Tag: technology

Annals of Unhelpful Polling: Internet Access Edition

A new BBC poll is garnering plenty of press attention for its striking finding that 78% of global respondents believe that Internet access “should be a fundamental right of all people.” Fascinating!  Except… what exactly does that mean?

The obvious problem here is that, at least as it’s worded in English, the question is ambiguous between two equally plausible readings.  Especially when juxtaposed with another question about whether the Internet should be regulated by government, it could be understood as asking whether there’s a fundamental negative right to be free to use the Internet – to read and communicate free of government censorship or other onerous barriers.  That’s probably how we’d interpret a parallel question about whether people had a “fundamental right” to “access” information via newspapers or books.

Many folks, though, seem to be reading it as a measure of support for a fundamental positive right to be provided with (broadband?) Internet access. And that just seems a bit silly, frankly. There’s a decent case to be made that it’s desirable for governments that can afford it to make some kind of public Internet access available to citizens who can’t.  You can even imagine that, a few years down the line, some states in the developed world might have moved so heavily toward interacting with the public online that it would become more or less necessary for full political equality.  But a basic human right? Something that governments are “violating fundamental rights” if they don’t do? It’s not just that I don’t believe this; I have trouble imagining that much of anyone literally thinks so.  A few of my friends at Free Press, maybe, but 4/5 of the world’s population?  Color me dubious.

I’ll confess being startled at the response to a much less ambiguous question: A global majority agreed that “the Internet should never be regulated by any level of government anywhere.” While I find this pattern of responses congenial enough, I can’t take it much more seriously.  After all, what falls under the category of “regulation of the Internet”?  Censorship, of course, which I expect is what most people immediately thought of.  But in reality, of course, there are a whole panoply of laws and rules that at least arguably “regulate” the Internet in some sense, some of which even I would approve of. I have many, many issues with the Digital Millennium Copyright Act, for instance, but there’s nothing wrong with the idea that there should be a basic protocol that provides both a safe harbor for service providers hosting user content and a mechanism for complaining about copyright-infringing or libelous or otherwise tortious material.  Probably there are other “regulations” I’d approve too, but I’d have to sit and think about it for an hour to even enumerate all the different kinds of rules that might be considered to “regulate the Internet” in one way or another.

Because it’s at least not susceptible to such dramatically divergent readings, this response might be more useful as a kind of big-picture attitude check. But the reality is that almost none of the respondents can really mean it because even someone steeped in tech policy would have to sit and think about the question for a half hour to really get a grip on what it entails. Or might entail. If the BBC were engaged in some kind of serious social science, they probably would have worked up better questions.  But of course, that’s not the business they’re in.  They’re in the business of asking the sort of question that will let them run exciting headlines that get re-tweeted and drive page views. And 100% of respondents in my poll of myself agree they’ve succeeded.

Radioactive Corporate Welfare

A good default proposition regarding the government’s role in the economy would state that the government should not loan money to an enterprise if the enterprise in question cannot find one single market actor anywhere in the universe to loan said enterprise a single red cent.  It might suggest – I don’t know – that the investment is rather … dubious.

Alas, like all good propositions regarding the government’s role in the economy, this one is being left by the roadside by the Obama administration.  Unfortunately, the only complaint being made by a not insubstantial segment of the political Right – frequently, the political crowd that is busy decrying “Bailout Nation” – is that the loan guarantees are not fat enough.

I write, of course, about the $8.3 billion federal loan guarantee announced by President Obama this week for Southern Company to build two new nuclear power plants.  The money will be used to guarantee the loans being made by the federal government (via the Federal Financing Bank) to partially cover the cost of Southern’s projected $14 billion nuclear construction project at their Vogtle plant near Waynesboro, Georgia.  The loan guarantees were authorized by Congress in the 2005 Energy Policy Act and, we are told, are the first installment on a total package of $54 billion that the President would like to hand out to facilitate the construction of 7-10 new nuclear power plants (Congress, however, has only authorized $18.5 billion to this point).

