Privacy

Privacy Declared Public Good

by Jack O'Connor on June 19, 2009

in Privacy

Bruce Schneier, eminent cryptographer, has declared market failure. He points to what he calls a meta-problem:

Those entrusted with our privacy often don’t have much incentive to respect it . . . What this all means is that protecting individual privacy remains an externality for many companies, and that basic market dynamics won’t work to solve the problem. Because the efficient market solution won’t work, we’re left with inefficient regulatory solutions.

Privacy is indeed an externality, but customer satisfaction is an externality, too. The whole point of markets is that they help us work these things out. What Mr. Schneier has described is not a market failure but in fact the original sin of the regulator: the assumption that, though the market chose publicity, it should have chosen privacy. We can’t make that claim without evidence.

Before we go making assumptions about what homo economicus might or mightn’t choose, we should remind ourselves of some of the benefits of publicity. Search engines like Google can give me tailored results, and targeted advertising funds many of their nifty services. When TransUnion vouches for me, I can reliably get a loan from a banker I’ve never met. If I’m married with kids, insurers who know that can offer me cheaper policies. These benefits are substantial, and we should be quicker to assume that the market values them than that it has ignored the associated costs.

There are plenty of good reasons for choosing privacy, and for the most part that choice is open to us. It’s still legal to pay with cash, walk around without ID, and forgo health insurance. It can be monstrously inconvenient, but that’s the price we pay when we make unusual choices. Of course, these options may not be legal for much longer, and there are already many legally required disclosures that should include privacy requirements–car insurance and airplane tickets, for example. There’s plenty of work to be done to make sure privacy stays legal, but that’s a long way from making it mandatory.

Mr. Schneier acknowledges several of the inefficiencies of regulation, to his credit, but he misses the single largest. None of us have exactly the same priorities when it comes to privacy, but when the choice is made for us by legislation, we’re stuck with a one-size-fits-all regime. As Mr. Schneier points out himself, there are also limits to how much regulation can accomplish. A privacy violation is the act of revealing information–not using it–and without any “IRS misplaces laptop” headlines, it’s usually impossible to tell whodunnit.

And of course, that’s the real problem here. If we don’t act like private people, we won’t be private people. I don’t share Mr. Schneier’s willingness to regulate, but he is absolutely right that the reality of privacy has changed too quickly for our norms to keep up. Posting drunken photos on Facebook is one of the stupidest things we can do with a computer, yet we do it all the time, because we don’t appreciate the consequences. It’s not just a lack of judgment, either. Everyone knows not to send cash through the postal service, but most of us still don’t have the slightest clue how email works. This too shall pass.

When man discovered fire, he learned not to burn himself. When we brought electricity into the home, we learned not to shock ourselves. If and when our online indiscretions come back to haunt us, we’re going to learn the value of privacy, and how to get it. Once we do, the market will bend over backwards to sell it to us. But insulating us from the consequences of our decisions can only make things worse.  If we try to save ourselves the trouble of adjusting, if we put our chips on government to simply make the problem disappear, we won’t be ready when the stakes are a lot higher.

Is Facebook Violating Federal Wiretapping Laws?

by Ryan Radia on May 14, 2009 · 2 comments

in Privacy, Tech & Telecom

Facebook has been at the center of a controversy involving its moderation policies and The Pirate Bay, a popular Bittorrent tracker that was found guilty of copyright infringement by a Swedish court last month. Since early April, Facebook has enforced a “site-wide” ban on links to The Pirate Bay – including those in private messages.

This practice may run afoul of federal wiretapping statutes that bar service providers from “intercepting” private messages, according to an article that appeared on Wired Threat Level last week. Wired quotes Kevin Bankston, a senior attorney for the Electronic Frontier Foundation, who explains that Facebook’s practice raises “serious questions about whether Facebook is in compliance with federal wiretapping law.”

It’s important to draw a distinction between the traditional notion of “wiretapping” and Facebook’s “interception” of user messages, which doesn’t involve any human intervention. Regardless of how the courts may interpret ancient laws like the 1986 Electronic Communications Privacy Act, an automated computer system flagging and deleting certain strings from user messages simply isn’t comparable to a third party secretly listening in on a private phone conversation.

Besides, Facebook makes clear to its users from the get-go that their messages and postings are subject to a set of rules (which Facebook lays out in plain English). If Facebook believes a message or posting is against the rules, it can block or remove it. This is not an unreasonable rule; many online discussion forums have enforced similar policies since the Web’s early days. Such filtering is possible only if sites can “examine” messages to identify misconduct.

