Study Shows Piracy Can Sometimes Be Beneficial To Markets & Consumers Alike

from the another-form-of-competition dept

If you've been around Techdirt for more than a few weeks, you probably know that one of our core arguments is that piracy should be seen as a competitor, not as some kind of mad demon whose antics can only be thwarted by equally demonic countermeasures. As such the solution for piracy isn't engaging in idiotic, harmful behavior (like copyright troll lawsuits or kicking people off the internet), it's to compete with piracy by offering better, cheaper products that make piracy less appealing. And no, just because you think "competing with free" isn't fair, doesn't mean this entire paragraph isn't true.

Numerous studies (including our own) have shown that you beat piracy through innovation, not scorched earth tactics. But a new collaborative study out of the University of Indiana highlights how piracy, at least in moderation, can have an actively positive impact on both the health of a market and consumers alike. More specifically, the study highlights how piracy can act as a form of invisible competition that prevents both a manufacturer and a retailer from jacking up prices at an unreasonable rate:

"When information goods are sold to consumers via a retailer, in certain situations, a moderate level of piracy seems to have a surprisingly positive impact on the profits of the manufacturer and the retailer while, at the same time, enhancing consumer welfare," wrote Antino Kim, assistant professor of operations and decision technologies at Kelley, and his co-authors.

"Such a win-win-win situation is not only good for the supply chain but is also beneficial for the overall economy."

The researchers are quick to trot out HBO's hit show Game of Thrones, which has frequently been paraded about as one of the most pirated shows of all time, as a good example. In the researchers' examples, they note that piracy prevents both the manufacturer (HBO) and the retailer (say, Comcast) from engaging in using their positions of power to jack up rates (double marginalization), since being too aggressive on pricing would simply drive users to cut the cord and engage in piracy, reducing overall revenues.

That said, the full paywalled paper makes it clear they're not advocating for these companies to suddenly start embracing piracy, just to acknowledge that the impact of piracy on markets is not wholly negative, and therefore heavy-handed anti-piracy efforts may prove counterproductive:

"Our results do not imply that the legal channel should, all of a sudden, start actively encouraging piracy," researchers said. "The implication is simply that, situated in a real-world context, our manufacturer and retailer should recognize that a certain level of piracy or its threat might actually be beneficial and should, therefore, exercise some moderation in their anti-piracy efforts.”

While HBO has had its missteps on this front (you might recall their efforts to "poison" certain BitTorrent files in a bid to make piracy confusing and untenable), executives have generally understood that piracy isn't exclusively a negative phenomenon. Time Warner execs, for example, have noted how the piracy of Game of Thrones (and the countless articles breathlessly heralding this reality) is almost "better than an Emmy" when it comes to marketing their product. Much in the same way they see password sharing as a new form of marketing, not as some kind of diabolical evil in need of crushing.

That said, the researchers did note that with AT&T now owning HBO in the wake of its $86 billion acquisition of Time Warner, AT&T's effectively now the manufacturer and the retailer in this equation. As such, it may be incentivized to crack down harder on piracy than HBO did previously (in fact it already is). Still, the researchers were quick to point out that there's still other perks to piracy AT&T shouldn't ignore:

“However, there are other positive effects of piracy such as positive network effect (i.e., the more people use the product, the more valuable it becomes) and learning (i.e., pirate users may learn about the product and buy the legal version later on),” Kim added. “These are older insights from other papers. What we find here is in addition to those."

Given this is AT&T we're talking about, whether it gets the message is far from certain.

Filed Under: benefits, competition, copyright, economics, monopoly, piracy, studies

Study Shows That Wartime Program To Abolish Copyright On German Science Books Brought Significant Benefits To US

from the perhaps-we-should-do-it-more-often dept

As Techdirt readers know, there is a ratchet effect that means copyright always gets longer and stronger. As well as being inherently unfair -- why must the public always lose out when copyright law is changed? -- there's another unfortunate consequence. If the term or breadth of copyright were reduced from time to time, we would be able to test the effects of doing so on things like creativity. For example, if it turned out that shortening copyright increased the number of works being produced, then there would be a strong argument for reducing it further in the hope that the effect would be strengthened. The fact that we have been unable test this hypothesis is rather convenient for copyright maximalists. It means they can continue to call for the term of copyright to be increased without having to address the argument that this will cause less creativity, or reduce access to older works.

Even though it is not possible to test the effects of reduced copyright directly, two US academics, Barbara Biasi and Petra Moser, have spotted a clever way of investigating the idea indirectly, in the field of science publishing. As they write in a post on CEPR's policy portal, in 1942 the US Book Republication Program (BRP) allowed US publishers to reprint exact copies of German-owned science books, effectively abolishing copyright for that class of works. They have looked at what impact this dramatic change had on the use of those reprinted works by scientists. Comparing citation rates before and after the BRP was introduced is not enough on its own: citation rates fluctuate, so it is necessary to compare the BRP citation rate with something else. The researchers' solution is to look at the citation rate of Swiss books from the same time:

This approach addresses the issue that English-language citations may have increased mechanically after 1942, if English-language scientists published more after the war. Like German scientists, Swiss scientists were leaders in chemistry and mathematics and wrote primarily in German, but due to Switzerland's neutrality, Swiss-owned copyrights were not accessible to the BRP. [Office of Library Services] estimates of a matched sample of BRP and Swiss books (in similar fields and with similar levels of pre-BRP non-English citations) confirm the significant increase in citations in response to the BRP.