The claim being made by some – that the loan guarantees are necessary to jump-start investor interest in new nuclear power plant construction – is not quite correct.  Even these lavish loan guarantees aren’t enough to do that.  In a letter to the U.S. Department of Energy dated July 2, 2007, six of Wall Street’s s then-largest investment banks – Citigroup, Credit Suisse, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley – informed the administration that, contrary to the government’s expectations, anything short of a 100 percent unconditional guarantee would be insufficient to induce private lending.

Why is it risky to build nuclear power plants?  Because new nuclear projects tie up more capital for longer periods of time than its main competitor, natural-gas fired generation.  Nuclear power makes economic sense only if natural gas prices are very high.  Then, over time, the high initial costs of nuclear power would be offset by nuclear power’s lower fuel costs.  Moreover, as noted by Moody’s in an analysis published in July of last year, there is uncertainty associated with construction costs, regulatory oversight, technological developments that might reduce the cost of rival facilities, and the ability of utilities to recover costs and make a profit over the lifetime of the plant – a risk tied up in the economic prospects of the region being served by the plant.  And those risks have been increasing, not decreasing, as time has gone on.

In short, even during the go-go days prior to the September 2008 crash – a time when Wall Street was allegedly throwing around money left and right to all sorts of dubious borrowers – the banks that stand accused of recklessly endangering their shareholders on other fronts were telling utility companies that they would not loan them anything for new nuclear power plant construction unless the feds unconditionally guaranteed every last penny of those loans.  That’s how risky market actors think it is to build nuclear power plants.

And it’s not as if the federal government disagrees completely.  The Congressional Budget Office pegs the chance of default (program-wide) at 50 percent or better and the Government Accountability Office likewise thinks that default risks are quite high.  Energy Secretary Stephen Chu says that he thinks the chance of default is much lower.  We can only speculate about who’s right given that no one has tried to build a nuclear power plant in the United States for over 30 years.

Regardless of what the risk actually is, the loan guarantees do not reduce that risk.  They simply transfer the risk from the bank to taxpayer.  In this particular case, however, the loan guarantee transfers risk from one arm of the state to the other, so it doesn’t really count.  But if such loan guarantees  ever were to induce actual private lending for plant construction, that’s how it would work.

Plenty of arguments have been offered to justify these loan guarantees.  Most of them are flimsy on their face.

For instance, we’re often told that we “need” new power plants.  But with electricity demand declining over the past couple of years, it is unclear when that need might arise.

Regardless, when the market “needs” more electricity, that need will be manifested in price signals that will carry with them profit opportunities.  Profit-hungry investors will be willing and able to meet that need without the help of government.  Of course, if market conditions don’t radically change, those needs will be met with gas-fired power plants, but hey, if that bothers you, take it up with someone else.

Others argue that we need the jobs that will be produced by new nuclear power plants.  Well, building big new reactors will certainly employ a lot of (largely unionized) construction workers.  But that’s one reason why building a nuclear power plant is not very economic compared to building gas-fired generators.  If creating jobs is the idea whether the project makes any economic sense or not, then let’s just ban food imports and farm equipment and put everyone to work with hand plows and scythes.

Two somewhat more serious arguments have been offered to justify these loan guarantees.  Neither of them stands up to much scrutiny either.

The first argument – the argument most often heard from the nuclear power industry and some segments of the political Left – is that we need nuclear power to reduce greenhouse gas emissions.  Of course, the best (that is, most efficient) way to reduce greenhouse gas emissions is to internalize the cost of greenhouse gas emissions in the retail price of electricity and then allow market actors to adjust their production and consumption decisions accordingly.  That price internalization exercise, however (whether directly through a carbon tax or indirectly through a cap-and-trade program), does not appear to be in the cards in the foreseeable future.  Hence, the loan guarantees are advanced as a “second-best” solution, one that will get us the technology and economic efficiency that would be delivered by a properly crafted carbon tax or cap-and-trade program without the retail price increases associated with either.

