The Death of Ephemeral Conversation

The political firestorm over former U.S. Rep. Mark Foley’s salacious instant messages hides another issue, one about privacy. We are rapidly turning into a society where our intimate conversations can be saved and made public later. This represents an enormous loss of freedom and liberty, and the only way to solve the problem is through legislation.

Everyday conversation used to be ephemeral. Whether face-to-face or by phone, we could be reasonably sure that what we said disappeared as soon as we said it. Of course, organized crime bosses worried about phone taps and room bugs, but that was the exception. Privacy was the default assumption.

This has changed. We now type our casual conversations. We chat in e-mail, with instant messages on our computer and SMS messages on our cellphones, and in comments on social networking Web sites like Friendster, LiveJournal, and MySpace. These conversations -- with friends, lovers, colleagues, fellow employees -- are not ephemeral; they leave their own electronic trails.

We know this intellectually, but we haven’t truly internalized it. We type on, engrossed in conversation, forgetting that we’re being recorded.

Foley’s instant messages were saved by the young men he talked to, but they could have also been saved by the instant messaging service. There are tools that allow both businesses and government agencies to monitor and log IM conversations. E-mail can be saved by your ISP or by the IT department in your corporation. Gmail, for example, saves everything, even if you delete it.

And these conversations can come back to haunt people -- in criminal prosecutions, divorce proceedings or simply as embarrassing disclosures. During the 1998 Microsoft anti-trust trial, the prosecution pored over masses of e-mail, looking for a smoking gun. Of course they found things; everyone says things in conversation that, taken out of context, can prove anything.

The moral is clear: If you type it and send it, prepare to explain it in public later.

And voice is no longer a refuge. Face-to-face conversations are still safe, but we know that the National Security Agency is monitoring everyone’s international phone calls. (They said nothing about SMS messages, but one can assume they were monitoring those too.) Routine recording of phone conversations is still rare -- certainly the NSA has the capability -- but will become more common as telephone calls continue migrating to the IP network.

If you find this disturbing, you should. Fewer conversations are ephemeral, and we’re losing control over the data. We trust our ISPs, employers and cellphone companies with our privacy, but again and again they’ve proven they can’t be trusted. Identity thieves routinely gain access to these repositories of our information. Paris Hilton and other celebrities have been the victims of hackers breaking into their cellphone providers’ networks. Google reads our Gmail and inserts context-dependent ads.

Even worse, normal constitutional protections don’t apply to much of this. The police need a court-issued warrant to search our papers or eavesdrop on our communications, but can simply issue a subpoena -- or ask nicely or threateningly -- for data of ours that is held by a third party, including stored copies of our communications.

The Justice Department wants to make this problem even worse, by forcing ISPs and others to save our communications -- just in case we’re someday the target of an investigation. This is not only bad privacy and security, it’s a blow to our liberty as well. A world without ephemeral conversation is a world without freedom.

We can’t turn back technology; electronic communications are here to stay. But as technology makes our conversations less ephemeral, we need laws to step in and safeguard our privacy. 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.

And we need to remember, whenever we type and send, we’re being watched.

Foley is an anomaly. Most of us do not send instant messages in order to solicit sex with minors. Law enforcement might have a legitimate need to access Foley’s IMs, e-mails and cellphone calling logs, but that’s why there are warrants supported by probable cause--they help ensure that investigations are properly focused on suspected pedophiles, terrorists and other criminals. We saw this in the recent UK terrorist arrests; focused investigations on suspected terrorists foiled the plot, not broad surveillance of everyone without probable cause.

Without legal privacy protections, the world becomes one giant airport security area, where the slightest joke -- or comment made years before -- lands you in hot water. The world becomes one giant market-research study, where we are all life-long subjects. The world becomes a police state, where we all are assumed to be Foleys and terrorists in the eyes of the government.

This essay originally appeared on Forbes.com.

Posted on October 18, 2006 at 3:30 PM • 66 Comments

Comments

Rob MayfieldOctober 18, 2006 3:52 PM

It's hard to see the downside if it were only used to keep the politicians with skeletons in their closets out of positions of power ... but then you realise it affects nearly all of us and the reality of the situation sinks in ...

B.W. McAdamsOctober 18, 2006 4:12 PM

Due to SEC rules, securities firms are required to log IM conversations now, in addition to the email they've been required to log for years.

