Calculating the Benefits of the Advanced Encryption Standard
NIST has completed a study—it was published last year, but I just saw it recently—calculating the costs and benefits of the Advanced Encryption Standard.
From the conclusion:
The result of performing that operation on the series of cumulated benefits extrapolated for the 169 survey respondents finds that present value of benefits from today’s perspective is approximately $8.9 billion. On the other hand, the present value of NIST’s costs from today’s perspective is $127 million. Thus, the NPV from today’s perspective is $8,772,000,000; the B/C ratio is therefore 70.2/1; and a measure (explained in detail in Section 6.1) of the IRR for the alternative investment perspective is 31%; all are indicators of a substantial economic impact.
Extending the approach of looking back from 2017 to the larger national economy required the selection of economic sectors best represented by the 169 survey respondents. The economic sectors represented by ten or more survey respondents include the following: agriculture; construction; manufacturing; retail trade; transportation and warehousing; information; real estate rental and leasing; professional, scientific, and technical services; management services; waste management; educational services; and arts and entertainment. Looking at the present value of benefits and costs from 2017’s perspective for these economic sectors finds that the present value of benefits rises to approximately $251 billion while the present value of NIST’s costs from today’s perspective remains the same at $127 million. Therefore, the NPV of the benefits of the AES program to the national economy from today’s perspective is $250,473,200,000; the B/C ratio is roughly 1976/1; and the appropriate, alternative (explained in Section 6.1) IRR and investing proceeds at the social rate of return is 53.6%.
The report contains lots of facts and figures relevant to crypto policy debates, including the chaotic nature of crypto markets in the mid-1990s, the number of approved devices and libraries of various kinds since then, other standards that invoke AES, and so on.
There’s a lot to argue with about the methodology and the assumptions. I don’t know if I buy that the benefits of AES to the economy are in the billions of dollars, mostly because we in the cryptographic community would have come up with alternative algorithms to triple-DES that would have been accepted and used. Still, I like seeing this kind of analysis about security infrastructure. Security is an enabling technology; it doesn’t do anything by itself, but instead allows all sorts of things to be done. And I certainly agree that the benefits of a standardized encryption algorithm that we all trust and use outweigh the cost by orders of magnitude.