One of several problems with this argument is that it would take one hell of a carbon tax – or one hell of an onerous cap-and-trade program – to get anyone interested in building nuclear power plants.  If natural gas prices remained roughly where they are at present (that is, if they were to remain at historical norms) then it would take a $90 per ton carbon tax or a cap-and-trade program that delivered carbon emission credits at $90 per ton on the open market to induce investment in nuclear power plants.  Few economists who study climate policy believe that a carbon tax of that size is defensible given what we know about climate change.

And that’s if construction costs are as low as advertised.  Were they to double (as they did from 2003 to 2009) – either because of endogenous increases in the cost of capital, labor, or construction-related resources or because of cost overruns – then it would take at least a $150 per ton carbon tax (or a cap-and-trade program that delivered $150 carbon credits to the market) to induce investment.

You might ask yourself what the historical relationship is between final (inflation-adjusted) nuclear power plant construction costs in the United States and construction costs as projected at the onset of the project.  Happily, the CBO has done your homework for you.  They found that final construction costs averaged 207 percent of projected costs.  Hence, a doubling of construction costs is probably more likely than not once a project is underway … if past is prologue.

The upshot is that there are many more efficient ways to respond to greenhouse gas emission constraints than to go on a nuclear power bender.  This observation is heresy on the Right, but almost every credible analysis of the matter backs up that observation.

The second argument one hears to justify federal loan guarantees is that they are necessary to counter-balance the excessive regulatory costs associated with new plant construction.  Now, put aside the fact that the Nuclear Energy Institute – the trade association of the nuclear power industry – has often expressed near-total satisfaction with the current federal regulatory regime.  If the regulatory regime is truly “bad” and, accordingly, is imposing steep and unnecessary costs on the industry, then the correct remedy is to improve said regulatory regime, not to subsidize the industry.

The counter-complaint that positive regulatory reforms are impossible is difficult to swallow.  After all, if there is sufficient political will to bestow tens of billions of dollars worth of tax money on this industry, then surely there is enough political will to reform the bad and unnecessarily costly regulations allegedly bedeviling the object of those very same legislative affections.

I will confess to being skeptical about the argument that high construction costs are largely the fault of regulators.  Building a light water breeder reactor is a technologically challenging and costly undertaking whether regulators are on the scene or not.  Moreover, it is not obvious to me that the regulations that are in place are a priori objectionable from a libertarian perspective.

One rarely, if ever, hears of particulars in this bill of complaint offered about nuclear regulation.  But if a persuasive bill of complaints is ever presented, then the appropriate response is regulatory reform and then to leave the decision to build or not to build to markets.

In the course of announcing these loan guarantees, President Obama said this week that “The fact is, changing the ways we produce and use energy requires us to think anew. It requires us to act anew.”  Well, there’s nothing new about throwing subsidies at nuclear power.  Economist Douglas Koplow calculates that federal nuclear subsidies have totaled $178 billion from 1947-1999.  The promise of a nuclear economy with rates too cheap to meter has been made for over half a century.  What would be new would be a policy of “just saying no” to industries with their hands out in Washington.

[Cross-posted at MasterResource]

Obama Commands the Impossible

Today’s New York Times reports that President Obama has “ordered the rapid development of technology to capture carbon dioxide emissions from the burning of coal,” as well as mandating the production of more corn-based ethanol and financing farmers to produce “cellulosic” ethanol from waste fiber.

You’ve got to like the president’s moxie.  Faced with his inability to pass health care reform and cap-and-trade, he now chooses to command the impossible and the inefficient.

Most power plants are simply not designed for carbon capture.  There isn’t any infrastructure to transport large amounts of carbon dioxide, and no one has agreed on where to put all of it.  Corn-based ethanol produces more carbon dioxide in its life cycle than it eliminates, and cellulosic ethanol has been “just around the corner” since I’ve been just around the corner.