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Remaining ‘Swiss’ No Longer An Option

by Gary Howard on March 6, 2009 · 1 comment

in Economy, International, Personal Liberty

In a running theme, I again cover the topic of the U.S. government’s heavy-handed dealings with swiss bank UBS.  A nod to my colleague John Berlau, whose letter in today’s Financial Times gives a nod to former ambassador Faith Whittlesey and her commentary in FT expressing concern over the Obama administration demanding the names of 52,000 Americans who do business with UBS.  As I stated in previous posts on this issue, these actions by federal authorities are setting a bad precedent for the privacy of American citizens.  As usual, I am left at the end my post with questions: When the government can demand to know every detail of your financial life, what is there to stop it from exerting control over it?

More Big Brother Tactics Against Charity

by Gary Howard on March 5, 2009 · 2 comments

in Odds & Ends, Personal Liberty, Politics as Usual

There are more  developments on the charity front-not exactly related to the budget issue I posted on previously–but interesting nonetheless.  Apparently, the National Committee for Responsive Philanthropy (do not miss this link!)-NCRP, wants to work with legislators to push this agenda.  At first glance, its goals laid out here seem harmless enough:

It attempts to answer the questions: What differentiates an exemplary foundation from the rest of its peers? What can foundations do to improve its relevance to nonprofits, the economically and socially underserved Americans and society as a whole?

Of course, all things are not always what they seem.  Here is a critique of the report in by Heather Higgins of Philanthropy Roundtable:

The full text of the report came out March 3, but NCRP has been circulating a 15-page summary that already makes clear that this paper is not only replete with flawed logic, poor economic understanding and selective data, but is most disingenuously an Orwellian world of deliberate redefinition, where benign and admirable words are used but have meanings very different from common understanding.

Why? Because this report is a tool to a larger end. The document says it’s to be used to “criticize those who do not measure up.” Moreover, “Policymakers may find the criteria valuable when considering regulations or legislation … and the media will find the resource helpful for reporting.”

Back up a minute. NCRP has been around for 30 years. Its Web site homepage features “Happy Birthday, Saul Alinsky,” for the radical-left union and community organizer. Though self-styled as an independent “watchdog” of foundations, the reality is that NCRP doesn’t care about charity broadly–indeed it’s quite contemptuous of large swaths of it. It only cares about encouraging ever-greater flows of funds to the groups it deems worthy and truly serving of the public good, chief among which would be “social justice” activists like ACORN, an NCRP member.

In another article by an affiliate group critical of the report:

However, despite its name, The Alliance for Charitable Reform believes these benchmarks have nothing to do with measuring effectiveness. In fact, the natural consequence of these benchmarks will be to reduce the scope and diversity of the foundation sector to one that serves a more narrow set of highly politicized interests…

…”On average, foundation assets have dropped 20-40% and The New York Times reports an unusual number of charities filing for bankruptcy. It is incomprehensible that the NCRP is proposing criteria that could further ravage the charitable sector,”…

Again, I leave with more questions: Is there an effort out there to ‘de-fund’ or seriously reduce the funding of certain private non-profit charities, and ensure only select ones remain well-funded?   If so, why? I have no idea, it may be just a misunderstanding of intentions, but it sure seems fishy.

UBS agrees to deal with the devil

by Gary Howard on February 19, 2009

in International, Legal, Nanny State, Personal Liberty, Regulation, Trade

I revoke my previous apology to the Swiss, and reiterate my previous disapproval.  As evidenced by the latest outcome in the U.S. tax case involving UBS, we have moved beyond troubling and into something much worse.

...the world’s largest wealth manager in terms of assets, agreed to pay a $780 million fine and disclose information about some of its clients to settle a landmark U.S. tax case.

As I said in my older post: “In direct contradiction to their own legal view of tax evasion.  Even though some may argue that this is moot because the U.S. does not consider a financial transaction as something beholden to privacy rights, the Swiss do–and besides, the U.S. view is wrong.  A person’s financial records should be considered as sacred as their medical records.”

And with an eye toward history, let us not forget:

One issue of the time that reinforced the passage of this law [Swiss Banking Secrecy Act] came during the era of Hitler when a German law stated that any German with foreign capital was to be punished by death. Swiss banks were watched closely by the German Gestapo. It was after Germans began being put to death for holding Swiss accounts that the Swiss government was even more convinced of the need for bank secrecy.