The SEC can demand at any point in time for you to provide them IM logs from any given dates, for individual people or your whole firm.

It's of course, much harder to filter signal from noise with IM than email.

Another KevinOctober 18, 2006 4:16 PM

It has never been really different:

--Qu'on me donne six lignes écrites de la main du plus honnête homme, j'y trouverai de quoi le faire pendre. - le Cardinal de Richelieu

Rough translation: Give me six lines written by the hand of a man, however honest, and I shall find in them something to have him hanged.

The only difference today, and for the literate it is only a sight one, is that one needn't put pen to paper, and still risks Richelieu's gallows.

Another KevinOctober 18, 2006 4:17 PM

Only a *slight* difference, not only a *sight* one. (Why do typos become immediately apparent only after you post?)

MooseOctober 18, 2006 4:33 PM

Ubiquitous use of strong crypto would also go a long way to preventing third parties from recording ephemeral conversations. However, I don't think it's perfect.

First, some countries require you to surrender your keys under legal obligations, or face additional charges. In effect, you are being asked to provide evidence against yourself.

Second, there is no guarantee that one of the legitimate parties to the encrypted conversation isn't sharing the key, or storing cleartext content. In the Foley case, even if encryption were used for transmission, the young man could well have kept cleartext versions. Worse, if the crypto regimen included digital signatures, then Mr. Foley's signature might be on all the messages. Plausible deniability? Not so much.

Third, you'd want to use archival-quality crypto. If you'd used DES 20 years ago, you could be confronted with brute-force key cracks today. Ars longa, vita brevis.

MartyOctober 18, 2006 4:35 PM

The authors of instant messages, as content originators, should be able to include some sort of flag indicating that their messages may not be saved.

Of course, that's ridiculous. Who in their right mind would propose such a thing?

Wait... if the broadcast flag were real and Foley's IMs were HD video messages (shudder) with the DRM flag set, would there be a scandal?

Bruce SchneierOctober 18, 2006 4:51 PM

"It's hard to see the downside if it were only used to keep the politicians with skeletons in their closets out of positions of power ... but then you realise it affects nearly all of us and the reality of the situation sinks in ..."

The difference is the power imbalance. Open government is good for liberty because the government has all the power, and open government reduces the power imbalance between the government and the people.

Forced openness in people is bad for liberty because it decreases the power of the people with respect to the government.

Bruce SchneierOctober 18, 2006 4:52 PM

"It has never been really different:

"--Qu'on me donne six lignes écrites de la main du plus honnête homme, j'y trouverai de quoi le faire pendre. - le Cardinal de Richelieu

"Rough translation: Give me six lines written by the hand of a man, however honest, and I shall find in them something to have him hanged.

"The only difference today, and for the literate it is only a sight one, is that one needn't put pen to paper, and still risks Richelieu's gallows."

No. The difference today, and it is a major one, is that a modern-day Richelieu has many more words to choose from. That's why the loss of ephemoral conversation is important.

RogerOctober 18, 2006 5:29 PM

Excellent essay, Bruce. Just two minor quibbles:

1. Maybe Forbes wasn't the right forum, but it might have been germane to mention OTR encryption.

2. "Gmail, for example, saves everything, even if you delete it." No. The anti-Google crowd has just about made this a meme, but it isn't true. What the Gmail privacy policy says is that if you delete something from your account, there will be a delay before it is actually overwritten, and even then they can't guarantee to hunt down all traces on old backups. With regard to overwriting, most providers don't do so at all; while regarding offline copies, the same caveat is given by every webmail provider who even bothers to mention deletion (most don't), because it is totally impracticable to do otherwise.

Bruce SchneierOctober 18, 2006 5:35 PM

"Wow. With this statement, perhaps you're disclosing more than you think."

I don't think I am. I very much believe in the ionnovative 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 settiong the playing field.

Companies are not public charities, and it's just crazy to expect them to act as such.

McGavinOctober 18, 2006 5:37 PM

"and the only way to solve the problem is through legislation"

WHAT!? I thought the only way to protect ourselves was with Mathematics?