However, doing what doesn’t make any economic sense makes a lot of political sense in Washington, because inefficient technologies require subsidies–in this case to farmers, ethanol processors, utilities, engineering and construction conglomerates, and a whole host of others.  Has the president forgotten that his unpopular predecessor started the ethanol boondogle (his response to global warming) and drove up the price of corn to the point of worldwide food riots? Hasn’t he read that cellulosic ethanol is outrageously expensive? Has he ever heard of the “not-in-my-backyard” phenomenon when it comes to storing something people don’t especially like?

Yeah, he probably has.  But the political gains certainly are worth the economic costs.  Think about it.  In the case of carbon capture, it’s so wildly inefficient that it can easily double the amount of fuel necessary to produce carbon-based energy.  What’s not to like if you’re a coal company, now required to load twice as many hopper cars?  What’s not to like if you’re a utility, guaranteed a profit and an incentive to build a snazzy, expensive new plant?  And what’s not to like if you’re a farmer, gaining yet another subsidy?

Technology Clarifies Debate About Whole-Body Imaging Technology

I was dismayed today to listen to a recorded radio program in which James Carafano of the Heritage Foundation debated Michael German of the ACLU about the whole-body imaging systems being considered for airports after the Christmas attempt to light a bomb on a flight into Detroit.

Carafano, who I like personally, is a careless debater. He misstated the law, insulted a caller to the radio program, and misstated people’s names as he mischaracterized their views—in particular, my name and my views.

The segment was recorded, so we can capture exactly what Carafano said:

When the Transportation Security Administration rolled out this technology, they went through a very long and detailed consultation period with privacy and civil liberties groups including Jim Lindsey at Cato. I remember Jim Lindsey, when we had a session on privacy and civil liberties, stood up and complimented Secretary Chertoff, and said, “Look, this is something that you’ve actually done right. You’ve gone out to the stakeholder community, and you’ve gone over the procedures with us and we’ve come up with procedures that we’re very, very comfortable with.” So I think the privacy issue is really a non-issue.

At a Heritage event in June, 2008, I rose to rebut how Secretary Chertoff dismissed privacy advocates. He said privacy advocates prefer “no-security” airlines and that they want people to use fraudulent documents. As I gently chastised him for that, I did compliment the work of one TSA official to minimize privacy consequences of millimeter wave, which does provide a margin of security.

The event was recorded, so we can capture exactly what I said: “Frankly, I think millimeter wave is not a bad technology. Peter Pietra at TSA has done a good job, I think, of getting the agency to design the system well.”

That’s it. I made no reference to a ”long and detailed consultation period,” and I don’t know of any such thing happening. I didn’t compliment Secretary Chertoff, but a deputy who—despite Chertoff, most likely—managed to instill some privacy protections in TSA’s use of whole-body imaging systems. As to my comfort, I’ll take “less uncomfortable than I would have been” over “very, very comfortable,” which is inaccurate.

As I’ve written elsewhere, ”I think [TSA privacy officer Peter Pietra has] done a creditable job of trying to build privacy protections into this system… . But maybe it’s not enough. We’re talking about trying to maintain privacy with a technology that’s fundamentally intrusive.”

Perhaps I’ve taken too subtle a position on millimeter wave: It provides a small margin of security at a high cost to privacy. With that, I’ll let the country make its decision, while I seek to moot this as a public policy issue: Airline security should be provided by airlines and airports, not the government.

I don’t think it’s appropriate to speak of me—by any name—as an endorser of this technology or the process of its adoption. Thanks to sound and video recording technology, the record can be clear.

Do Bring a Phonecam to a Snowball Fight

By now, you’ve probably heard the story—and seen the video.  During the weekend’s Snowpocalypse™ in DC, a gaggle of young urbanites, using Twitter and other social media, announced a big group snowball fight at the corner of 14th and U Streets.  For a while, it was all good fun, with the participants periodically stopping the skirmish to help dislodge a motorist for a snowdrift, amid collective cheers. But an off-duty plainclothes cop whose Hummer had been hit by a few snowballs lost his cool—and advanced on the crowd to berate them with his gun drawn. You’d think an angry, out-of-uniform guy brandishing a gun might set off a dangerous stampede in the snow, but true to form, the DC crowd responded with chanting: “You don’t bring a gun to a snowball fight!”