Reading the comments on left-leaning blogs, you hear cheers and a tinge of jealousy about the whole thing.  No matter if UBS did or did not help people avoid U.S. taxes, I cannot read this without envisioning a slippery slope argument.  If the current climate continues, it won’t be too far-fetched to imagine laws like that of WWII Germany criminalizing and imprisoning people for choosing where to put their own money.  And I won’t even mention the new Treasury Secretary. Oops

PEOTUS Behavioral Targeted Advertising Adventure

by Nick Brown on January 16, 2009 · 7 comments

in Privacy, Regulation, Tech & Telecom

The prevention of regulation and the Rule of Law pounding its mighty fist within a medium or sector of business is generally something that is lauded around these parts.  On occasion, though, an industry will find that it is possibly pushing the envelope ever so much over the line and chooses to act on its own behalf.  This self-supervision, for the most part, tends to deter government involvement and the creation of legal regulation, which can in many cases be far more costly than self-imposed rules.

In December of 2007 the FTC notified the online advertising industry that Behavioral Targeting-style advertising was pushing the boundaries of privacy.  Their letter–entitled “Behavioral Advertising: Moving the Discussion Forward to Possible Self-Regulatory Principles”–should have made it abundantly clear that this was a warning shot and the hammer was about to drop.  The industry, quick to respond, and taking congressional action very seriously, announced yesterday (some thirteen months later) that they would seek self-regulation.

The announcement of the proposal to self-regulate came from a partnership between four advertising industry trade associations, including, American Association of Advertising Agencies (AAAA), the Association of National Advertisers (ANA), the Direct Marketing Association (DMA), and the Interactive Advertising Bureau (IAB).  They plan to work with the Council of Better Business Bureaus to develop their guidelines.

Behavioral advertising is not a new idea.  Advertisers have been seeking better ways to target market specific consumers since the first caveman opened a tool shop.  There is nothing wrong with this.  If I make widgets for men that work in coal mines in West Virginia, I’m going to set up billboards for my product outside the tunnel to the mine.  This is just good business sense.  But the modern computer age’s concern with targeted marketing is that it has become extremely personal, so personal that some are concerned with the privacy factor and how much personal data they may be giving up as they surf the web.

While surfing your favorite website, the site will send your browser (Firefox, Internet Explorer, Chrome, etc.) what is referred to as a “cookie”. It is essentially a small text file, quite harmless in nature, and is generally used to track things like web site shopping cart contents or personal settings on that website. It can, however, be used by advertisers enlisted on that site to determine what types of things you are interested in so that targeted marketing of ads can be implemented.

In these cases a cookie is sent to your machine from an advertiser on the site.  This creates a sort of road map for the advertiser of what you like based on the content of the website you were viewing.  Then upon viewing a different website, the advertiser can take the information it recorded about you from the cookie, and display adverts based on things you previously viewed that the advertiser assumes you would want to see.  What results is a totally personalized advertisement experience for you while you surf the web.

So where’s the rub?  While the identity of a user cannot be revealed by a cookie, a user that has registered with a website can be linked to a cookie.  What results is a privacy dilemma because instead of an anonymous individuals surfing habits being recorded, very specific information about who this person is could then be revealed. Additionally, the advertiser could also then tie a specific person to what they are looking at online.

“When you start to get into the details, it’s scarier than you might suspect,” Marc Rotenberg, executive director of the Electronic Privacy Information Center, a privacy rights group told The New York Times’ Louise Story. “We’re recording preferences, hopes, worries and fears.”

Most Internet companies would provide the rebuttal that a user’s account information was seen as just an ID number.  But the concern is that an ID number is attached to an account, an account contains the user’s personal info, and at some point the data could be accessed.  The privacy concern may be far fetched, or it could be completely legitimate.  It would all come down to the ethicality of the company.

So why the sudden movement toward action by the advertising trade associations after 13 months of ignoring the issue? Because PEOTUS Obama is days away from becoming POTUS. And rumors are that lobbyist fear behavioral targeted marketing will be the main privacy issue examined by Congress this year.

“There are no immune companies or business models from Capitol Hill or state regulation,” said Mike Zaneis, VP-public policy at the IAB.

Obviously the move is to get out in front of the issue. A self-regulating industry could deter Congress from considering legislation to legally enforce guidelines. But a self-regulated industry is also watch dogged by its own people. Only time will tell if they have the will power and character to maintain that approach, but it is certainly hoped for as less government legislation is the favorable outcome.

Federally Sanctioned Propaganda Machine

by Gary Howard on December 11, 2008 · 1 comment

in Bailout Watch, Economy, Intellectual Property, Nanny State, Odds & Ends, Privacy, Regulation, Tech & Telecom

 

Apple's 1984 "Big Brother" commercial.

