wayne crews – Technology Liberation Front

Skeptical Takes on Expansive Industrial Policy Efforts

Adam Thierer — Mon, 15 Mar 2021 17:09:11 +0000

[Last updated 3/25/22]

Industrial Policy is a red-hot topic once again with many policymakers and pundits of different ideological leanings lining up to support ambitious new state planning for various sectors — especially 5G, artificial intelligence, and semiconductors. A remarkably bipartisan array of people and organizations are advocating for government to flex its muscle and begin directing more spending and decision-making in various technological areas. They all suggest some sort of big plan is needed, and it is not uncommon for these industrial policy advocates to suggest that hundreds of billions will need to be spent in pursuit of those plans.

Others disagree, however, and I’ll be using this post to catalog some of their concerns on an ongoing basis. Some of the criticisms listed here are portions of longer essays, many of which highlight other types of steps that governments can take to spur innovative activities. Industrial policy is an amorphous term with many definitions of a broad spectrum of possible proposals. Almost everyone believes in some form of industrial policy if you define the term broadly enough. But, as I argued in a September 2020 essay “On Defining ‘Industrial Policy‘,” I believe it is important to narrow the focus of the term such that we can continue to use the term in a rational way. Toward that end, I believe a proper understanding of industrial policy refers to targeted and directed efforts to plan for specific future industrial outputs and outcomes.

The collection of essays below is merely an attempt to highlight some of the general concerns about the most ambitious calls for expansive industrial policy, many of which harken back to debates I was covering in the late 1980s and early 1990s, when I first started a career in policy analysis. During that time, Japan and South Korea were the primary countries of concern cited by industrial policy advocates. Today, it is China’s growing economic standing that is fueling calls for ambitious state-led targeted investments in “strategic” sectors and technologies. To a lesser extent, grandiose European industrial policy proposals are also prompting new US counter-proposals.

All this activity is what has given rise to many of the critiques listed below. If you have suggestions for other essays I might add to this list, please feel free to pass them along. FYI: There’s no particular order here.

Scott Lincicome and Huan Zhu, “Questioning Industrial Policy: Why Government Manufacturing Plans Are Ineffective and Unnecessary,” Cato Institute Working Paper, June 16, 2021.

[I]ndustrial policy – properly defined – has an extensive and underwhelming history in the United States, featuring high costs (seen and unseen), failed objectives, and political manipulation. Surely, not every U.S. industrial policy effort has ended in disaster, but facts here and abroad argue strongly against new government efforts to boost “critical” industries and workers and thereby fix alleged market failures. Such efforts warrant intense skepticism – skepticism that today is unfortunately in short supply.

Adam Thierer, “Industrial Policy as Casino Economics,” The Hill, July 12, 2021.

While some government investments will always be necessary, policymakers engaging in casino economics means bad industrial policy bets and taxpayer money squandered on risky ventures best made by private actors. We need to keep Uncle Sam’s gambling habits in check.

Adam Thierer, “Thoughts on the America COMPETES Act: The Most Corporatist & Wasteful Industrial Policy Ever,” Technology Liberation Front, January 26, 2022.

As far as industrial policy measures go, the COMPETES Act is one of the most ambitious and expensive central planning efforts in American history. It represents the triumph of top-down, corporatist, techno-mercantilist thinking over a more sensible innovation policy rooted in bottom-up competition, entrepreneurialism, private investment, and free trade.

Adam Thierer & Connor Haaland, “Does the US Need a More Targeted Industrial Policy for AI & High-Tech?” Mercatus Center at George Mason University, Special Study, November 2021.

This paper considers how both the recent history of high-tech industrial policy efforts at the national and international level—as well as some state and local economic development efforts in the United States—might better inform the wisdom of proposed efforts for AI or other high-tech sectors. That history is spotted with some limited successes alongside a long string of costly failures. We explore the reasons for those failures and recommend that the US refocus on the policy prerequisites that helped give rise to the computing and internet revolutions: a more generalized approach to economic development rooted in light-touch regulation and taxation of emerging technology.

Samuel Gregg, “Can America Build A Broad-Based Economy?” Law & Liberty, March 1, 2022

Of course, if a government decides to put enough money and resources behind a given industrial policy, it will likely produce some results. Yet the same is true of the gambler. If she stays in the casino long enough and spends enough money, she will win a few hands of cards. But the odds are that she will also lose a great deal of money, especially if she is as inept a gambler as the government is maladroit at identifying industry trends or entrepreneurial opportunities. Moreover, just as a compulsive gambler’s behavior will have numerous negative effects on her family’s well-being, so too does industrial policy risk inflicting wider damage upon a nation’s economy and political system. The harms range from gross misallocations of resources to the rampant cronyism and rent-seeking that seems inseparable from industrial policy (which, I again note, its advocates studiously avoid discussing), to name just a few.