AnonymousOctober 18, 2006 5:51 PM

"Legislation is just a way of setting the playing field."
I wonder what percentage of legislation from Federal and U.S. state legislatures, as well as Federal and state agencies and regulatory bodies, could be judged to have as its primary purpose in enactment the "setting [of] the playing field." Would be interesting to try to measure that. I wonder if there are more recent statistics, compiled and easily available for perusal, than this: http://www.johnlocke.org/policy_reports/display_story.html?id=10

Matthew SkalaOctober 18, 2006 5:55 PM

I wonder if OTR really makes much difference. All you need is the transcript which could have been forged, but wasn't, and for one side of the conversation to swear "this is a true record of the conversation we had". That's pretty much the level of credibility that already exists for unencrypted email and IM.

OTR means that IM conversations can be cryptographically signed without becoming *more* credible as evidence than current unsigned communications. But I don't see how it can make them *less* credible than current unsigned communications, and current unsigned communications are already credible enough to be a big problem.

You bet Foley's IM logs were unsigned and in a format that could easily have been forged, and that hasn't helped him much.

Another KevinOctober 18, 2006 6:41 PM

"No. The difference today, and it is a major one, is that a modern-day Richelieu has many more words to choose from. That's why the loss of ephemoral conversation is important."

If Richelieu's six lines suffice to condemn a man, what does he profit from the man's entire life story?

Take a letter, CALEA...October 18, 2006 6:43 PM

With the revelation that they can watch everyone's communications, this makes it even more damning that they didn't catch Foley's shenanigans as they were happening. It's clear that while the monitoring can be universal, the actual policing is conducted in a biased manner.

Of course this comes from the same administration whose idea of making it easier to find a needle in a haystack is to pile on more hay...

Basil BerntsenOctober 18, 2006 6:44 PM

I agree with your assessment. I assume that most anything I write on the internet (whether email, SMS, or IM) could be read by anyone who wanted it badly enough. I avoid saying anything online that I would not stand up in front of everyone I know and say publicly. It's the same mentality one has to have if they keep a blog. "Living out loud" can be dangerous if you gain enough notoriety.

quincunxOctober 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.


1October 18, 2006 6:59 PM

"If Richelieu's six lines suffice to condemn a man, what does he profit from the man's entire life story?"

He can condemn all the people he talked to during his life.

AnonymousOctober 18, 2006 7:01 PM

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

What about the need for courts, to adjudicate property-rights disputes?

quincunxOctober 18, 2006 7:47 PM

"What about the need for courts, to adjudicate property-rights disputes?"

Courts don't need to be monopolistic.

International law works in this fashion, where allowed.

royOctober 18, 2006 8:28 PM

At a prior job, the chief agreed it was a good idea to assume that every keystroke would be relayed to Microsoft, so that even that name should never be mentioned in any of our email, reports, or any other digital communication. And that was back when the big worry was MS lawsuits.

I took that to heart.

Now that there are far greater entities to worry about, and far more at stake, the practice still makes sense, once updated.

Assume everything you write, even to yourself, will go to everybody on the planet who (a) doesn't like you now, and (b) won't like you later.

the other GregOctober 18, 2006 8:53 PM

"International law works in this fashion"

Is that some kind of magic spraycan which does away with the need for courts and governments and their hired thugs?

False DataOctober 18, 2006 9:52 PM

Another aspect worth considering is what the long term effects will be if there is no change.

For example, many of the attacks on people based on older data trails assume that someone's views stay constant over time: if you say "yes I said that but I was wrong," you face accusations of hippocracy (a.k.a flip-flopping). One long term impact could be greater acceptance of the idea that people can change their minds, which might be a good thing or a bad one--it would raise questions of exactly what you're voting for in an election, for example.

Another possibility is that people put less trust in the data trails, especially where the record would be fairly easy to alter and what it contains conflicts with whatever the audience wants to believe. In that case, an important question would be what other things people would start relying on as the "truth".

Finally, it takes a lot of resources--either time or money--to go through increasing numbers of electronic records. It might be worth asking how that fact is likely to shift the current balances of power.

False DataOctober 18, 2006 10:40 PM

I should read the preview more closely.

I meant "exactly what you're voting for" in the sense of "what does it mean to vote for a particular candidate if you believe that candidate is likely to change his or her mind while in office?"

One other point on shifts in the balances of power: thinking about how power is likely to shift should tell you something about who has an incentive to act, how they're likely to act, and who is likely to oppose change.

