The Obama Administration has just released a draft “Consumer Privacy Bill of Rights Act of 2015.” Generally speaking, the bill aims to translate fair information practice principles (FIPPs) — which have traditionally been flexible and voluntary guidelines — into a formal set of industry best practices that would be federally enforced on private sector digital innovators. This includes federally-mandated Privacy Review Boards, approved by the Federal Trade Commission, the agency that will be primarily responsible for enforcing the new regulatory regime.

Many of the principles found in the Administration’s draft proposal are quite sensible as best practices, but the danger here is that they could soon be converted into a heavy-handed, bureaucratized regulatory regime for America’s highly innovative, data-driven economy.

No matter how well-intentioned this proposal may be, it is vital to recognize that restrictions on data collection could negatively impact innovation, consumer choice, and the competitiveness of America’s digital economy.

Online privacy and security is vitally important, but we should look to use alternative and less costly approaches to protecting privacy and security that rely on education, empowerment, and targeted enforcement of existing laws. Serious and lasting long-term privacy protection requires a layered, multifaceted approach incorporating many solutions.

That is why flexible data collection and use policies and evolving best practices will ultimately serve consumers better than one-size-fits all, top-down regulatory edicts. Continue reading →

by Adam Thierer & Andrea Castillo

Cybersecurity policy is a big issue this year, so we thought it be worth reminding folks of some contributions to the literature made by Mercatus Center-affiliated scholars in recent years. Our research, which can be found here, can be condensed to these five core points:

1)         Institutions, societies, and economies are more resilient than we give them credit for and can deal with adversity, even cybersecurity threats.

See: Sean Lawson, “Beyond Cyber-Doom: Assessing the Limits of Hypothetical Scenarios in the Framing of Cyber-Threats,” December 19, 2012.

2)         Companies and organizations have a vested interest in finding creative solutions to these problems through ongoing experimentation and they are pursing them with great vigor.

See: Eli Dourado, “Internet Security Without Law: How Service Providers Create Order Online,” June 19, 2012.

3)         Over-arching, top-down “cybersecurity frameworks” threaten to undermine dynamism in cybersecurity and Internet governance, and could promote rent-seeking and corruption. Instead, the government should foster continued dynamic cybersecurity efforts through the development of a robust private-sector cybersecurity insurance market.

See: Eli Dourado and Andrea Castillo, “Why the Cybersecurity Framework Will Make Us Less Secure,” April 17, 2014.

4)         The language sometimes used to describe cybersecurity threats sometimes borders on “techno-panic” rhetoric that is based on “threat inflation.

See the Lawson paper already cited as well as: Jerry Brito & Tate Watkins “Loving the Cyber Bomb? The Dangers of Threat Inflation in Cybersecurity Policy,” April 10, 2012; and Adam Thierer, “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle,” January 25, 2013.

5)         Finally, taking these other points into account, our scholars have conclude that academics and policymakers should be very cautious about how they define “market failure” in the cybersecurity context. Moreover, to the extent they propose new regulatory controls to address perceived problems, those rules should be subjected to rigorous benefit-cost analysis.

See: Eli Dourado, “Is There a Cybersecurity Market Failure,” January 23, 2012.


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Yesterday afternoon, the Federal Aviation Administration (FAA) finally released its much-delayed rules for private drone operations. As The Wall Street Journal points out, the rules “are about four years behind schedule,” but now the agency is asking for expedited public comments over the next 60 days on the whopping 200-page order. (You have to love the irony in that!) I’m still going through all the details in the FAA’s new order — and here’s a summary of what the major provisions — but here are some high-level thoughts about what the agency has proposed.

Opening the Skies…

  • The good news is that, after a long delay, the FAA is finally taking some baby steps toward freeing up the market for private drone operations.
  • Innovators will no longer have to operate entirely outside the law in a sort of drone black market. There’s now a path to legal operation. Specifically, small unmanned aircraft systems (UAS) operators (for drones under 55 lbs.) will be able to go through a formal certification process and, after passing a test, get to operate their systems.

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Cory BookerLast Wednesday, it was my great pleasure to testify at a Senate Commerce Committee hearing entitled, “The Connected World: Examining the Internet of Things.” The hearing focused “on how devices… will be made smarter and more dynamic through Internet technologies. Government agencies like the Federal Trade Commission, however, are already considering possible changes to the law that could have the unintended consequence of slowing innovation.”

But the session went well beyond the Internet of Things and became a much more wide-ranging discussion about how America can maintain its global leadership for the next-generation of Internet-enabled, data-driven innovation. On both sides of the aisle at last week’s hearing, one Senator after another made impassioned remarks about the enormous innovation opportunities that were out there. While doing so, they highlighted not just the opportunities emanating out of the IoT and wearable device space, but also many other areas, such as connected cars, commercial drones, and next-generation spectrum.

I was impressed by the energy and nonpartisan vision that the Senators brought to these issues, but I wanted to single out the passionate statement that Sen. Cory Booker (D-NJ) delivered when it came his turn to speak because he very eloquently articulated what’s at stake in the battle for global innovation supremacy in the modern economy. (Sen. Booker’s remarks were not published, but you can watch them starting at the 1:34:00 mark of the hearing video.) Continue reading →

This morning at 9:45, the Senate Committee on Commerce, Science, and Transportation is holding a full committee hearing entitled, “The Connected World: Examining the Internet of Things.” According to the Committee press release, the hearing “will focus on how devices — from home heating systems controlled by users online, to wearable devices that track health and activity with the help of Internet-based analytics — will be made smarter and more dynamic through Internet technologies. Government agencies like the Federal Trade Commission, however, are already considering possible changes to the law that could have the unintended consequence of slowing innovation.”