Phil Gramm & Mike Solon, “Peace Through Strength Requires Economic Freedom,” Wall Street Journal, March 1, 2022.

The America Competes Act is the House’s effort to outdo the Chinese Communist Party’s latest five-year plan. The 2,900-page bill would make an old Soviet commissar blush. [. . . ] America’s success in the world economy has never depended on industrial policy or government subsidies. It has come from the relative absence of government planning and subsidies. This is hardly news. The U.S. government provided support for the efforts of Samuel Langley, the greatest aviation expert of the 1890s, in his effort to make America first in powered flight. His manned Aerodrome flopped into the Potomac River. It was the Wright brothers, two unsubsidized but determined bicycle makers from Dayton, Ohio, who flew at Kitty Hawk, N.C., and changed the world.

Scott Lincicome, “Moving Fast and Breaking Things,” Capitolism, February 2, 2022.

Adam Thierer, “The Coming Industrial Policy Hangover,” The Hill, February 16, 2022.

In the rush to pass legislation, we’ve barely heard a peep about the $250-$350 billion price tag. This follows a massive splurge of recent government borrowing, which led to the U.S. national debt hitting another lamentable new record: $30 trillion. China already owns over $1 trillion of that debt, making one wonder if we’re really countering China by adopting a massive, new and unfunded industrial policy that they will end up financing indirectly.

Podcast: “What’s Wrong with Industrial Policy,” Hold These Truths with Rep. Dan Crenshaw, February 16, 2022.

Tad DeHaven and Adam Thierer, “ The Military-Industrial Complex Offers a Cautionary Tale for Industrial Policy Planning,” Discourse, March 25, 2022.

Wayne Crews, “What To Do Instead Of The America COMPETES Act,” Forbes, February 2, 2022.

All this spending and expansion of the federal government, atop which our leaders would lay the America COMPETES Act and doubtless its own accompanying guidebook, has massive, ignored regulatory effects. Trillions in government spending (”investment”) have altered and will alter the entire trajectory and competitive environment of industries engaged in large-scale enterprises and transactions. This removes vast swaths of business activity from free competitive enterprise altogether, and creates displacements and distortions such that the restoration of free enterprise becomes a near-impossible disentanglement. The result is, after 100 years of big government and seduction of and fusion with big business, the greatest endeavors—from infrastructure to artificial intelligence, from smart cities to space—now consist of “partnerships” with governments rather than free enterprise, at scales and at costs so gigantic they can only be ignored.

Adam Thierer, “‘Japan Inc.’ and Other Tales of Industrial Policy Apocalypse,” Discourse, June 28, 2021.

Perhaps the most ironic indictment of industrial policy punditry lies in the way all the earlier books and essays about Japanese planning not only failed to forecast the many flops associated with it, but also did not foresee China as a potential future economic juggernaut. [. . .] What might that tell us about the ability of experts to predict the future course of countries and economies?

Adam Thierer, “Can Government Reproduce Silicon Valley Everywhere?” Technology Liberation Front, September 12, 2021.

government efforts to artificially try to create regional innovation hubs in a top-down, technocratic fashion will almost certainly persist. As they do, some will argue that this time will be different! Perhaps, but it is more likely that the past is prologue; these new hubs will likely cause federal politicians to jockey for position to have their regions named one of the winners and get a big cut of all the new high-tech pork being served up by Washington.

Weifeng Zhong, “Beijing Can’t Make Sense of Biden’s China Strategy. Can Biden?” Washington Examiner, July 01, 2021.

America is not China, and it would be a fatal mistake to equate competing with China with imitating what China does. Doing so would risk the advantageous U.S. position as the world’s chief innovator, whose ideas are turned into products by vibrant private sectors both domestically and internationally.

Mike Watson, “Industrial Policy in the Real World,” National Affairs, Summer 2021.

Given the nature of industrial policymaking in the United States, there’s little reason to believe future attempts at industrial planning will result in a more coherent, rational, or strategic allocation of resources than they have in the past. [. . .] In short, industrial policy in the United States cannot be steered by a small group of enlightened individuals, because a small group of enlightened individuals will never be at the helm. Indeed, in some sense, there is no single “helm” to speak of.