Tom DavisOctober 18, 2006 10:52 PM

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

If legislation could actually solve problems, we could just make it illegal to blow up airplanes and then we wouldn't need a security checkin at airports.

Oh wait. It is illegal to blow up airplanes. I guess that whole law thing doesn't actually prevent action.

Or maybe you meant that while legislation would not solve the problem, it would discourage people from making other people's private information public. But I would argue that that is exactly the case now. Publicizing private information to prove illegal or improper behavior would almost certainly be protected. Putting so-called private videos on Flickr would also invalidate any claims to legal protection. Corporations would no doubt be allowed to provide a notice that "Dialogs may be recorded to improve customer service." Other than that, what private information is currently being publicized?

The only way for people to be able to safeguard their privacy is for them to be aware of the ways that their privacy can be breached. And I think that the Foley incident is doing just that.

RalphOctober 18, 2006 11:24 PM

@ Another Kevin

"If Richelieu's six lines suffice to condemn a man, what does he profit from the man's entire life story?"

Perhaps the point might be that six lines were easier to hide and protect from the inquisition than a vast multitude.

As Richelieu pointed out, paraphrased from the bible, "in a multitude of words, sin is to be found". Therefore in the midst of inquisitions defence of privacy becomes paramount.

I take Bruce's point to be that without a better legal framework defence of privacy and therefore freedom or justice is very hard.

averrosOctober 19, 2006 2:10 AM

> the only way to solve the problem is
> through legislation.

The words of True Believer. How about, like, letting people to protect themselves?

All the legistlation is doing is prohibiting to the citizens the things the govenment busybodies will still be able to do with impunity. So they can spy on us, but we cannot spy on them.

Arturo QuirantesOctober 19, 2006 2:16 AM

"I take Bruce's point to be that without a better legal framework defence of privacy and therefore freedom or justice is very hard."

I also took another point from Bruce, when long ago he wrote:

"While technology infrastructures can persist for generations, laws and policies can change overnight. Once a communications infrastructure optimized for surveillance becomes entrenched, a shift in political conditions may lead to abuse of this new-found power. Political conditions may shift with the election of a new government, or perhaps more abruptly from the bombing of a federal building."

Prophetical words that have turned out to be true. After all, if you keep a powerful tool you will eventually find an excuse to use it.

Ewan GunnOctober 19, 2006 4:32 AM

See, this is all well and good - a shocking wake up call to reality. Like Bruce said, we know this already, but we don't _know_ it.

I, for one, want to know what I myself can do about this now, in the short term. Long term yes, legal aspects and privacy laws and terms and conditions are all wonderful, but what about now? I'm hoping there won't be, but there might be a chance of oversight in any laws that says any information _already_ logged can still be used in these immoral ways.

Also, it does provide a bit of a conundrum. I am a student studying network computing - I _need_ to send information across these channels. And once it leaves the university network, that's it, I have no control over the use, logging or other ways that information can be stored or used.

Worse, I'm planning on doing a PhD in Security and Forensic Computing. How does this realisation affect my future research and (more importantly) corporate ties? I'm beginning to take the view that is used for cryptographic methods - make it open and clear exactly how it works, then if it still can't be broken it's considered secure (I may have explained that wrong, alas I left my copy of Applied Cryptography at home!) So if I am developing a procedure or piece of software for security purposes, I want to make the algorithms behind it open and clear. I'm trying to work out how to do this in practise of course, and input is welcome.

I think I went off the rails a bit there, sorry.

HulluOctober 19, 2006 5:43 AM

If someone went through all the electronic chats I've ever had at least the following could be interpreted(out of context interpretation allows for wonders) from it:
1) I could be fired
2) I could be expelled from the University
3) I could be sued for countless of planned crimes, and some committed ones
4) I could be seen as a terrorist
5) I think this list is endless

I'm quite certain at least those things could be easily interpreted from all my e-chats and other conversations - especially if you don't evaluate the context as carefully as my mind probably had it evaluated when the conversation happened. Why do I leave these records? I think I live in childish trust and think that if I don't ever do anything really terrible no one bothers to dig up everything I've ever said to twist it to get me a maximum sentence.

... but if all had been recorded, was I ever sued for anything serious, anything at all could be interpreted from my chathistory.