Apple's 1984 "Big Brother" ad

An article over at Ad Age brings up an angle on the whole auto industry bailout probably not considered much before.  The fact that a yet-to-be-appointed “car czar” will have control over a multibillion dollar advertising budget for the big three.  Under the guise of “oversight,” this would effectively “Create World’s Most Powerful Marketing Exec[utive].”  

The draft rescue plan for Detroit sent to the White House by Congress yesterday calls for the appointment of a “car czar” who will oversee the Big Three automakers’ expenses over $25 million — which, by extension, would include media buys. Based on Advertising Age’s estimates of spending by General Motors Corp., Chrysler and Ford Motor Co., that would give the as-yet-unnamed car czar control over some $7.3 billion in marketing spending in the U.S. alone.

The most disturbing thoughts about this (particularly to those concerned with liberty) are provoked here: 

The car czar would wield a budget more than double those of AT&T, Verizon, Unilever and Johnson & Johnson, which round out the nation’s top five marketing spenders, and give the car czar more clout with media and agencies than such famed names in marketing as Walmart Chief Marketing Officer Stephen Quinn and Anheuser-Busch VP-Marketing Dave Peacock.

…If the bailout goes through, agencies that work for the Big Three will essentially be toiling on a government account, with all the associated red tape and strictures that involves.

So there you have it.  We should all be concerned about this for many reasons.  As mentioned, the large ad budget that comes with a czar-controlled U.S. auto industry will allow a government bureaucrat to wield unbalanced and unchecked influence over not only who gets ad contracts, but what media outlets get ad money. The czar can simply refuse to give business to an advertising agency who works for a foreign competitor of the big three (or a “non-compliant” corporation), or refuse to pay money to show ads on outlets that they deem “unfriendly” to the administration or its mission.   This will be an unequivocal disaster.  We have already seen the lengths to which administrations (and pre-administrations) have gone to influence and/or silence media they do not like.  What kind of power plays do you think are possible when the administration’s appointee controls a major source of media outlets’ ad revenue? Whatever it ends up being, it won’t be pretty.

No “Technology Czar,” Please

by Wayne Crews on November 5, 2008 · 8 comments

in Economy, Intellectual Property, Nanny State, Personal Liberty, Privacy, Tech & Telecom

Like everybody else in town, we’re pondering the implications of the transition to the Obama Administration for various policy areas here at CEI. On the technology/Internet front, CNet’s Declan McCullagh has a superb overview today.

On the high-technology front, president-elect Obama has indicated he’d appoint a Chief Technology Officer. The role seems federal-government-focused: The tech “czar” would manage government technology policy with respect to matters like cybersecurity, privacy and Internet policies–basically securing governement networks and keeping government agencies on the cutting edge of communications technology.

The role as described seems limited to “bringing government into the 21st century.” But would the role remain circumscribed? “Czars,” like commissions of various sorts, are tempting for politicians, and can end up as barriers and stumbling blocks to non-political solutions to normal problems and challenges. A drug czar wages a hugely expensive war on drugs; An education czar ends up supporting funding of education programs from Washington, D.C.

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LibertyWeek 14: Conviction Spooktacular

by Richard Morrison on October 29, 2008 · 1 comment

in Podcast

Prepare yourself for the latest episode of the best free market podcast around, LibertyWeek.

Your hosts Richard Morrison and Cord Blomquist discuss the looming presidential election, Halloween, the conviction of Alaska Sen. Ted Stevens, the continuing economic unease, tough times for the U.S. Postal Service, American companies react to Internet censorship abroad, Cox’s new wireless service, Microsoft’s new web-based OS Azure, and all the finest Olympic News.

Listen now!

Stopping “Badvertising” at Yahoogle.

by Wayne Crews on October 15, 2008 · 1 comment

in Economy, Privacy, Tech & Telecom

As an indicator of how perverse wealth-draining antitrust policy has become, have a look at the “concessions” being squeezed out of Google and Yahoo on their proposed advertising collaboration.

In the communications realm, it used to be that the heavy-metal infrastructure companies were regarded as monopolistic or potentially so. Then, wise regulators feared the Windows desktop surely was an essential facility to which competitors deserved access. Now, “mere” content companies are the monopolies.

Think about it; websites–code!!–are being regarded as something regulators must oversee, as if our left-mouse-button no longer works should the ads we’re served up by Yahoogle seem stilted.

The end result of concessions here, as in satellite mergers and elsewhere, is that we end up with entities that increasingly do not resemble what would exist in a free market. Kind of like banks in a world in which central bankers have controlled money and credit for decades, but that’s another story.

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