Samuel Gregg, “Industrial Policy Mythology Confronts Economic Reality,” Law & Liberty, September 3, 2021.

If prizes in policy debates were given out for persistence, those advocating for more widespread use of industrial policy in America would be first in line. No matter how many times it is pointed out that they don’t understand the nature and workings of comparative advantage; or avoid acknowledging how industrial policy fosters rampant cronyism and corruption; or highlight what they consider examples of countries in which industrial policy has been employed successfully (only to have it demonstrated that it didn’t quite work out the way they suggested), they don’t give up.

Elizabeth Nolan Brown, “If This Is How America COMPETES, We’re Going to Lose,” Reason, January 26, 2022.

the bill can’t simply address one main issue or a few critical needs. Instead, it tries to insert the government into every aspect of all sorts of industries and markets and pretend that bureaucrats can solve complex social and cultural issues.

Chang-Tai Hsieh, “Countering Chinese Industrial Policy Is Counterproductive,” Project Syndicate, September 15, 2021.

US political leaders have long tried to counter Chinese industrial policy. And now they seem to have decided that the best way to do that is to emulate it. But their agenda betrays a profound lack of understanding of the unique challenge posed by China’s coupling of an authoritarian political regime with a dynamic market economy.

Adam Thierer, “Industrial Policy Advocates Should Learn from Don Lavoie,” Discourse, November 5, 2021.

“In light of the inherent deficiencies of central planning,” Lavoie said, “it might be argued that the U.S. should instead try to reduce current government interference with the competitive process to the absolute minimum consistent with other political goals.” It remains wise advice for today’s policymakers.

Anne O. Krueger, “America’s Muddled Industrial Policy,” CGTN, June 25, 2021.

Governments have a poor track record of identifying “winners” – be it a company or a category of technology – whereas private companies have proved better at transforming new discoveries into new products or cost savings. That is why the U.S. state traditionally has stuck to funding basic research.

Eric Boehm, “Massive Subsidies Won’t Solve the Semiconductor Supply Chain Crisis,” Reason, January 28, 2022.

Tracy C. Miller, “The Case for Limiting Government Semiconductor Subsidies,” The Hill, June 26, 2021.

Without the subsidies, firms would be more cautious about building or expanding foundries. If long-term production capacity is truly insufficient, high prices and anticipated profits give firms the right incentives to build or expand and satisfy demand at cost-covering prices.

Scott Lincicome, “The ‘Endless Frontier’ and American Industrial Policy,” Cato Institute Blog, May 26, 2021.

U.S. industrial policy has a long history of struggling to overcome political pressures, just as public choice predicts, and the EFA is no different. None of this means that all legislating is bad, or that politicians don’t at least occasionally vote in the national interest. Instead, the public choice framework simply adds another hurdle—along with things like the “knowledge problem,” seen and unseen costs, and misaligned incentives—to designing and implementing commercial policies specifically intended to beat the admittedly messy and imperfect situation that the market generates. It’s imperative that we understand these risks before supporting policies that, while they might look good on paper, could easily morph into a counterproductive boondoggle—one we’ve seen countless times with respect to U.S. industrial policy.

Daniel W. Drezner, “Is the United States capable of industrial policy in 2021?” Washington Post, June 14, 2021.

To believe that the United States can pursue a high-caliber industrial policy, however, requires assuming a more competent state than I have seen in the past decade.

Douglas Holtz-Eakin, “The Nicest Thing I Can Write About Supply Chain Policy,” The Daily Dish, June 10, 2021.

Nevertheless, the Senate just passed a provision for $50 billion to subsidize chip fabrication – something the president had requested – and the House will doubtlessly concur. That might seem like an industry victory, but wait until it realizes that the administration will assume it gives it the right to insist on union jobs, micromanage the design of chips, and dictate the pricing and distribution of the products. Good luck with that. As the definitive volume on policy analysis (Benjamin Franklin’s Poor Richard’s Almanack) put it, “He that lieth down with dogs shall rise up with fleas.”

Lipton Matthews, “Industrial Policy—a.k.a. Central Planning—Won’t Make America Great,” Mises Wire, November 5, 2021.

Although industrial policy is in vogue, the evidence suggests that it is not necessary for long-term development. Moreover, despite the popularity of industrial policy in China, America remains the world’s economic power, and by following China, it may lose this vaunted position.

Richard Beason, “Japanese Industrial Policy: An Economic Assessment,” National Foundation for American Policy, November 2021.

