.”

As long as they do so voluntarily there can be no problem.

“Inevitably, the market ends up consolidated in one player who, because of their position, economies of scale, etc., can hire the best on the labor side, and provide the cheapest on the product side.”

The monopsonist monopolist is a unicorn. To assume that something like this would arise out of the free wishes of consumers is ridiculous given the diversity of natural resources, talent, and its dispersal among the world, I fail to see how such a thing could come about VOLUNTARILY without force.

Furthermore such an organization would have absolutely no idea if it was profitable since all profit and losses would be internalized. Such an organization would also drive up all the factor prices, and melt away all profits.

It is impossible for such as thing to occur.

“The board game “Monopoly” was meant to demonstrate this; only one person ever wins, everyone else goes bankrupt. Think about it.”

Monopoly is flawed. People do not live by rolling dice and have it decide whose property they will visit today, how much they have to shell out, etc…

Furthermore, the price mechanism is fixed as part of the rules of the game. There is no market – no negotiation, no innovation, in short it is not realistic.

“If I vote with my dollars, paying more for companies that I believe to be doing the right thing (i.e. not externalizing every possible cost, like polluters), I suffer a competitive disadvantage, and eventually will have less and less money, percentage-wise, than those who care not.”

That is because companies are given permission to pollute, i.e. to violate other people’s property right, by an institution that violates people’s rights, and yet is supposedly in charge of protecting them.

The US legal system eventually reneged on its practice of prosecuting property rights invaders on grounds of pollution in the 1840s. Companies have been allowed carte blanche to go ahead an pollute in the name of the general welfare. The general welfare argument decreed that industry is important, and that property rights had to take a back seat for the benefit of the public. Whereas before, pollution was a crime, now industry had a license to commit crime, only now it wasn’t called a crime.

Eventually, the permission to pollute gave way to a polluting technology and industry. And in this case you are correct – your wish to respect the environment is stymied by the incentive to pollute, an incentive created by legislation!

And again the solution is to go back and repeal all the crap that deviated from protecting your property rights (in this case your personal right not to get pollutants into your body, that you did not sanction). Such a result would create a clean industry, because the cost of violating property could be imputed into the cost of operations. There is no externalizing, but instead internalization. Only an optimal amount of pollution will then result. Will it make sense to build a energy plant in a suburb with potentially high risk of serious charges? or should we build it in the middle of nowhere and then route the wires? The price mechanism will allow for rational allocations of resources, as opposed to more creative legislative ‘solutions’.