Specifically, there was a 67% increase in citations of BRP books compared to similar Swiss books. The research suggests this was driven largely by the 25% drop in average prices seen after the BRP scheme was introduced. The reduction in price seems to have allowed a wider range of US libraries to purchase the more affordable BRP texts, whereas Swiss books remained concentrated in the holdings of two wealthy research libraries (Yale and Chicago). Better access was correlated with more citations: the data shows that the latter increased most near the locations of BRP libraries. The researchers conclude:

In the context of contemporary debates, our findings imply that policies which strengthen copyrights, such as extensions in copyright length, can create enormous welfare costs by discouraging follow-on science, especially among less affluent institutions and scientists.

Critics might point out that this is just one study of one rather specific area. But that's an argument for reducing copyright terms, perhaps on a trial basis, to see whether the results of this research are confirmed. However, the copyright ratchet will never allow that, not least because the companies involved probably know it would confirm that constantly strengthening copyright is bad for everyone except themselves.

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Filed Under: benefits, copyright, germany, public domain, science, us

Analysis Finds TISA's Benefits Are 'Insignificant', Points Out That Costs Of Deregulation Are Completely Ignored

from the anyone-remember-TISA? dept

Back in 2014, Techdirt first wrote about TISA, the Trade in Services Agreement, another massive international trade deal that was being negotiated behind closed doors with no public scrutiny. Its central aim was to establish a common regulatory framework for services globally. But in doing so, it would circumscribe the ability of governments to bring in their own national laws, since many options would be forbidden by the agreement. For key areas, then, TISA would impose globally-agreed standards for services, with little freedom to diverge, whatever the local populace or democratically-elected politicians might think or want.

During 21 rounds of talks, good progress was made on agreeing what should be in TISA, and it seemed that a final text was quite near. But with the election of Donald Trump, everything went quiet, as TISA negotiators waited to find out what his views on the deal would be. Since then, not much has happened, although TISA's supporters are doubtless hoping that negotiations can be picked up again at some point.

As part of its participation in TISA, the European Commission is obliged to undertake a trade sustainability impact assessment of the likely effects. In this case, the analysis was carried out by the Dutch consultancy ECORYS and the London-based CEPR, both familiar names in this context. The final report was submitted in July 2017, which has given others a chance to examine what benefits the EU expects TISA to bring with it, and the assumptions that lie behind those predictions. The Chamber of Labour, Vienna, commissioned the Austrian Foundation for Development Research (OFSE in German) to produce a report on the report, and this has now been published. Drawing on the sustainability impact assessment's own predictions, the OFSE underlines that TISA is really pretty pointless from an economic point of view:

The economic effects of TiSA according to the SIA study are positive, but insignificant: The economic effects reported are miniscule and do not make for a convincing case for concluding TiSA. EU GDP is expected to increase by 0.1%, exports by 0.2%.

For the US, the figures are 0% for GDP and 0.6% -- in other words, exports rise slightly, but for no overall economic benefit. The average increase for all 23 participating countries is 0.05% for GDP and 0.4% for exports. As the report puts it: "This magnitude of effects is close to statistical insignificance."

These figures taken from the report commissioned by the EU are likely to err on the side of optimism in order to support the European Commission's view that TISA is a Good Thing. But as the Austrian Foundation for Development Research points out, there is a huge flaw in the published analysis. The figures quoted above are the predicted benefits to flow from bringing regulatory systems into alignment. That is typically achieved not by levelling standards up, which would be an acceptable way of accomplishing harmonization, but by levelling down through the removal of stricter regulations. As the OFSE explain:

the benefits of regulation accrue to society at large, insofar as they help to forestall harm from society, for instance by restricting the use of toxic chemicals, or directly confer a benefit, e.g. by increasing the quality of a product or service. Typically, the positive externalities generated by regulation greatly exceed their economic cost. These insights notwithstanding, the empirical trade literature has considered the cost side of regulation only, by conceptualizing regulation as a non-tariff barrier to trade.

As with other trade deals, such as TPP and TTIP, regulations are seen in a purely negative light, as costs borne by businesses, which should be removed for that reason. No account is taken of the fact that they have important benefits for the public -- for example, in terms of protecting their health, and the environment. The Austrian Foundation for Development Research rightly notes that the costs of deregulation must be included alongside the economic benefits in order to arrive at a fair picture of whether trade deals like TISA are worth pursuing. The organization also makes some suggestions for improving TISA and other future trade deals:

Include legal remedies for safeguarding the public interest in EU trade agreements that (i) maintain the right to withdraw commitments in cases of extreme changes in economic conditions, e.g. during a severe economic crisis, or a change in collective preferences due to democratically legitimate regime changes; (ii) reserve the right to impose trade sanctions, e.g. withdrawal of liberalization commitments, for severe breaches of internationally agreed standards and fundamental rights, e.g. with respect to [International Labour Organization] Core Labor Standards or international environmental agreements; and (iii) facilitate access to legal remedies for affected communities and individuals in partner countries, e.g. in cases where the economic activities of EU companies or local companies de-facto controlled by EU companies are in breach of international law or EU legislation.

Although some may see these ideas as evidence that the OFSE espouses a particular political viewpoint, which is probably true, it's larger point about the need to include all the costs and benefits when assessing whether to proceed with TISA is inarguable. No responsible management about to embark on a course of action in a company -- no matter how small -- would consider only the benefits of doing so, without examining the costs and the risks too. Given the far greater economic and social impact of globe-spanning trade deals, the same balanced approach must surely apply to TISA and any future trade agreements.