There is no evidence to support the claim that Japanese industrial policy during the 1955-1990 period enhanced growth rates by sector, industries with economies of scale (greater efficiency when produced in increased amounts), productivity growth or “competitiveness.” The reality of the political process and government spending priorities makes it very difficult for such policies to be effective. Furthermore, even if political pressures had not intervened, it seems questionable to suggest that government policymakers would be better than actual market participants in determining the most efficient allocation of resources to produce the best economic outcomes.

Douglas Irwin, “ Memo to the Biden administration on how to rethink industrial policy,” Peterson Institute for International Economics, October 2020.

The challenge for policymakers is to identify such industries without succumbing to the notion that every industry is vital to some public objective. For example, the goal of “economic security” is so broadly defined and open-ended that virtually every domestic producer could claim the need for government support on that basis. The risk is that ill-conceived government programs will encourage corrupt behavior in which industries benefit themselves without contributing to national welfare.

Jim Pethokoukis, “Will Biden’s embrace of industrial policy pay off?” AEI Blog, January 15, 2021.

The history of such efforts in advanced capitalist economies gives ample reason for skepticism about the effectiveness of such top-down government planning, from Japanese economic stagnation to the now-mothballed Concorde supersonic jet to France’s failed attempt to create a thriving tech sector. The Internet might seem like the exception that negates the rule, but what turned out to be a successful partnership of government and entrepreneurs didn’t arise out of some master plan from Washington. And what do even the smartest plans look like when filtered through the dodgy quality of American governance? Maybe as an excuse for cronyism and protectionism.

Adam Thierer & Connor Haaland, “Should the U.S. Copy China’s Industrial Policy?” Discourse, March 11, 2021.

America needs to embrace its already vibrant venture capital market, the benefits of basic science and prize competitions, and a light-touch regulatory approach instead of gambling taxpayer dollars on grandiose industrial policy schemes that would likely become boondoggles.

Connor Haaland & Adam Thierer, “Can European-Style Industrial Policies Create Tech Supremacy?” Discourse, February 11, 2021.

Thus far, however, the Europeans don’t have much to show for their attempts to produce home-grown tech champions. Despite highly targeted and expensive efforts to foster a domestic tech base, the EU has instead generated a string of industrial policy failures that should serve as a cautionary tale for U.S. pundits and policymakers, who seem increasingly open to more government-steered innovation efforts.

Phil Levy & Christine McDaniel, “ Does the U.S. Need a Vigorous Industrial Policy?” Discourse, February 16, 2021.

we are certainly hearing new enthusiasm these days about industrial policy. It seems to have proponents or converts on both sides of the aisle. This either means that a new consensus has emerged, or it means that the term is being used so loosely that it has lost its original meaning. I’ll go with the latter; it now means different things to different people.

Wall Street Journal columnist Greg Ip discussing why “ The traditional skepticism toward industrial policy is well deserved.”

The traditional skepticism toward industrial policy is well deserved. Once Washington starts writing checks for semiconductors, other industries may get in line with the outcome determined more by political clout than economic merit. As in shipbuilding, the targeted companies may end up in perpetual need of federal protection and unable to compete internationally

David Ignatius, “The U.S. is quietly mobilizing its economy against China,” Washington Post, March 4, 2021.

The industrial policy the AI commission recommends could unlock talent and innovation. But if officials aren’t careful, government intervention could also afflict our best companies with the dead weight and dysfunction of our broken political system. We need government to spawn brainpower, not bureaucracy.

Veronique de Rugy, “Support for Industrial Policy is Growing,” AIER, January 18, 2020.

Looking at the federal government today tells me that the problems surrounding R&D programs in the past continue today, and will continue tomorrow, because they are simply a consequence of the normal functioning of government. It is hard to wish these problems away, even in the face of the private sector’s “imperfections.” Those arguing for more funding in R&D should proceed with caution.

Ben Reinhardt on concerns about The Endless Frontier Act

This bill is proposing to give money with risk-averse restrictions to a risk-averse organization (the NSF) to be dispersed among other risk-averse organizations (Universities) into a system with increasingly risk-averse incentives. Note that I’m not saying “it’s all fubar’d lets burn it to the ground!” but I am suggesting that instead of slamming on the accelerator, we should be asking “what would a tune-up and an oil change look like instead?”

Ryan Bourne, “Do Oren Cass’s Justifications for Industrial Policy Stack Up?” Cato Commentary, August 15, 2019.