Clive RobinsonOctober 19, 2006 6:40 AM

I guess I can only repeat my past comments from nearly two years ago on this sort of thing,

http://www.schneier.com/blog/archives/2005/02/implanting_chip.html

http://www.schneier.com/blog/archives/2005/11/instantaneous_d_1.html#c24322

WELCOME TO THE GOLD FISH BOWL

Because that's about how we will be living our lives within a few years.

Also once we get used to having our every word and action recorded how long before we get the memory and attention span of a goldfish ?

There is an old saying about disasters,

The first step is only visable with hindsight. The second step is visable to those who care to look. The third is visable to all although some chose to be blind to it at their peril.

JasonOctober 19, 2006 6:56 AM

I think "Google reads our Gmail and inserts context-dependent ads." is a bit too targeted.
I know of at least 5 (more?) external services that filter based off the content of your e-mail. And I'm not talking baysien filtering, I'm talking parsing e-mails and rejecting them if they contain a blacklisted domain, or some other blacklisted/bad word.

Sure, GMail does robotic targeted ads, but other people outright don't want you talking about certain web sites / web locations (I'm sure some IP addresses are included).

Josh OOctober 19, 2006 6:57 AM

I agree with overall with your piece, Bruce, but I'm not sure about the following statement.

"...we know that the National Security Agency is monitoring everyone’s international phone calls."

I don't believe they are or can monitor *everyones* international phone calls. I was pretty sure that they were listening to calls that had endpoints on either side thought or known to be associated with terrorism. I could be wrong, but I don't believe that Canadian children calling their Grandmonthers back in Winnepeg were being monitored by the NSA.

jayhOctober 19, 2006 8:06 AM

Legislation is the last thing to protect us. The government will not make things difficult for itself, there will be plenty of exceptions (either admitted or not) so at best it is a false impression of privacy.

The best privacy is that which you control directly. Encryption, steganography, etc. NOTHING else means anything.

BennyOctober 19, 2006 8:14 AM

@ jayh and the others who blast legislation in favor of cryptography:

Yes, we should not rely solely on legislation. But neither should we rely solely on cryptography either. How will cryptography help secure your data once you give it to another party, say, your credit card company? I think Bruce's point is that we need stronger privacy legislation to complement use of crypto, because there are things each does well that the other doesn't. Defense in depth, right?

HulluOctober 19, 2006 8:20 AM

Just can't encrypt everything.

Or, at least I don't think I can train my mind&body to encrypt my speech. And decrypt others'.

JeanOctober 19, 2006 8:50 AM

A few things:

"... normal constitutional protections don’t apply to much of this ..." Well, in the USA they do apply, but are not being applied. Judicial rulings and legislation have eroded protections and, unfortunately, it will take another layer of legislation and rulings to shore them back up again.

We need an unambiguous, legal definition of "privacy."

Since so little is encrypted nowadays, encrypted messages become a beacon on where to focus attention.

USA NSA, along with others, does indeed have the capability to capture "everything." Analysis targeting is something of an issue, however.

converter42October 19, 2006 9:45 AM

Legislation will never happen. The only way to enforce any limits would be through the courts, and by the time any case made it to The Supremes it would be framed in such a way that a "favorable" decision would spell disaster in the long run.

Crypto would be the only way to prevent casual use of our information, but we're stuck with non-native plugin solutions for IM and email and widespread adoption of transparent and universally compatible schemes is very unlikely.

I'm not a big fan of government interference in corporate affairs, but maybe we should write some legislation requiring carriers to offer such encryption. I can think of at least one legislator who'd think it would be a good idea, even if he wouldn't dare advocate it publicly, given his current situation.

t3knomanserOctober 19, 2006 11:07 AM

I agree to the need of an enhanced legal framework. But: all considerations of the complexity of that aside, my real concern is the _return_ of the ephemeral nature of conversation. I want everything I do, say, hear and see recorded- but by me, with full Constitutional protections. And I think technology needs to develop in that direction.

quincunxOctober 19, 2006 11:57 AM

The problem with crypto is that if you are caught with reams of encrypted data, you are forced to provide a key - otherwise you get sent to jail until you do so.

In that case, the mere of use of crypto makes you look guilty. The threat of physical privation will likely lead you to decrypt the data, and hope that the lack of evidence to the case is good enough - not whether you may have other illegal material or other evidence to different 'crimes'.