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Filed Under: benefits, eu, free trade, tisa
Companies: cepr, ecorys

It's Official: US International Trade Commission Predicts Negligible Economic Benefits From TPP

from the and-that's-even-before-you-start-to-factor-in-the-costs dept

Techdirt has written hundreds of stories about TPP over the years. So many of those have revealed troubling aspects of the deal that it's hard to single out the worst. But there can be no doubt that one of the most extraordinary facts is that the US and the other TPP nations were negotiating for eight years the biggest so-called trade deal in history with only the sketchiest idea about its likely benefits. Instead, politicians and supporters simply assured the public that it would all be great, honest. And yet when the rigorous econometric studies began to appear, they consistently showed that TPP would produce almost no benefits whatsoever.

Upon hearing that a planned course of action designed to bring financial gains would do nothing of the kind, most rational people in ordinary life would try something else. But not the politicians and TPP negotiators, who carried on despite these clear signs that TPP was simply not worth the effort. They either ignored these studies completely, or at most said that the only reliable predictions worth considering were the official ones, which would come from the US International Trade Commission (USITC) once TPP's text had been finalised. Last week, the USITC released its massive 792-page report (pdf). Here's a key part of the summary:

The Commission used a dynamic computable general equilibrium model to determine the impact of TPP relative to a baseline projection that does not include TPP. The model estimated that TPP would have positive effects, albeit small as a percentage of the overall size of the U.S. economy. By year 15 (2032), U.S. annual real income would be $57.3 billion (0.23 percent) higher than the baseline projections, real GDP would be $42.7 billion (0.15 percent) higher, and employment would be 0.07 percent higher (128,000 full-time equivalents).

Like all the figures mentioned there, that 0.15% GDP boost would be achieved in 2032, which means that on average TPP is expected to produce an extra annual GDP boost of roughly 0.01%. Public Citizen's Global Trade Watch (pdf) pulled out a few other interesting figures from the report, which:

Estimates a worsening balance of trade for 16 out of 25 U.S. agriculture (p. 124), manufacturing (p.228), and services (p. 340) sectors that the ITC selected to feature. This includes vehicles, wheat, corn, autoparts, titanium products, chemicals, seafood, textiles and apparel, rice and even financial services. Autoparts would be hard hit with employment projected to decrease by 0.3 percent.

Estimates the TPP will increase the U.S. global trade deficit by $21.7 billion by 2032.

Projects even the U.S. services trade balance will worsen by 2032 as service imports of $7 billion swamp the estimated increase in exports of $4.8 billion (p. 35).

Global Trade Watch also notes that the USITC's track record for predictions is not good:

The actual outcomes of past trade pacts have been significantly more negative than ITC projections generated using the same methodology employed for the TPP study. This makes today’s unusually negative ITC findings on the TPP especially ominous.

The economist Dean Baker from the Center for Economic Policy Research (CEPR) agrees about the USITC's past failures:

The USITC also has not done well in projecting winning and losing sectors from trade agreements. A recent analysis by CEPR found no relationship between the industries that were projected to be export and import gainers and losers from the trade deal with Korea and the actual outcome.

He goes on to point out an even more worrying aspect of the latest modelling:

this analysis does not seem to incorporate any of the losses associated with the stronger and longer patent and copyright protection required under the TPP. Higher prices for drugs, software and other protected items are likely to impose substantial costs on the United States and other parties to the agreement. For example, the New Zealand government estimated that just one provision -- extension of copyright protection from 50 years to 70 years -- would cost the country 0.024 percent of GDP. This amount is 10 percent of the total gains projected in the USITC report. It is entirely possible that a full assessment of the cost of these provisions would show that the TPP would lead to a net reduction in income for the United States and other countries in the pact.

That's a hugely important point. On the rare occasions when TPP supporters have made specific claims about the economic benefits of TPP, they have consistently failed to take into account any downsides. It's like going into a business deal only looking at the benefits, and ignoring any possible costs. Against this chorus of disapproval, it's interesting to see how TPP supporters try to spin the USITC's miserable figures. Here's what the Business Roundtable, "an association of chief executive officers of leading U.S. companies", has to say:

"The release of the ITC report marks an important step in the process for considering the TPP. We look forward to reviewing the report's findings as we continue to highlight the benefits of the TPP to American businesses, farmers and workers," said Tom Linebarger, Chairman and Chief Executive Officer of Cummins Inc., and Chair of the Business Roundtable International Engagement Committee. "The TPP will remove many foreign barriers to U.S. goods and services and impose strong, enforceable rules for trade -- enabling U.S. manufacturing, services and technology companies to grow their sales to important international markets."

"The TPP sets high standards and reflects American priorities, and if the United States doesn't take the lead in shaping international trade rules, our economic competitors will," continued Linebarger.

That's it: the Business Roundtable could not find a single number to quote that made TPP look like a good deal. What about the ultimate TPP cheerleader, US Trade Representative Michael Froman? What did he have to say about the report? This:

"The ITC report illustrates for the American people and members of Congress the benefits TPP will deliver in their own backyards. If you are a poultry farmer in Delaware this report shows that chicken exports will increase by $174 million annually under TPP. If you are a rancher in Nebraska this report shows that beef exports will increase by $876 million annually under TPP. And if you build cars in the Midwest, this report shows that auto exports will rise $1.95 billion annually. With today's study as another important data point, our work with Congressional leaders on TPP implementation and enforcement will continue and accelerate in the days and weeks ahead."

Froman decided to pretend it was all about little numbers, and to gloss over the fact that when you add up all those little numbers to find out TPP's total benefit...you still get a little number. Froman also fell back on that old favorite -- fear-mongering about China:

"What cannot be quantified in this study or any other is the cost to American leadership if we fail to pass TPP and allow China to carve up the Asia-Pacific through their own trade agreement. If we allow China to beat us in defining the rules for trade it will undercut our workers and businesses and prevent us from taking badly needed steps to improve worker rights, bolster intellectual property protections, and protect the environment through TPP."