It is my pleasure to have been invited to testify at this hearing. I’ve long had an interest in the policy issues surrounding the Internet of Things. All my relevant research products can be found online here, including my latest law review article, “The Internet of Things and Wearable Technology Addressing Privacy and Security Concerns without Derailing Innovation.

My testimony, which can be found on the Mercatus Center website here, begins by highlighting the three general conclusions of my work:

  1. First, the Internet of Things offers compelling benefits to consumers, companies, and our country’s national competitiveness that will only be achieved by adopting a flexible policy regime for this fast-moving space.
  2. Second, while there are formidable privacy and security challenges associated with the Internet of Things, top-down or one-size-fits-all regulation will limit innovative opportunities.
  3. Third, with those first two points in mind, we should seek alternative and less costly approaches to protecting privacy and security that rely on education, empowerment, and targeted enforcement of existing legal mechanisms. Long-term privacy and security protection requires a multifaceted approach incorporating many flexible solutions.

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do not panicOn Sunday night, 60 Minutes aired a feature with the ominous title, “Nobody’s Safe on the Internet,” that focused on connected car hacking and Internet of Things (IoT) device security. It was followed yesterday morning by the release of a new report from the office of Senator Edward J. Markey (D-Mass) called Tracking & Hacking: Security & Privacy Gaps Put American Drivers at Risk, which focused on connected car security and privacy issues. Employing more than a bit of techno-panic flare, these reports basically suggest that we’re all doomed.

On 60 Minutes, we meet former game developer turned Department of Defense “cyber warrior” Dan (“call me DARPA Dan”) Kaufman–and learn his fears of the future: “Today, all the devices that are on the Internet [and] the ‘Internet of Things’ are fundamentally insecure. There is no real security going on. Connected homes could be hacked and taken over.”

60 Minutes reporter Lesley Stahl, for her part, is aghast. “So if somebody got into my refrigerator,” she ventures, “through the internet, then they would be able to get into everything, right?” Replies DARPA Dan, “Yeah, that’s the fear.” Prankish hackers could make your milk go bad, or hack into your garage door opener, or even your car.

This segues to a humorous segment wherein Stahl takes a networked car for a spin. DARPA Dan and his multiple research teams have been hard at work remotely programming this vehicle for years. A “hacker” on DARPA Dan’s team proceeded to torment poor Lesley with automatic windshield wiping, rude and random beeps, and other hijinks. “Oh my word!” exclaims Stahl. Continue reading →

A couple weeks ago at State of the Net, I was on a panel on Bitcoin moderated by Coin Center’s Jerry Brito. The premise of the panel was that the state of Bitcoin is like the early Internet. Somehow we got policy right in the mid-1990s to allow the Internet to become the global force it is today. How can we reprise this success with Bitcoin today?

In my remarks, I recall making two basic points. Continue reading →

Ten or fifteen years ago, when I sat around and thought about what I would do with my life, I never considered directing the technology policy program at Mercatus. It’s not exactly a career track you can get on — not like being a lawyer, a doctor, a professor.

One of the things I loved about Peter Thiel’s book Zero to One is that it is self-consciously anti-track. The book is a distillation of Thiel’s 2012 Stanford course on startups. In the preface, he writes,

“My primary goal in teaching the class was to help my students see beyond the tracks laid down by academic specialties to the broader future that is theirs to create.”

I think he is right. The modern economy provides unprecedented opportunity for people with talent and grit and passion to do unique and interesting things with their lives, not just follow an expected path. Continue reading →

Chairman Thomas E. Wheeler of the Federal Communications Commission unveiled his proposal this week for regulating broadband Internet access under a 1934 law. Since there are three Democrats and two Republicans on the FCC, Wheeler’s proposal is likely to pass on a party-line vote and is almost certain to be appealed.

Free market advocates have pointed out that FCC regulation is not only unnecessary for continued Internet openness, but it could lead to years of disruptive litigation and jeopardize investment and innovation in the network.

Writing in WIRED magazine, Wheeler argues that the Internet wouldn’t even exist if the FCC hadn’t mandated open access for telephone network equipment in the 1960s, and that his mid-1980s startup either failed or was doomed because the phone network was open whereas the cable networks (on which his startup depended) were closed. He also predicts that regulation can be accomplished while encouraging investment in broadband networks, because there will be “no rate regulation, no tariffs, no last-mile unbundling.”  There are a number of problems with Chairman Wheeler’s analysis. First, let’s examine the historical assumptions that underlie the Wheeler proposal.

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Farhad Manjoo’s latest New York Times column, “Giving the Drone Industry the Leeway to Innovate,” discusses how the Federal Aviation Administration’s (FAA) current regulatory morass continues to thwart many potentially beneficial drone innovations. I particularly appreciated this point:

But perhaps the most interesting applications for drones are the ones we can’t predict. Imposing broad limitations on drone use now would be squashing a promising new area of innovation just as it’s getting started, and before we’ve seen many of the potential uses. “In the 1980s, the Internet was good for some specific military applications, but some of the most important things haven’t really come about until the last decade,” said Michael Perry, a spokesman for DJI [maker of Phantom drones]. . . . He added, “Opening the technology to more people allows for the kind of innovation that nobody can predict.”

That is exactly right and it reflects the general notion of “permissionless innovation” that I have written about extensively here in recent years. As I summarized in a recent essay: “Permissionless innovation refers to the notion that experimentation with new technologies and business models should generally be permitted by default. Unless a compelling case can be made that a new invention or business model will bring serious harm to individuals, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later.” Continue reading →