@the other greg:

"Is that some kind of magic spraycan which does away with the need for courts and governments and their hired thugs?"

It does away with the former, but not the latter.

Courts are an indispensible tools for seeking justice.

Governments are tools of oppression and injustice.

RvnPhnxOctober 19, 2006 12:36 PM

We are never safe when there is a witch hunt on. This is not news.
In the words of Giles Corey:
"More weight!"

X the UnknownOctober 19, 2006 1:19 PM

@ quincunx:
"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."

Protection Rackets, Numbers Running, etc., are organized crime, which will exist regardless of trade laws. Furthermore, classic monopolistic behavior is arguably very organized crime, whether it is actually illegal by statute or not.

quincunxOctober 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.

C GomezOctober 19, 2006 2:43 PM

The last thing I want is legislation.

There's no reason I can't take action, today. Unfortunately the world of personal encryption is still too hard to use, despite the efforts of a few people. There's no reason I can't keep spreading the word to encrypt communications.

Look, I agree with some of the philosophical context of this article. But the last thing in the world that will help is legislation. Legislation just opens Congress and the states to the idea that they _actually can regulate_ this. They can't. It will just create a sordid mess of laws (criminalizing things like, I dunno... speech) that either can't be enforced or are enforced arbitrarily and lightly.

This is one area I would rather Congress stays the hell out of. Believe me, I've thought for years about the privacy of my online conversations, and encrypt those that need to be.

OutlawIt!October 19, 2006 2:58 PM

"...the only way to solve the problem is through legislation."

I like the following idea, in response to the proposal of politically expedient legislation as an attempted method of problem-solving:

"It's dangerously shortsighted to make legislative decisions based on the threat of the moment without regard to the long-term consequences of those decisions."

AnonymousOctober 19, 2006 4:00 PM

What I would like to see is end to end encryption with ephermel keys the standard for IM, email and voip. That way only the end points can capture the communication contents. The NSA can still spy on targetted inviduals by spending the resources needed to monitor those individuals, but they can't record everyone's conversations.

BennyOctober 19, 2006 4:30 PM

Again, what good does encryption do w.r.t. data you have given to a third party as part of a transaction, such as when applying for a credit card? Once it's in someone else's hands, it's out of your control. The best way to ensure that companies take care of your data is to ensure it's costly for them not to do so, and legislation is the best way to accomplish that, IMHO.

@ quincunx: Yeah, we get it, you think "state == bad!!!" IIRC, you've already been asked not to spew your anti-state angst in every topic that's even remotely government-related. 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.

quincunxOctober 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.

Tom DavisOctober 19, 2006 6:01 PM

@Ewan Gunn

Whether sending written correspondence by mail or e-mail, or telling a co-worker something, it is important to remember that the information becomes the property of whomever you're sending it to. This has always been the case, it's just so much easier and cheaper to send a text message today than it was two hundred years ago.

It is important to remember that it was the recepients who stored and disclosed the instant messages from Mr. Foley.

In Neil Stephenson's novel, "Cryptonomicon" the uber-paranoid Douglas Shaftoe will only send confidential information by previously arranged codes like which joke he sends will explain whether or not he found a submarine. Likewise, Randy explains to another meeting attendee that delicate topics should only be discussed in one on one face to face conversations so that in a court of law, anything said could be denied.

When I was growing up, I learned discretion. You don't talk about your personal business in public if you want it to remain private.

BennyOctober 19, 2006 7:18 PM

@quincunx:

First, thank you for a remarkably civil reply, in light of the rudeness of my previous post. I inadvertently channeled much frustration related to personal matters that had nothing to do with you or the discussion at hand. For that, I apologize.

Now, back to the discussion -

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

Well, there is quite a difference between being anti-current-state and being-anti-state, full stop. I myself am anti-current-state. 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.

"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."

A laudable goal. And you have indeed presented many arguments about the flaws of governments (note I am not saying I'm fully convinced yet :p). However, IMHO, you have failed to provide convincing arguments as to why a free-market system...

1. Is practical: 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. Do you assume that most people will recognize the formation of a monopoly, and vote against it with their dollars? 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. I believe the real world abounds with examples that demonstrate this is not the case.