Oren Cass asserts that markets cannot generally allocate resources efficiently by industry. Yet he provides no meaningful metrics to show this is the case, nor shows why his policies would deliver better outcomes. His two main claims about the benefits of a manufacturing sector — “stable employment” and “strong productivity growth” — are directly contradictory. A plethora of evidence suggests as countries’ get richer due to automation and technological improvements, they demand relatively more services, and so the industrial sector declines in employment terms.

Scott Lincicome, “ Manufactured Crisis: ‘Deindustrialization, Free Markets, and National Security,” Cato Policy Analysis No. 907, January 27, 2021.

This skepticism—mostly absent from Washington—is indeed warranted: analyses of the U.S. manufacturing sector and the relationship between trade and national security, as well as the United States’ long and checkered history of security‐related protectionism, undermine the theoretical justifications for imposing protectionism and industrial policy in the name of national defense. Instead, open trade, freer markets, and global interdependence will in almost all cases produce better outcomes in terms of national security and, most importantly, preventing wars and other forms of armed conflict.

Matthew Lau, “Trudeau government’s ‘industrial policy’ creates all the wrong incentives,” Toronto Sun, March 16, 2021.

Addressing the Growing Problem of Regulatory Accumulation

Adam Thierer — Tue, 28 May 2019 20:06:23 +0000

[This essay originally appeared on the AIER blog on May 23, 2019 under the title, “Spring Cleaning for the Regulatory State.”]

Spring is in full blossom, and many of us are in the midst of our annual house-cleaning ritual. A regular deep clean makes good sense because it makes our living spaces more orderly and gets rid of the gunk and grime that has amassed over the past year.

Unfortunately, governments almost never engage in their own spring-cleaning exercise. Statutes and regulations continue to accumulate, layer by layer, until they suffocate not only economic opportunity, but also the effective administration of government itself. Luckily, some states have realized this and have taken steps to help address this problem.

Mountains of Regulations

First, here are some hard facts about regulatory accumulation:

Red tape grows: Since the first edition of his annual publication Ten Thousand Commandments in 1993, Wayne Crews has documented how federal agencies have issued 101,380 rules. Other reports find agency staffing levels jumped from 57,109 to 277,163 employees from 1960 to 2017, while agency budgets swelled in real terms from $3 billion in 1960 to $58 billion in 2017 (2009$).
Nothing ever gets cleaned up: A Deloitte survey of U.S. Code reveals that 68 percent of federal regulations have never been updated and that 17 percent have only been updated once. If a company never updated its business model, it would fail eventually. But governments get away with doing the same thing without any fear of failure. “If it were a country, U.S. regulation would be the world’s eighth-largest economy, ranking behind India and ahead of Italy,” Crews notes.
The burden of regulatory accumulation is getting worse: “The estimate for regulatory compliance and economic effects of federal intervention is $1.9 trillion annually,” Crews finds, which is equal to 10 percent of the U.S. gross domestic product for 2017. When federal spending is added to regulatory costs are added to federal spending, Crews finds, the burden equals $4.173 trillion, or 30 percent of the entire economy. Mercatus Center research has found that “economic growth in the United States has, on average, been slowed by 0.8 percent per year since 1980 owing to the cumulative effects of regulation.” This means that “the US economy would have been about 25 percent larger than it actually was as of 2012” if regulation had been held to roughly the same aggregate level it stood at in 1980.

In sum, the evidence shows that the red tape is growing without constraint, hindering entrepreneurship and innovation, deterring new investment, raising costs to consumers, limiting worker opportunities/wages, and undermining economic growth.

Regulations accumulate in this fashion because the administrative state is on autopilot. Legislatures pass broad statutes delegating ambiguous authority to agencies. Bureaucrats are then free to roll the regulatory snowball down the hill until it has become so big that its momentum cannot be stopped.

The Death of Common Sense

Policy makers enact new rules with the best of intentions, of course, but we should not assume that the untrammeled growth of the regulatory state produces positive results. There is no free lunch, after all. Every regulation is a restriction on opportunities for experimentation with new and potentially better ways of doing things. Sometimes such restrictions make sense because regulations can pass a reasonable cost-benefit test. It would be foolish to assume that all regulations on the books do.

Spring cleaning for the regulatory state, therefore, should be viewed as an exercise in “good governance.” The goal is not to get rid of all regulations. The goal is to make sure that rules are reasonable and cost-effective so that the public can actually understand the law and get the highest value out of their government institutions.