In other words, yes, it's true TPP offers absolutely negligible benefits for the US but oh, look, a squirrel...

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Filed Under: benefits, economics, itc, tpp

Senator John McCain Weighs In On 'Going Dark' Debate -- Insists That He Understands Cryptography Better Than Cryptographers

from the maverick dept

Who knew that Senator John McCain understood encryption better than actual cryptographers? Late last week, he wrote an op-ed for Bloomberg View, in which he trots out all the usual talking points on how Silicon Valley just needs to nerd harder to solve the "Going Dark" problem. There's lots of cluelessness in the piece, but let's focus on the big one:

Top cryptologists have reasonably cautioned that “new law enforcement requirements are likely to introduce unanticipated, hard to detect security flaws,” but this is not the end of the analysis. We recognize there may be risks to requiring such access, but we know there are risks to doing nothing.

Actually, it kind of is "the end of the analysis" because the core element of that analysis is the fact that any attempt to backdoor encryption doesn't just make security weaker, it puts basically everyone at much greater risk. It introduces cataclysmic problems for any system that stores information that needs to be kept secure and private.

The following sentence is equally inane, in which he tries to place the "risks" of backdooring encryption on the same plane as the risk of ISIS using encryption. Let's be clear here: the risk of backdooring encryption isn't just significantly larger than the risk of ISIS using encryption, they're not even in the same universe. Even worse, by backdooring encryption, you are almost certainly increasing the risk of ISIS as well, by giving them a massive vulnerability to attack and exploit. Trying to suggest that this is an "on the one hand, on the other hand" situation is so ridiculously ignorant, one wonders who the hell is advising Senator McCain on this topic.

The fact is that there are always some risks. Tens of thousand of people die in car accidents in the US every year, yet you don't hear Senator McCain weighing the risks of driving versus the risks of banning cars. And that's a much more reasonable position to stake out, because banning cars would actually reduce automobile deaths — but it would also cripple the economy. But here's the thing: backdooring encryption has the potential to do much more damage to the economy than banning automobiles, because it would create vulnerabilities that could really completely shut down our economy. So, for McCain to pretend that there are somewhat equal risks on either side isn't just ignorant and meaningless, it's dangerous.

Some technologists and Silicon Valley executives argue that any efforts by the government to ensure law-enforcement access to encrypted information will undermine users’ privacy and make them less secure. This position is ideologically motivated and profit-driven, though not without merit. But, by speaking in absolute terms about privacy rights, they bring the discussion to a halt, while the security threat evolves.

Honestly, this is not true. I know that Comey's favorite line these days is that using strong encryption is a "business model decision," but Silicon Valley's interest in strong encryption doesn't appear to be driven by their own bottom lines, frankly. If it was, they would have adopted it much earlier. Strong encryption actually undermines some companies' business models, in that it makes it more difficult for them to collect the data that many of them rely on. The move towards stronger encryption has mostly been the result of a few things: (1) the fact that the NSA broke into their data centers and put their legitimate users at risk, (2) a better understanding of the wider risks from malicious attackers of what happens when you have weak encryption and (3) user demands for privacy. The last one may have indirect business model benefits in that it keeps users happier, but to argue that keeping users happy is somehow a purely money-driven decision, and frame it as somehow a bad thing, is pretty damn ridiculous.

And, honestly, while there are some activists who speak in absolute terms about "privacy rights," you rarely hear that from Silicon Valley companies. In fact, those who have absolute views on privacy tend to be the most critical of Silicon Valley companies for taking a much less principled view on "privacy rights." McCain pretending that this is driven by some sort of "privacy rights" advocacy suggests he's (again) woefully misinformed on this issue.

To be clear, encryption is often a very good thing. It increases the security of our online activities, provides the confidence necessary for economic growth through the Internet, and protects our privacy by securing some of our most important personal information, such as financial data and health records. Yet as with many technological tools, terrorist organizations are using encryption with alarming success.

Actually, they're not using encryption with "alarming success." There are very, very, very, very few examples of terrorists using encryption successfully. The Paris attackers? Unencrypted SMS. San Bernardino? Unencrypted social media communication.

The jihadists' followers and adherents use encryption to hide their communications within the U.S. FBI Director James Comey recently testified that the attackers in last year's Garland, Texas, shootings exchanged more than 100 text messages with an overseas terrorist, but law enforcement is still blinded to the content of those texts because they were encrypted.

Notice that this is the only example that comes up in these discussions. That's because it's the only example. And it's not even a very good one. Because, as with most encrypted communication, the metadata was still perfectly accessible. That's why they know that the attackers exchanged messages with a terrorist. Sure, they may not be able to understand the direct contents of the message, but the same thing would have been true if the attacker and the people he communicated with had worked out a code before hand. Or, you know, if they had met and talked in person. Is McCain going to ban talking in person too?

Finally, McCain's "solution" to all of this is to make a law telling Silicon Valley to nerd harder and solve the problem... or else:

As part of this effort, Congress should consider legislation that would require U.S. telecommunications companies to adopt technological alternatives that allow them to comply with lawful requests for access to content, but that would not prescribe what those systems should look like. This would allow companies to retain flexibility to design their technologies to meet both their business needs and our national security interests.