2. Is reachable: Yes, asking you to supply a full-blown transition plan is probably unfair on my part. 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. Even if a free-market system is truly superior, I simply fail to see how a transition can be accomplished without an unacceptably high amount of disruption to society. It gets tiresome to keep hearing about how the current system is flawed, and this other system is so much better, if we could just magically move from one to the other. The net effect is that the audience becomes alienated to the very idea you're trying to sell them on.

Clive RobinsonOctober 20, 2006 11:20 AM

@Benny

"Well, there is quite a difference between being anti-current-state and being-anti-state, full stop. I myself am anti-current-state. 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."

Sorry I have to disagree there, the system is broken and can easily seen be seen to be so. In fact democracy as we practice it has been known to be broken since Cromwell chopped the Kings head choped off.

Think about it, you get the oportunity once every four years (or less if the current incumbrants think they cannot lose) to say who will be in power next.

The people you vote for make you a very vague set of promises which they invariably do not and usually have no intention of keeping, and you have no recourse on this, other than not to vote for them the next time.

By then they will have had the fun of raising taxes and spending it whilst paying lip service to you the voter. They will have done the damage, and you have no legal way to deal with them, so in reality they cannot lose...

Also I have yet to see a balot paper with "none of the above" as a voting option on it. The nearest thing is a spoiled vote which actuall counts as nothing no matter how many there are.

So you know that one of those very probable liars is going to make their decisions in your name for the next four years and spend your money how they think will either get them voted for next time or get them a nice well paid job instead. Which is why tactical voting is not realy any better than not voting (which might account for the low voter turn out these days).

So legaly there is nothing you can do untill next time when the whole process is repeated (with the same stupid outcome). This is not democracy in anything other than mis-appropriated of the ideal and name.

Winston Churchill once commented,

"Democracy is the worst possible form of governement, except for all the rest"

I would say he certainly knew what he was talking about.

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).

I say it's dangerously broken and we need to fix it the real question is how... However the sooner we think about it the better it will be for all of us who are not politicians.

RvnPhnxOctober 20, 2006 12:03 PM

I see a lot of comments here about how a "true democracy" would be better than what we have now. I agree that many of the current representative democracies have serious problems, but I also respect the fact that true democracy (aka "mob rule") isn't actually the best of the possible alternatives. For proof I point no further than the first society documented to have claimed itself to be a democracy (they even seem to have come up with the word): ancient Athens (one of the many city-states of ancient Greece). Do some serious reading an you will find out why this panacea is as false as all others.

AnonymousOctober 20, 2006 12:40 PM

Communication always implies trust.

Any form of it means giving information away to others, and those could propagate it further. You need to secure the cannel AND make sure that your conversational partner is trustworthy.

Communicating is somewhat like investing. Make sure the expected return on investment (what you achieve with the communication) is worth the risk (that the information you give away could propagate further).

And this is a pity. I would love to talk to others just for fun, friendship, honesty, social health, call it what you like. Makes me sick that I can't any longer because my data gets so aggressively abused.

roverOctober 20, 2006 1:35 PM

@Bruce, you wrote: "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 settiong the playing field."

The "prisoner's dilemma" [1] supports these claims. Unfortunately, the state in its current form cannot "set the playing field correctly" because the humans that direct it are players themselves. There are no fairminded forces at all.

Second, who is entitled to define "correctly" anyway? Politics is not about "doing right". It is a market place where the rich outbid the poor. Most of us want to believe that all players possess an equal amount of currency in this market (exactly one vote). But this would only be the case if we could vote for each detail question separately, and elections were perfectly fair.

In practise, we vote for one of two baskets with unknown contents, and for the next 4 or 8 years the elected basket sells its power for real money (not votes). Hence our influence is very limited. Also, there is ample reason to believe that elections are not at all fair these days. If so, we have even less than one vote to choose between the two obscure baskets.

Is this really much different than a game of roulette where you can put your only chip on either black or red, but the bank chooses nonetheless which color wins?

There are even structures that continue to exert power largely independently of elections. Global corporations with monopolies and oligopolies, secret agencies, personal connections between people in key positions, and many more.

Also, you seem to assume that all players will abide to the rules of the playing field. This has never been the case. Rules cannot stop people and organizations from doing things whose expected benefits outweigh the expected punishment weighted with the risk of getting caught. Especially players with the power to change the rules usually feel entitled to break them at will, and usually have the power to do so without the public knowing.