Philip K. Howard, founder and chair of the nonprofit coalition Common Good and the author of The Death of Common Sense, has written extensively about how regulatory accumulation has become a chronic problem. “Too much law,” he argues, “can have similar effects as too little law.” “People slow down, they become defensive, they don’t initiate projects because they are surrounded by legal risks and bureaucratic hurdles,” Howard notes. “They tiptoe through the day looking over their shoulders rather than driving forward on the power of their instincts. Instead of trial and error, they focus on avoiding error.”

In such an environment, risk-taking and entrepreneurialism are more challenging and economic dynamism suffers. But regulatory accumulation also hurts the quality of government institutions and policies, which become fundamentally incomprehensible or illogical. “Society can’t function when stuck in a heap of accumulated mandates of past generations,” Howard concludes. This is why an occasional regulatory house cleaning is essential to unleash economic opportunity and improve the functioning of our democratic institutions.

Regulatory House Cleaning Begins

Reforms to address this problem are finally happening. In a series of new essays, my colleague James Broughel has documented how several states — including Idaho, Ohio, Virginia, and New Jersey — are undertaking serious efforts to get regulatory accumulation under control. They are utilizing a variety of mechanisms, including “regulatory reduction pilot programs” and “red tape review commissions.” Recently, Idaho actually initiated a sunset of its entire regulatory code and will now try to figure out how to clean up its 8,200 pages of regulations containing 736 chapters of state rules.

Meanwhile, other states are undertaking serious reform in one of the worst forms of regulatory accumulation: occupational licenses. The Federal Trade Commission notes that roughly 30 percent of American jobs require a license today, up from less than 5 percent in the 1950s. Research by economist Morris Kleiner and others finds that “restrictions from occupational licensing can result in up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.” And many of the rules do not even serve their intended purpose. A major 2015 Obama administration report on the costs of occupational licensing concluded that “most research does not find that licensing improves quality or public health and safety.”

Arizona, West Virginia, and Nebraska are among the leaders in reforming occupational-licensing regimes using a variety of approaches. In some cases, the reforms sunset licensing rules for specific professions altogether. Other proposals grant workers reciprocity to use a license they obtained in another state. Finally, some states have proposed letting most professions operate without any license at all but then requiringall, but then require them to make it clear to consumers that they are unlicensed.

The Need for a Fresh Look

Sunsets are not silver-bullet solutions, and the recent experience with sunsetting and “de-licensing” requirements at the state level has been mixed because many legislatures ignore or circumvent requirements. Nonetheless, sunsets can still help prompt much-needed discussions about which rules make sense and which ones no longer do.

Sunsets can be forward-looking, too. I have proposed that when policy makers craft new laws, especially for fast-paced tech sectors, they should incorporate a clause that what we might think of as “the Sunsetting Imperative.” It would demand that any existing or newly imposed technology regulation should include a provision sunsetting the law or regulation within two years. Reforms like these are also sometimes referred to as “temporary legislation” or “fresh look” requirements. Policy makers can always reenact rules that are still relevant and needed.

By forcing a periodic spring cleaning, sunsets and fresh-look requirements can help stem the tide of regulatory accumulation and ensure that only those policies that serve a pressing need remain on the books. There is no good reason for governments not to clean up their messes on occasion, just like the rest of us have to.

Internet Security Concerns, Online Anonymity, and Splinternets

Adam Thierer — Sun, 15 Feb 2009 17:55:03 +0000

What would it take to create a more secure Internet? That’s what John Markoff explores in his latest New York Times article, “Do We Need a New Internet?” Echoing some of the same fears Jonathan Zittrain articulates in his new book The Future of the Internet, Markoff wonders if online viruses and other forms of malware have gotten so out-of-control that extreme measures may be necessary to save the Net. Compared to when cyber-security attacks first started growing over 20 years ago, Markoff argues that:

[T]hings have gotten much, much worse. Bad enough that there is a growing belief among engineers and security experts that Internet security and privacy have become so maddeningly elusive that the only way to fix the problem is to start over.

Like many others, Markoff fingers anonymity as one potential culprit:

The Internet’s current design virtually guarantees anonymity to its users. (As a New Yorker cartoon noted some years ago, “On the Internet, nobody knows that you’re a dog.”) But that anonymity is now the most vexing challenge for law enforcement. An Internet attacker can route a connection through many countries to hide his location, which may be from an account in an Internet cafe purchased with a stolen credit card. “As soon as you start dealing with the public Internet, the whole notion of trust becomes a quagmire,” said Stefan Savage, an expert on computer security at the University of California, San Diego.