In other words, despite the fact that all of the best cryptographers in the world have said that what you're asking for is basically impossible and would make everyone less safe, just do it anyway -- and do it in a way that when it falls apart and everyone is made more vulnerable, Congressional leaders like John McCain can spin around and blame the companies rather than themselves.

We have to encourage companies and individuals who rely on encryption to recognize that our security is threatened, not encouraged, by technologies that place vital information outside the reach of law enforcement. Developing technologies that aid terrorists like Islamic State is not only harmful to our security, but it is ultimately an unwise business model.

Does John McCain seriously not employ a single knowledgeable staffer who could point out to him that basically every encrypted technology that ISIS uses is not made by an American company? Seriously, look at the list of ISIS's preferred encryption technologies: So who, exactly, is developing technologies that "aid terrorists like Islamic State" and need their encryption undermined?

Meanwhile, we haven't even touched on the biggest issue, as was highlighted in that big paper from Harvard last week. And it's this: the whole Going Dark thing is a total myth, because for the tiny, tiny, tiny bit of information that is now blocked out by strong encryption, there's a mountain of other data that is now accessible to law enforcement and the intelligence community. Things have been getting lighter and lighter and lighter for decades.

Shouldn't a sitting Senator understand these basic facts?

Filed Under: benefits, costs, cryptography, encryption, going dark, isis, john mccain, national security, risk, security, threat

Research Shows Mass Surveillance Fails 'Drastically' In Striking Balance Between Costs And Benefits To Society

from the case-not-made dept

One of the many problems with the debate on mass surveillance is that it is largely driven by emotions, on both sides. Facts are few and far between -- much is secret, for obvious reasons -- which makes objective discussion hard. What is needed is some rigorous research into this area. Surprisingly, it turns out the European Union has been funding just such a project, called "Surveille," a name derived from "Surveillance: Ethical Issues, Legal Limitations, and Efficiency." Here are the project's aims:

1. To provide a comprehensive survey of the types of surveillance technology deployed in Europe.

2. To assess the benefits and costs of surveillance technology. 'Benefits' refers to the delivery of improved security; 'costs' to the economic costs, negative public perceptions, negative effects on behaviour and infringement of fundamental rights.

3. To identify, elaborate and assess the whole range of legal and ethical issues raised by the use of surveillance technology in the prevention, investigation and prosecution of terrorism and other crime -- including those related to fundamental rights.

4. To communicate continuously the results of the research to a representative sample of stakeholders: European decision-makers, law enforcement professionals, local authorities, and technology developers, and to receive feedback to inform continuing research.

A post on the Just Security site by Professor Martin Scheinin, the coordinator of the Surveille project, gives a good summary of the latest results of the research, which have been released as a 50-page paper entitled "Assessing Surveillance in the Context of Preventing a Terrorist Act" (pdf). Here's what he writes:

Electronic mass surveillance -- including the mass trawling of both metadata and content by the US National Security Agency -- fails drastically in striking the correct balance between security and privacy that American officials and other proponents of surveillance insist they are maintaining.

We arrived at this conclusion by subjecting a wide-range of surveillance technologies to three separate assessments by three parallel expert teams representing engineers, ethicists, and lawyers. Each team conducted assessments of surveillance technologies, looking at ethical issues they raise; the legal constraints on their use – or those that should exist – on the basis of privacy and other fundamental rights; and, finally, their technical usability and cost-efficiency. This work was fed into and commented upon by two end-user panels, one consisting of law enforcement officials and the other of representatives of cities and municipalities.

The main academic paper is not at all dry; that's because it consists largely of a detailed analysis of real-life surveillance techniques of the kind frequently discussed here on Techdirt. It subjects them to assessments from very different viewpoints -- technical, ethical and legal. Interesting as these are, it's the final conclusions that are most important, because they give the lie to the oft-expressed view that mass surveillance is somehow "justified" by the results it produces:

Various kinds of Internet monitoring techniques are applied side by side with more traditional surveillance techniques. We find most of the Internet monitoring applications both ethically and legally impermissible, assessing them poorly in comparison with traditional, non-technology based surveillance methods. Furthermore, the Internet monitoring techniques compare poorly with the traditional techniques also in terms of usability.

...

Internet monitoring techniques, with the exception of targeted social networking analysis, represent an unacceptable interference with fundamental rights to privacy and data protection, the deepest ethical risks of chill and damage to trust, intrusion and discrimination, while also violating moral norms of proportionality of methods and consent of the policed. Meanwhile these high moral and legal costs reflect a mostly middling to poor usability benefit, performing worse with regard to cost, efficiency and privacy-by-design than lower tech alternatives. The case for a mass Internet monitoring system is found wanting.

A crucial point made there, so often ignored in debates about mass surveillance, is that low-tech approaches are generally better. In other words, there is no need to trade off fundamental rights for safety by spying on the entire Internet: greater security can be provided by adopting traditional, well-regulated, non-technology-based surveillance methods that do not require everyone to give up their privacy online. Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: benefits, costs, eu, europe, mass surveillance, surveillance

Copyright Week: If We Want To Get Copyright Right, It's Time To Go Back To Basics

from the copyright-week dept

All week we've been posting stories for Copyright Week, discussing important elements of copyright law that are at risk of getting trampled or destroyed in the effort to reform copyright. These are issues that will be squashed almost entirely if we leave it to the lobbyists to hash out what a new copyright law looks like. Today is the final day of Copyright Week, which happens to coincide with the second anniversary of Internet Freedom Day -- the day that the internet spoke up and said NO!! the last time a group of lobbyist sought to change copyright in dangerous ways, with SOPA/PIPA.

So how can we get copyright right? Well, respecting things like transparency, the public domain, open access, the freedom to tinker and fair use are certainly important and necessary starting points.

