I guess the search for market failure in the privacy area is interesting to me. I wrote about it the other week too. It’s nice that those who prefer regulation feel obligated to justify that preference. It’s acknowledgment of the fact, increasingly well-accepted worldwide, that functioning free markets do a better job of discovering and satisfying consumers’ interests than any other method for organizing societies’ resources.
A recent market failure blog post called “Privacy and the Market for Lemons, or How Websites Are Like Used Cars,” seems to have piqued Adam’s interest. (See the comments.) In it, privacy and anonymity researcher Arvind Narayanan makes the case for privacy market failure. (Evidently, it’s an argument that others have made before.)
“In the realm of online privacy and data collection,” he says, “information asymmetry results from a serious lack of transparency around privacy policies. The website or service provider knows what happens to data that’s collected, but the user generally doesn’t.” Several economic, architectural, cognitive and regulatory limitations/flaws “have led to a well-documented market failure—there’s an arms race to use all means possible to entice users to give up more information, as well as to collect it passively through ever-more intrusive means.”
Alas, there’s no link at “well-documented.” I would like to see that documentation. But more importantly, what Narayanan appears to be speaking of as market failure—an arms race to get more information from Web users—is not one. That’s market action that Narayanan doesn’t like.
So where’s the market failure? Continue reading →
Over at MediaFreedom.org, a new site devoted to fighting the fanaticism of radical anti-media freedom groups like Free Press and other “media reformistas,” I’ve started rolling out a 5-part series of essays about “The Battle for Media Freedom.” In Part 1 of the series, I defined what real media freedom is all about, and in Part 2 I discussed the rising “cyber-collectivist” threat to media freedom. In my latest installment, I offer an analytical framework that better explains the major differences between the antagonists in the battle over media freedom.
Understanding the Origins of Political Struggles
In his many enlightening books, Thomas Sowell, a great economist and an even better political scientist, often warns of the triumph of good intentions over good economics. It’s a theme that F.A. Hayek and Milton Friedman both developed extensively before him. But Sowell has taken this analysis to an entirely differently level in books like A Conflict of Visions: Ideological Origins of Political Struggles, and
The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy
. Sowell teaches us that no matter how noble one’s intentions might be, it does not mean that those ideas will translate into sound public policy. Nonetheless, since “the anointed” believe their own intentions are pure and their methods are sound, they see nothing wrong with substituting their will for the will of millions of individuals interacting spontaneously and voluntarily in the marketplace. The result is an expansion of the scope of public decision-making and a contraction of the scope of private, voluntary action. As a result, mandates replace markets, and freedom gives way central planning.
Sowell developed two useful paradigms to help us better understand “the origins of political struggles.” He refers to the “constrained” versus “unconstrained” vision and separates these two camps according to how they view the nature of man, society, economy, and politics:
| “Constrained Vision” |
“Unconstrained Vision” |
| Man is inherently constrained; highly fallible and imperfect |
Man is inherently unconstrained; just a matter of trying hard enough; man & society are perfectible |
| Social and economic order develops in bottom-up, spontaneous fashion. Top down planning is hard because planners aren’t omnipotent. |
Order derives from smart planning, often from top-down. Elites can be trusted to make smart social & economic interventions. |
| Trade-offs & incentives matter most; wary of unintended consequences |
Solutions & intentions matter most; less concern about costs or consequences of action |
| Opportunities count more than end results; procedural fairness is key; Liberty trumps |
Outcomes matter most; distributive or “patterned” justice is key; Equality trumps liberty |
| Prudence and patience are virtues. There are limits to human reason. |
Passion for, and pursuit of, high ideals trumps all. Human reason has boundless potential. |
| Law evolves and is based on the experience of ages. |
Law is made by trusted elites. |
| Markets offer benefit of experience & experimentation and help develop knowledge over time. |
Markets cannot ensure desired results; must be superseded by planning & patterned justice |
| Exponents: Aristotle, Adam Smith, Edmund Burke, James Madison, Lord Acton, F.A. Hayek, Ludwig von Mises, Milton Friedman, James Buchanan, Robert Nozick |
Exponents: Plato, Rousseau, William Godwin, Voltaire, Robert Owen, John Kenneth Galbraith, John Dewey, Earl Warren, Bertrand Russell, John Rawls |
I’ve posted another response in the Cato Unbound online debate over the impact of Lawrence Lessig’s Code and Other Laws of Cyberspace upon the book’s 10th anniversary. You will recall that I went fairly hard on Prof. Lessig in my essay, “Code, Pessimism, and the Illusion of ‘Perfect Control,’” and Lessig responded with a counter-punch that went after me for it. I respond in a new essay about “Our Conflict of Cyber-Visions.” In the piece, I address Lessig’s assertion that I just didn’t understand the central teachings of Code, as well as his reluctance to accept the “cyber-collectivism” label that I affixed to his book and life’s work. Again, please hop over to Cato Unbound for my complete response.
But one thing from the essay that I thought worth reproducing here is my effort to better define the key principles that separate the cyber-libertarian and cyber-collectivist schools of thinking. I argue that it comes down to this:
The cyber-libertarian believes that “code failures” are ultimately better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions. Moreover, the decisive advantage of the market-driven approach to correcting code failure comes down to the rapidity and nimbleness of those response(s).
Of course, another key difference relates to how quickly one jumps to the conclusion that “code failures” are actually occurring at all. I argue:
Continue reading →
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