Consequently, Markoff suggests that:

A more secure network is one that would almost certainly offer less anonymity and privacy. That is likely to be the great tradeoff for the designers of the next Internet. One idea, for example, would be to require the equivalent of drivers’ licenses to permit someone to connect to a public computer network. But that runs against the deeply held libertarian ethos of the Internet.

Indeed, not only does it run counter to the ethos of the Net, but as Markoff rightly notes, “Proving identity is likely to remain remarkably difficult in a world where it is trivial to take over someone’s computer from half a world away and operate it as your own. As long as that remains true, building a completely trustable system will remain virtually impossible.” I’ve spent a lot of time writing about that fact here and won’t belabor the point other than to say that efforts to eliminate anonymity for the entire Internet would prove extraordinarily intrusive and destructive — of both the Internet’s current architecture and the rights of its users. There’s just something about a “show-us-you-papers,” national ID card-esque system of online identification that creeps most of us out. That’s why I spend so much time fighting age verification mandates for social networking sites and other websites; it’s the first step down a very dangerous road.

But what if we could apply such solutions in a narrower sense? That is, could we create more secure communities within the overarching Internet superstructure that might provide greater security? Markoff starts thinking along those lines when he suggests…

What a new Internet might look like is still widely debated, but one alternative would, in effect, create a “gated community” where users would give up their anonymity and certain freedoms in return for safety.

… but he is still thinking in terms of a replacement model for the entire Internet, which would be misguided for the reasons I stated above. We don’t want to force a single, intrusive, anonymity-killing replacement model on the entire online universe. Starting over isn’t even possible in a practical sense.

It’s a shame that Markoff didn’t interview my old colleague Wayne Crews for his story because Wayne has outlined an alternative framework worth considering. For many years, Wayne has been preaching about “spinternets,” or the notion that we need to start thinking about how develop not just one better Internet, but many better Internets. In a visionary piece for Forbes back in early 2001, Wayne argued that the solution to the growth of various online concerns “is more Internets, not more regulations”:

The Internet needs borders beyond which users can escape damaging political resolutions of these battles, which are rooted in the Internet’s nonowned, common-property status. Conflicting legislative visions in a cyberspace populated by exhibitionists at one extreme and would-be inhabitants of gated communities on the other, reveal the basic truth that not everybody wants or needs to be connected to everybody else.

Again, there’s that notion of “gated communities” that Markoff brought up. It’s not for everybody, but those seeking greater security could perhaps find it inside such online communities. Of course, others who wanted a different experience could start a completely different gated community under Wayne’s model.

But the problem with this notion, quite obviously, is that very few people want to stay inside their gated communities all the time. In the physical world of gated communities, for example, members of it still like to get out of there once and awhile to visit shops, events, parks, friends and family, etc. The same goes for the Internet. Just ask all those former denizens of AOL’s gated community. For awhile, many of them — over 25 million strong at the zenith of its popularity — were content to spend most of their digital day inside the walls of Case’s Castle. Gradually, however, they felt the need to explore outside those walls. And so they did. A mass exodus ensued and the walls came crumbling down around AOL’s gated community.

But that doesn’t necessarily mean the idea of online gated communities is entirely dead. There are certainly many closed, tightly-controlled networks out there already — mostly in corporate or government environments — that offer a glimpse of how such a model might work in practice. Also, smaller social networking sites aimed at kids provide another example since they are usually tightly-controlled walled gardens that offer much greater security.

But Wayne was always thinking of something bigger — much bigger — than just closed corporate / government networks. He was thinking about a world of many different Internet s that didn’t necessarily have a back door to the broader Internet. Think of it as many parallel, but unconnected digital systems and networks, each serving a different set of values and cultures with unique rules.

Wayne envisioned the primary critique of this model in his original piece, noting that “it will be criticized as Balkanization.” Indeed, Sonia Arrison called it “techno-isolationism, which goes against the very spirit that makes the Internet great.” Indeed, it certainly would destroy something very precious about the current Internet — universal connectivity and openness. But that’s sort of the point, isn’t it! Universal connectivity and openness have given us many wonderful things, but some troubling things, too. That’s what Markoff was getting at in his NYT piece, and it’s part of what Wayne was aiming to address with his splinternets idea.

But do we really want to encourage a world of multiple Internets where, presumably, they are split right down to the root? In other words, there wouldn’t be a common language for networks to communicate or a way to access many sites and services outside the particular Net you are on at any given time. It would be the equivalent of living on different digital planets that never linked or communicated.