But it goes much further than that. I think it's worth repeating the basic framework for copyright reform I suggested last year, because not only does it still apply, it appears that Congress has shown no interest in following that framework. Instead, they've still been setting everything up as a "blue team vs. red team" game where every proposal has someone arguing for the exact opposite, and everything is seen as a zero sum game, rather than looking for solutions that actually expand the opportunity for everyone. So here are the basic principles I suggested earlier, which I think bear repeating:

1. Pretty much everyone is both a content creator and a content consumer. Over and over again we heard about concerns of certain creators as if they were a separate class of people unrelated to the wider public. That's silly. Especially as we have copyright law today -- in which every piece of creative content is immediately covered by copyright at the moment the expression is set in fixed form -- we are all creators. Nearly every email you write is probably covered by copyright. Every creator is also a consumer of content, and that includes professional creators. Professional content creation often involves building off of the influences of other works. We should support that as well. Otherwise, we begin to treat copyright as a sort of welfare program for professional creators, which is never what it was intended to be.
2. Technology is just a tool. It is neither a competitor to, nor an enemy of, content creators. With so many Representatives setting up the debate as "content vs. technology," we start to go down a very dangerous and distorted path that has little to do with reality. As a tool, technology certainly can create challenges for existing and traditional business models, but also tremendous opportunity. Look at the success of platforms like Kickstarter today. Would anyone seriously argue that the "technology" company Kickstarter is "anti" creator? Similarly, we're seeing more and more artists succeed by embracing new technology platforms that enable them to do amazing things: Bandcamp, TopSpin, BandZoogle, ReverbNation, SongKick, Dropbox, SoundCloud, Netflix, YouTube, Facebook, Twitter, HumbleBundle -- and many, many, many more. The list literally goes on and on and on. These are the tools that so many content creators are embracing today to help them to be better able to create, to promote, to distribute, to connect and to monetize their works than ever before. To argue that this is tech vs. content, when the tech companies seem to be handing content creators the most useful tools they've ever had to be successful, seems ridiculous.
3. Every legislative choice has costs and benefits. Too often, it seems like those pushing a certain proposal like to only look at one side of that equation. If we're to have an effective debate over copyright reform, it should include an upfront look at the costs and the benefits, the conditions and the consequences of various decisions across the board on the public. The purpose of copyright law, explicitly, is to promote the progress. We should be weighing carefully whether or not each change really would promote progress of science and the useful arts.
4. Decisions need to be made based on empirical data. As we've discussed in the past, historically, copyright reform discussions have been almost entirely faith-based. This is why the claims of "everyone just wants stuff for free" are so concerning," since the data suggests that's not even close to true. Given the recent call for objective research that would be practical in the copyright debate by the US National Research Council, I'm hopeful that we'll actually begin to see some useful data for this discussion. Hopefully those in Congress will actually pay attention to the data, rather than continue to insist that blatantly false claims must be true.
5. Finally, and most importantly, the focus needs to remain on promoting the progress of science and the useful arts. It's not about "protecting" any industry or any class. It's about what most helps to promote overall progress. Each proposal should be judged on that standard.

After I posted this last time, I had two lobbyists accuse me of being insane (literally -- they claimed I had mental deficiencies) for daring to suggest that everyone is both a creator and a content consumer. Of course, there's an easy response to that: if not everyone is a content creator, then perhaps we shouldn't have copyright laws that automatically grant life + 70 years copyright to every email they write. But, really, if we can stop looking at copyright as some sort of silly war between "artists" and "technologists" we could actually make a fair bit of progress. Copyright was always supposed to be about benefiting the public -- and when innovation opens up new opportunities for artists and consumers alike, that can work hand in hand.

Rather than viewing copyright policy as a zero sum game where one party "winning" means someone else losing, let's recognize that the only real stakeholder is the public, and any policy should be designed to be best for the public, and that's one where both artists and technologists are better off as well, because new technologies enable artists to better create, promote, distribute, connect and monetize their works, while providing the public with more content, more choices, more ways to support, more ways to share, more ways to express and to communicate. And the end result, as we've seen throughout history, tends to be better for just about everyone -- with the exception of those who stay wedded to obsolete models that are built around being the gatekeeper for areas of friction that no longer apply.

Focus on what's best for the public and it will also be best for creators and technologists alike. That's how you "get copyright right."

Filed Under: benefits, copyright, copyright week, fair use, public domain, the public

After 20 Years, It's Clear NAFTA Has Failed To Deliver Promised Benefits; So Why Trust TPP, TTIP Will Be Better?

from the learning-from-the-past dept

Both TPP and TAFTA/TTIP are based on the premise that by boosting trade and investment, general prosperity will increase too. And yet, despite the huge scale of the plans, and their major potential knock-on effects on the lives of billions of people, precious little evidence has been offered to justify that basic assumption. To its credit, the European Commission has at least produced a report (pdf) on the possible gains. But as I've analyzed elsewhere, the most optimistic outcome is only tangentially about increased trade, and requires a harmonization of two fundamentally incompatible regulatory systems through massive deregulation on both sides of the Atlantic. In any case, the much-quoted figures are simply the output of econometric models, which may or may not be valid, and require extrapolation to the rather distant 2027, by which time the world could be a very different place.