Initially, the Metropolitan Police Department “reviewed the evidence” and concluded that the officer had only been holding a cell phone after all—folks who’d said it was a gun must have just imagined it, what with all that snow. But it turns out there were a whole lot of video cameras and phonecams there, and still shots and recordings began to circulate on the Internet, making it impossible to deny what had happened.  By Monday, the chief of police had issued a statement calling the officer’s behavior “totally inappropriate” and announcing that he’d be relegated to desk duty pending further inquiry.

As anyone who follows the excellent work of my colleague Radley Balko will be well aware, things often play out quite differently—with departments circling the wagons, and no serious accountability for far more egregious abuses of authority. But video—increasingly ubiquitous and portable—can make a difference. And it strikes me that, in one sense, it helps remedy other kinds of social inequality.  Reviewing that video of the snowball scene, you might point out that the crowd is full of white 20-somethings, many of whom (given the city’s demographics) are almost certainly college-educated professionals, while police misconduct toward less privileged groups is far more likely to be ignored.

What is privilege, though? In cases like these, it consists largely in the ability to be seen and heard—to attract media attention, to articulate your story in a clear and compelling way, to be considered credible by press and the community. All of these, unfortunately, depend enormously on class, status, race, and education. Unless there’s video. And video is democratic these days. You’d have to poke around a bit to find even a bottom-of-the-line cheapo cell phone that didn’t come with at least a still camera, and likely video capture to boot. So while there’s been some attention paid to the potential of this kind of “Little Brother” surveillance to increase accountability—the to lessen disparity in power between citizen and cop—it’s also worth stressing the way it can lessen certain kinds of disparities between citizens.

That said, and just going by memory, it seems like most of the stories I encounter in this vein still involve white, middle-class, college-educated young people. One possibility is that this shows I’m wrong, and that other aspects of privilege still play into their videos circulating while others languish. Another, though, is just that they’re both accustomed to this kind of routine use of technology and sharing of data, and that they take their social power for granted. That is, it occurs more naturally to them that the right response to this kind of misbehavior is to record and circulate it. If it’s mostly the latter, we’re on an interesting precipice, where the main remaining precondition for the leveling effect to kick in is just awareness that the other preconditions are in place.  If that’s right, the next few years should be interesting.

Technology: Debating the Pace of Progress

Last night, thanks to Craigslist and a Web-enabled cell phone, I unloaded two extra tickets to tonight’s World Cup qualifying game between the U.S. and Costa Rica in under an hour. (8:00, ESPN2 “USA! USA! USA!”)

Wanting to avoid the hassle of selling the tickets at RFK, I placed an ad on Craigslist offering them at cost, figuring I might find a taker and arrange to hand them off downtown today or at the stadium tonight. Checking email as I walked to the gym, I found an inquiry about the tickets and phoned the guy, who happened to live 100 feet from where I was walking. A few minutes later, he had the tickets and I had the cash.

This quaint story is a single data point in a trend line—the high-tech version of It’s Getting Better All the Time. Everyone living a connected life enjoys hundreds, or even thousands, of conveniences every day because of information technology. Through billions of transactions across the society, technology improves our lives in ways unimaginable two decades ago.

Before 1995, nobody ever traded spare soccer tickets in under an hour, on a Tuesday night, without even changing his evening routine. If soccer tickets are too trivial (you must not understand the game), the same dynamics deliver incremental, but massive improvements in material wealth, awareness, education, and social and political empowerment to everyone—even those who don’t live “online.”

Sometimes debates about technology regulation are cast in doom and gloom terms like the Malthusian arguments about material wealth. But the benefits we already enjoy thanks to technology are not going away, and they will continue to accrue. We are arguing about the pace of progress, not its existence.

This is no reason to let up in our quest to give technologists and investors the freedom to produce more innovations that enhance everyone’s well-being even more. But it does counsel us to be optimistic and to teach this optimism to our ideological opponents, many of whom seem to look ahead and see only calamity.

