It's the Economy, Stupid

  • Bruce Schneier
  • Wired
  • June 29, 2006

Italian translation

I’m sitting in a conference room at Cambridge University, trying to simultaneously finish this article for Wired News and pay attention to the presenter onstage.

I’m in this awkward situation because 1) this article is due tomorrow, and 2) I’m attending the fifth Workshop on the Economics of Information Security, or WEIS: to my mind, the most interesting computer security conference of the year.

The idea that economics has anything to do with computer security is relatively new. Ross Anderson and I seem to have stumbled upon the idea independently. He, in his brilliant article from 2001, “Why Information Security Is Hard—An Economic Perspective” (.pdf), and me in various essays and presentations from that same period.

WEIS began a year later at the University of California at Berkeley and has grown ever since. It’s the only workshop where technologists get together with economists and lawyers and try to understand the problems of computer security.

And economics has a lot to teach computer security. We generally think of computer security as a problem of technology, but often systems fail because of misplaced economic incentives: The people who could protect a system are not the ones who suffer the costs of failure.

When you start looking, economic considerations are everywhere in computer security. Hospitals’ medical-records systems provide comprehensive billing-management features for the administrators who specify them, but are not so good at protecting patients’ privacy. Automated teller machines suffered from fraud in countries like the United Kingdom and the Netherlands, where poor regulation left banks without sufficient incentive to secure their systems, and allowed them to pass the cost of fraud along to their customers. And one reason the internet is insecure is that liability for attacks is so diffuse.

In all of these examples, the economic considerations of security are more important than the technical considerations.

More generally, many of the most basic security questions are at least as much economic as technical. Do we spend enough on keeping hackers out of our computer systems? Or do we spend too much? For that matter, do we spend appropriate amounts on police and Army services? And are we spending our security budgets on the right things? In the shadow of 9/11, questions like these have a heightened importance.

Economics can actually explain many of the puzzling realities of internet security. Firewalls are common, e-mail encryption is rare: not because of the relative effectiveness of the technologies, but because of the economic pressures that drive companies to install them. Corporations rarely publicize information about intrusions; that’s because of economic incentives against doing so. And an insecure operating system is the international standard, in part, because its economic effects are largely borne not by the company that builds the operating system, but by the customers that buy it.

Some of the most controversial cyberpolicy issues also sit squarely between information security and economics. For example, the issue of digital rights management: Is copyright law too restrictive—or not restrictive enough—to maximize society’s creative output? And if it needs to be more restrictive, will DRM technologies benefit the music industry or the technology vendors? Is Microsoft’s Trusted Computing initiative a good idea, or just another way for the company to lock its customers into Windows, Media Player and Office? Any attempt to answer these questions becomes rapidly entangled with both information security and economic arguments.

WEIS encourages papers on these and other issues in economics and computer security. We heard papers presented on the economics of digital forensics of cell phones (.pdf)—if you have an uncommon phone, the police probably don’t have the tools to perform forensic analysis—and the effect of stock spam on stock prices: It actually works in the short term. We learned that more-educated wireless network users are not more likely to secure their access points (.pdf), and that the best predictor of wireless security is the default configuration of the router.

Other researchers presented economic models to explain patch management (.pdf), peer-to-peer worms (.pdf), investment in information security technologies (.pdf) and opt-in versus opt-out privacy policies (.pdf). There was a field study that tried to estimate the cost to the U.S. economy for information infrastructure failures (.pdf): less than you might think. And one of the most interesting papers looked at economic barriers to adopting new security protocols (.pdf), specifically DNS Security Extensions.

This is all heady stuff. In the early years, there was a bit of a struggle as the economists and the computer security technologists tried to learn each others’ languages. But now it seems that there’s a lot more synergy, and more collaborations between the two camps.

I’ve long said that the fundamental problems in computer security are no longer about technology; they’re about applying technology. Workshops like WEIS are helping us understand why good security technologies fail and bad ones succeed, and that kind of insight is critical if we’re going to improve security in the information age.

Categories: Economics of Security

Sidebar photo of Bruce Schneier by Joe MacInnis.