Given the difficulty of saying anything definite about the future, it makes sense to look back at how past trade agreements have actually worked out for those involved. One of the most important, the North American Free Trade Agreement (NAFTA), has been operational for 20 years, and so offers us a wealth of hard facts. Public Citizen has just released an excellent analysis of what happened (pdf). As it points out:

NAFTA was fundamentally different than past trade agreements in that it was only partially about trade. Indeed, it shattered the boundaries of past U.S. trade pacts, which had focused narrowly on cutting tariffs and easing quotas. In contrast, NAFTA created new privileges and protections for foreign investors that incentivized the offshoring of investment and jobs by eliminating many of the risks normally associated with moving production to low-wage countries. NAFTA allowed foreign investors to directly challenge before foreign tribunals domestic policies and actions, demanding government compensation for policies that they claimed undermined their expected future profits. NAFTA also contained chapters that required the three countries to limit regulation of services, such as trucking and banking; extend medicine patent monopolies; limit food and product safety standards and border inspection; and waive domestic procurement preferences, such as Buy American.

This makes NAFTA the clear model for TPP and TAFTA, both of which hand enormous power to corporates, at the expense of the public and governments.

In 1993, NAFTA was sold to the U.S. public with grand promises. NAFTA would create hundreds of thousands of good jobs here -- 170,000 per year according the Peterson Institute for International Economics. U.S. farmers would export their way to wealth. NAFTA would bring Mexico to a first-world level of economic prosperity and stability, providing new economic opportunities there that would reduce immigration to the United States. Environmental standards would improve.

Techdirt has already discussed how NAFTA has proved disastrous for the US in basic financial terms; here we'll look at some of the other effects, not just in the US, but for Mexico too.

NAFTA has contributed to downward pressure on U.S. wages and growing income inequality. According to the U.S. Bureau of Labor Statistics, two out of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them taking a pay cut of greater than 20 percent.

…

Despite a 188 percent rise in food imports from Canada and Mexico under NAFTA, the average nominal price of food in the United States has jumped 65 percent since the deal went into effect.

…

The reductions in consumer goods prices that have materialized have not been sufficient to offset the losses to wages under NAFTA. U.S. workers without college degrees (63 percent of the workforce) have likely lost an amount equal to 12.2 percent of their wages under NAFTA-style trade even after accounting for the benefits of cheaper goods.

Taken together, these facts represent the reality for much of the US public: wages have fallen, the cost of food has risen, and even though consumer good prices have dropped, overall US workers are worse off than they were before NAFTA came into force. People have lost out in non-monetary ways, too:

Scores of NAFTA countries' environmental and health laws have been challenged in foreign tribunals through the controversial investor-state system. More than $360 million in compensation to investors has been extracted from NAFTA governments via "investor-state" tribunal challenges against toxics bans, land-use rules, water and forestry policies and more. More than $12.4 billion are currently pending in such claims.

NAFTA has been the test-bed for corporations to use investor-state dispute settlement (ISDS) to resist or even undo improvements in health and environmental laws that reduce their profits. Even the European Commission, a big fan of corporate sovereignty, has been forced to recognize that ISDS is a danger to the public for this reason. In many ways, Mexico has fared even worse than the US under NAFTA:

The export of subsidized U.S. corn did increase under NAFTA, destroying the livelihoods of more than one million Mexican campesino farmers and about 1.4 million additional Mexican workers whose livelihoods depended on agriculture.

The desperate migration of those displaced from Mexico's rural economy pushed down wages in Mexico's border maquiladora factory zone and contributed to a doubling of Mexican immigration to the United States following NAFTA's implementation.

That last point is important: one of the selling points of NAFTA was that it would help stem the flood of Mexican migrants into the US. As the Public Citizen document reports:

Then-Mexican President Carlos Salinas de Gortari claimed NAFTA would reduce the flow of migrants from Mexico into the United States, saying: "Mexico prefers to export its products rather than its people." Salinas infamously added that the U.S. decision over NAFTA was a choice between "accepting Mexican tomatoes or Mexican migrants that will harvest them in the United States."

As in the US, overall, Mexicans have lost out under NAFTA:

Real wages in Mexico have fallen significantly below pre-NAFTA levels as price increases for basic consumer goods have exceeded wage increases. A minimum wage earner in Mexico today can buy 38 percent fewer consumer goods as on the day that NAFTA took effect.

Public Citizen has performed an invaluable service by pulling together the figures for NAFTA in this rigorous, fully-referenced document. That's not least because the TPP negotiations are at a critical point, with President Obama desperate to obtain Fast Track trade authority that will allow him and his negotiators to push through TPP (and TAFTA/TTIP) with no real Congressional scrutiny and a simple yes/no vote at the end. As Public Citizen points out:

the administration and corporate proponents of the TPP will have difficulty getting the controversial deal through Congress. Twenty years of NAFTA's damage has contributed to a groundswell of TPP opposition among the U.S. public and policymakers. In November 2013, a bipartisan group of 178 members of the U.S. House of Representatives stated their early opposition to any attempt to Fast Track the TPP through Congress, while other members expressed similar concerns about the TPP and the Fast Track trade authority scheme.

Congressional rejection of the TPP stands to intensify as the 20th anniversary of NAFTA provides a fresh reminder of the damage that such past pacts have wrought. It was the initial outcomes of NAFTA that sank previous attempts at massive NAFTA expansions, such as the Free Trade Areas of the Americas and the Asia-Pacific Economic Cooperation (APEC) FTA.

NAFTA's two-decade legacy of tumult and hardship for millions of people in North America could similarly hasten the downfall of the attempt to expand the NAFTA model via Fast Track and the TPP. If so, it would constitute a unique benefit of an otherwise damaging deal.