Public Information and Public Choice

MalamudOne of the high points of last week’s Gov 2.0 Summit was transparency champion Carl Malamud’s speech on the history of public access to government information – ending with a clarion call for  government documents, data, and deliberation to be made more freely available online. The argument is a clear slam-dunk on simple grounds of fairness and democratic accountability. If we’re going to be bound by the decisions made by regulatory agencies and courts, surely at a bare minimum we’re all entitled to know what those decisions are and how they were arrived at. But as many of the participants at the conference stressed, it’s not enough for the data to be available – it’s important that it be free, and in a machine readable form. Here’s one example of why, involving the PACER system for court records:

The fees for bulk legal data are a significant barrier to free enterprise, but an insurmountable barrier for the public interest. Scholars, nonprofit groups, journalists, students, and just plain citizens wishing to analyze the functioning of our courts are shut out. Organizations such as the ACLU and EFF and scholars at law schools have long complained that research across all court filings in the federal judiciary is impossible, because an eight cent per page charge applied to tens of millions of pages makes it prohibitive to identify systematic discrimination, privacy violations, or other structural deficiencies in our courts.

If you’re thinking in terms of individual cases – even those involving hundreds or thousands of pages of documents – eight cents per page might not sound like a very serious barrier. If you’re trying to do a meta-analysis that looks for patterns and trends across the body of cases as a whole, not only is the formal fee going to be prohibitive in the aggregate, but even free access won’t be much help unless the documents are in a format that can be easily read and processed by computers, given the much higher cost of human CPU cycles. That goes double if you want to be able to look for relationships across multiple different types of documents and data sets.

All familiar enough to transparency boosters. Is there a reason proponents of limited government ought to be especially concerned with this, beyond a general fondness for openness? Here’s one reason.  Public choice theorists often point to the problem of diffuse costs and concentrated benefits as a source of bad policy. In brief, a program that inefficiently transfers a million dollars from millions of taxpayers to a few beneficiaries will create a million dollar incentive for the beneficiaries to lobby on its behalf, while no individual taxpayer has much motivation to expend effort on recovering his tiny share of the benefit of axing the program. And political actors have similarly strong incentives to create identifiable constituencies who benefit from such programs and kick back those benefits in the form of either donations or public support. What Malamud and others point out is that one thing those concentrated beneficiaries end up doing is expending resources remaining fairly well informed about what government is doing – what regulations and expenditures are being contemplated – in order to be able to act for or against them in a timely fashion.

Now, as the costs of organizing dispersed people get lower thanks to new technologies, we’re seeing increasing opportunities to form ad hoc coalitions supporting and opposing policy changes with more dispersed costs and benefits – which is good, and works to erode the asymmetry that generates a lot of bad policy. But incumbent constituencies have the advantage of already being organized and able to invest resources in identifying policy changes that implicate their interests. If ten complex regulations are under consideration, and one creates a large benefit to an incumbent constituent while imposing smaller costs on a much larger group of people, it’s a great advantage if the incumbent is aware of the range of options in advance, and can push for their favored option, while the dispersed losers only become cognizant of it when the papers report on the passage of a specific rule and slowly begin teasing out its implications.

Put somewhat more briefly: Technology that lowers organizing costs can radically upset a truly pernicious public choice dynamic, but only if the information necessary to catalyze the formation of a blocking coalition is out there in a form that allows it to be sifted and analyzed by crowdsourced methods first. Transparency matters less when organizing costs are high, because the fight is ultimately going to be decided by a punch up between large, concentrated interest groups for whom the cost of hiring experts to learn about and analyze the implications of potential policy changes is relatively trivial. As transaction costs fall, and there’s potential for spontaneous, self-identifying coalitions to form, those information costs loom much larger. The timely availability – and aggregability – of information about the process of policy formation and its likely consequences then suddenly becomes a key determinant of the power of incumbent constituencies to control policy and extract rents.