I think it’s unlikely we’ll ever get there, and if we did it would likely be driven by global governments challenging ICANN and existing Internet governance structures. In other words, the DNS root would be completely split by some countries (China?) who didn’t want to play by the same rules as the rest of the interconnected world, or who wanted to try to impose a different vision upon a new, competing global network.

But might there be a way to find a happy middle ground between the Wild West commons of the current Net and the “techno-isolationism” of Wayne’s splinternet model? Perhaps “Splinternet-lite” is the solution. Within the confines of the existing Internet superstructure, there are ways to create walled gardens today and limit the number of back doors to the broader Net. Again, the smaller social networking sites and virtual worlds aimed at kids already do that. Once you’re in there, you’re in a very different world. You have to be fully verified before you’re even let in the door, and once you’re inside their are tight limits on what you say, do, and explore. And you’ll get booted out pretty quickly if you break the rules. The result is greater safety and peace-of-mind for kids and parents alike. It’s a less clear, however, how that model would “scale up” and apply to the entire universe of online networks. I think we’ll have to be content with small patches of security within a world of insecurity. That’s the cost of the openness and interconnectivity that the Net current gives us.

In sum, there is no clear answer to John Markoff’s question, “Do we need a new Internet?” We certainly could do more to address the problems with the current Net, but upending it and starting over isn’t likely an option. More micro-splinternets within the overarching Net superstructure, however, might help those who are particularly risk-conscious find safe haven from various cyber-security fears. But it won’t shelter them from those problems completely.

Edge-Caching vs. Preferential Treatment

Ryan Radia — Tue, 16 Dec 2008 06:18:00 +0000

Claims that Google has abandoned its stance on network neutrality have been thoroughly debunked, as Cord and Adam note below. Over at Broadband Reports, Karl Bode explains that Google is seeking edge-caching agreements, not preferential treatment. Edge-caching involves Google housing its content on servers located inside consumer ISP networks, cutting bandwidth costs by allowing users to access Google content located just a few hops away.

Even though edge-caching doesn’t violate network neutrality as defined by Google, it’s still one of the many advantages that big players have over new entrants. Edge-caching isn’t a “fast track,” as the WSJ imprecisely terms it, but rather a short track—functionally, there’s a lot of similarity between the two. As Richard Bennett has explained time and time again, being close to end users is quite advantageous even without preferential treatment, as it eliminates the need to push vast amounts of data across the congestion-prone core of the public Internet.

We’ve heard about how edge-caching enables content providers and ISPs to cut their bandwidth bills and make more efficient use of finite network resources. Both of these are true, but there’s more—edge caching makes it much less likely that users will experience long load times or buffering hiccups while watching streaming video online. That high-def YouTube clip might take a few extra seconds to buffer if it has to make its way through congested central network exchanges—not so, however, if that video is housed just a few hops away, within your ISP’s network.

Of course, as Larry Lessig points out, there’s nothing stopping anybody from negotiating edge-caching arrangements with ISPs directly or with content delivery networks like Akamai. Like many network enhancing-technologies, though, edge caching costs money. But what’s wrong with that? A blog post over at NYTimes.com quips that Google has a “Treat All Rich Companies the Same” vision of net neutrality. The post goes on to point out that:

The reality today is that rich companies already get first class service, and most network neutrality proposals aren’t going to change that. Big sites buy faster Internet connections and get better service from their providers. Moreover, those with money can buy services content delivery networks like Akamai, or in the case of the superrich, they can set up their own networks, as Google is trying to do.

Neutrality supporters’ refrain—that the Internet must remain open to all, free from any arrangements that grant a leg up to established players at the expense of the little guy—would seem to go against edge-caching. This apparent disconnect between how net neutrality regulation is argued and how it’s actually defined is quite revealing, as ArsTechnica points out.

Wayne Crews argues on OpenMarket that arrangements such as those sought by Google benefit the Internet by making it a more valuable network than it would otherwise be:

Special deals like Google’s, as well as future proprietary services that use Internet technology, but may or may not ride the same pipes as the “capital-I” Internet, increase the Net’s overall functionality. Policy should not discourage the possible emergence of such a “Splinternet” by catering to the old-school model of infrastructure socialism and sleepy-headed “openness.”

And as Cord correctly states, efficient agreements that harness the Internet’s power to deliver rich content and give us greater access to information should welcomed, not shunned.