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Filed Under: benefits, nafta, promises

EU VP On Aaron Swartz: If Our Laws Hold Back Benefits From Openness, We Should Change Those Laws

from the still-waiting-for-the-others dept

As Techdirt has reported over the last ten days, the death of Aaron Swartz has provoked an outpouring of grief from friends and colleagues, who understandably wish to express their shock and anger at what happened. You'd expect that. What you might not expect is for a Vice-President of the European Commission to add her voice, but that's exactly what Neelie Kroes did this week. Her post is short, and worth reading in its entirety:

You've probably seen the terrible news about the death of Aaron Swartz. It's always horrifying when someone so young and so clearly talented feels they have no option but to take their own life. I know that this is something that shook the internet community deeply. And my thoughts are with his family, and what they must be going through right now.

This was a man who saw that greater openness can be good for citizens, and good for society. Hugely disruptive -- but hugely beneficial.

For me, the case is particularly clear when there aren't copyright issues, when information was already paid for by taxpayers, and when more openness can help new innovations and scientific discoveries.

I would never condone unlawful activity. But in my view, if our laws, frameworks and practices stand in the way of us getting all those benefits, then maybe they need to be changed.

Agree or disagree with his methods, Aaron could see the open direction we’re heading in, and its benefits. In the meantime, those scientists who are paying tribute by making their own work legally, openly available aren't just showing their respects -- they are also benefiting scientific progress.

Two points stand out there. First, the one regarding information "already paid for by taxpayers". That's a clear reference to the open access and open data movements, which seek to make precisely this kind of material available to all. In fact, the point that openness drives innovation and scientific progress is mentioned by Kroes not just once, but twice in her short post.

The other notable phrase is that "if our laws, frameworks and practices stand in the way of us getting all those benefits [of openness], then maybe they need to be changed". That's of a piece with her earlier frank comments about copyright being "a tool to punish and withhold, not a tool to recognise and reward," and her call for "flexibility in the system, not the straitjacket of a single model."

Given the stony silence from just about everyone in positions of power regarding Aaron Swartz's suicide, it's good that at least one politician had the decency to offer her condolences and admit that there's something seriously wrong with today's approach to sharing knowledge. It would be even better if more of her colleagues came to a similar realization and expressed it with equal honesty.

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Filed Under: aaron swartz, benefits, eu, laws, neelie kroes, openness, rules, scientific progress

Not This Again: IEEE Plays Up Bogus 'Digital Sharecropping' Argument Again

from the make-it-stop dept

Nearly six years ago, we wrote about the ridiculousness of Nick Carr's suggestion that Web 2.0 was all about "digital sharecropping", in which online service providers are somehow "exploiting" users to take the fruits of their labors. I would hope that, with six years of hindsight, people would still remember what a completely nonsensical argument this is -- based as it is on the economically clueless suggestion that the only possible benefit someone could get from using an online service is money. Of course that's not true. The reason that so many people use something like YouTube isn't because they're being exploited, but because it enables something wonderful and powerful for free. Prior to YouTube, if you wanted to put up a video, you had to install complex or expensive server software, pay a ton for bandwidth... oh yeah, and hope that whoever wanted to watch the video had the proper software to view it. YouTube took all of that away, and made it all free (and even added easy ways to monetize it). If that's exploitation, sign me up to be exploited. Similarly, look at a platform like Twitter, which has enabled amazingly powerful real time communications that has connected me with people worldwide in ways never before possible. That's not exploitation. It's called providing something of value.

So it's a shame to see the IEEE basically rehash Carr's silly argument as if it were still relevant, setting up a strawman about how "Web 2.0" (really, is anyone still using that term?) was all about empowerment, but the reality is that (*gasp*) there are companies involved. And some of them... (wait for it...) make money!

But the road to Utopia all too often ends up detouring through the business district, and Web 2.0 has been no exception. By offering the means of production free to their users, other leviathan sites, such as Facebook, Twitter, and YouTube, have generated enormous amounts of content at almost no expense. Even better, this content is a gold mine for targeted advertising.

Over in Utopia, the “workers” who generated all those articles, photos, tweets, and videos would get a cut of the profits they helped to generate. In the business district, however, users retain their amateur status, while the companies they labor for rake in billions. Worse, contributors don’t even own the content they create. The smallest of the small print in the terms of use, which you must agree to in order to get an account, states that the company can use your content as it sees fit.

Beyond the fact that this is a common misreading of the terms of service of most of the sites he's talking about (which merely request a license to make sure that their hosting of the content you put up is legit), author Paul McFedries completely ignores the tremendous value that people get for using those platforms... almost all of which is given out for free. While economic value is often measured in dollar terms, that doesn't mean that people don't get value if actual dollars aren't exchanged. The people using these platforms aren't being exploited -- they use them because they really, really value them.

Anthony De Rosa, a product manager at Reuters, calls this digital feudalism and laments that we “are being played for suckers to feed the beast, to create content that ends up creating value for others.”

And this is equally misguided. All sorts of things people do create value for others. Almost no economic activity is entirely contained so that only the person doing the initial activity retains 100% of the benefits. Concepts like externalities and spillovers exist in economics for a very good reason -- and part of the problem is people who don't understand that creating excess value that benefits others is actually a core reason we have economic growth in the first place. Creating value for others is of tremendous economic value. The problem is that people ignore the fact that those doing the creating are getting back more than enough value directly or they wouldn't be doing the activity in the first place.

It's a shame that we're still having these discussions today, after we've had many more years of experience with all of these valuable services to recognize that it's not exploitation to get a tremendously useful service for free, while also increasing value for others. It's actually how we innovate and grow the economy itself.

Filed Under: benefits, economics, exploitation, externalities, sharecropping, spillovers, value