Finally, your wording suggests that "set the playing field correctly" must work because not doing it will not work. Sadly, this is not so. I believe the economics are such that neither works.

Economics knock over ideals any day, and they lead any form of organization (private or governmental) to degrade us to gold fish as someone posted above, or laying hen in small surveilled laying batteries, as I think fits the analogy better. Seems to be a law of nature, just like gravity.

This means we can only depend on ourselves when it comes to privacy. Of course I am all for legislation in favour of privacy and data protection, and applaud for any we could get. But we are not going to get anything sufficient.

[1] http://en.wikipedia.org/wiki/Prisoners_dilemma

germain jamesOctober 20, 2006 6:55 PM

Welcome to the New World Order, not to be confused with the old world order. The old order is gone and the new order will keep everything in check. You all must have been asleep.I have been watching the New Order sweep in like the wind for years. Time to wake up folks or should I say, "Sorry! You slept through it, and now the film is over."

J.October 23, 2006 2:02 AM

Do you mean the US should get an equivelant to the European Union's data protection directive (often refered to as "EU privacy law")? It turns out laws are nice in theory, but wether they are upheld in practice, time will tell. I sometimes (have to) refer to it when I communicate with businesses.

See e.g. on Wikipedia the following
http://en.wikipedia.org/wiki/Data_Protection_Act_1984
http://en.wikipedia.org/wiki/Directive_95/46/EC_on_the_protection_of_personal_data

Also of interest are:
U.S. tech protests EU privacy laws http://news.zdnet.com/2100-9595_22-960134.html
Secret US Deal 'Broke EU Privacy Law' http://www.commondreams.org/headlines06/0929-06.htm

J.October 23, 2006 2:33 AM

"There is always monopolistic behavior, but there are no monopolies unless the law is structured to foster them."

True, but there are and have been many legal monopolies.

I learned something fascinatingly ironic today. Quote from http://en.wikipedia.org/wiki/Dutch_East_India_Company

"The Dutch East India Company (Vereenigde Oostindische Compagnie or VOC in Dutch, literally "United East Indies Company") was established on March 20, 1602, when the Estates-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia. It was the first multinational corporation in the world and it was the first company to issue stocks."

The first multinational corporation and first company to issue stocks was a monopoly granted by the country where it was founded. Now, given the climate one might argue such is somewhat understandable (?) I'm not sure on that.

A whole lot of 'basic resources' in the Netherlands and other countries such as UK and US, were either state owned or privately owned monopolies granted by state examples being: water supply for housing, energy, phone, money, Internet backbones... voting machines...

To understand why our current political system doesn't work, IMO, you need to understand a key element called fractional reserve system (FRS). The IRS is a small fish compared to that. The FRS is a monopoly granted by the country (in fact many countries; I'm not aware of a country which doesn't have it) on issuing money, controlling recessions and booms, and not backing up the money printed (or being digitally 1s and 0s) with real value anymore (e.g. gold). This makes money essentially a fraud and an illusion. The people behind the FRS have enormous power over our daily lives.

There have been different times, my friends. Before globalisation and money, we traded goods with each other. We just prefer "comfort" which coincidentally was the argument why the EU started (whereas most EU civilians had no say on wether to join, or not; no referendum). Also, democracy is a powerful right for the people but if the comedians are able to control the crowd via means such as holding back information, spreading FUD and disinformation, commiting or easily allowing election fraud, it suddenly becomes less bright. The example of Hitler also proved more than 70 years ago, that democracy can be used to create a totalitarian, non-democratic society, if that is what the majority wants or claims they want. The pattern of comfort (and with that, lazyness, apathy, being careless, lack of time) I find back in many key elements of our society and given all the stress we have to endure, it is understandable. I firmly believe it is by design, though, but except for many examples its hard to prove.

quincunxOctober 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.

solinymOctober 24, 2006 10:51 PM

@quincunx:

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?

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. The participants may be relied upon to maximize their own share of the market, regardless of the overall outcome. 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 board game ``Monopoly'' was meant to demonstrate this; only one person ever wins, everyone else goes bankrupt. Think about it.

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

quincunxOctober 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'.

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