Topic: Telecom, Internet & Information Policy

Economics Will Be Our Ruination

That there title is known as “clickbait.”

But there are challenges in using economics in public policy. Economics is a value-free tool that makes it easy to overlook embedded values.

In a recent story entitled “Pokémon Go is Everything that is Wrong with Late Capitalism,”—talk about clickbait—Vox reporter and Cato alum Timothy B. Lee recounts “some real downsides” to the new mobile gaming phenomenon. In brief, Internet businesses like Nintendo, Amazon, and such are causing a cash drain from most parts of the country to a small number of tech-industry centers. The result is a slow-down in the overall economy because entertainments like Pokémon Go don’t support complimentary businesses like the theaters, parking concessions, and restaurants, for example, that crop up around blockbuster movies.

Tech businesses are moving wealth from most places to San Francisco or Seattle, and the rest of the country concommitantly slumps.

But what is it to “slump”? Pokémon Go players aren’t slumping. They’re running all over the place, offending some of the more curmudgeonly among us. They’re making friends.

On average, market transactions make all parties better off. And Pokémon Go players certainly look like they’re having a good time. How is it that millions of market transactions are making us worse off?

The question is one of values. Orthodox economics prioritizes a bottom line measured chiefly in the flow of dollars or dollar-equivalents. To oversimplify, “good” is more dollars moving around. Fewer dollars on the move is “bad.” That’s often right, in my opinion, but sometimes it’s not. I don’t think people exist to keep certain measures of the economy moving upward—much less the numbers for their nation-states.

Happily, there’s some economic research being done out there that more neatly fits my values. Erik Hurst, a macroeconomist at the University of Chicago’s Booth School of Business, is investigating whether tech-based entertainments like Pokémon Go are contracting the labor supply—contra the widespread assumption that there’s a curious lack of demand.

It may be that young men, in particular, with less than a four-year college education, are forgoing work to play video games. Crucially, Hurst says, “happiness surveys actually indicate that they [are] quite content compared to their peers.” Let the economists fret. People are having a good time on the cheap.

Plenty of us in the world of advanced degrees and blog reading—we flâneurs among material that might contain the word “flâneur”—are inclined to believe that preferring video games to educational and career advancement is a road to a horrible life. That may be true, but it’s also a little self-focused. It may be that continuing advances in technologies of many kinds will make it smart in the future to have declined the rat race and enjoyed more leisure across the entire span of life—economic statistics be damned.

Title aside, I think Tim Lee’s piece made a pretty orthodox economic case. His prescriptions included both liberty-friendly and liberty-loathing ideas. And his real point was something about the Euro. Another response to his clickbait, naturally, is: ‘Pokemon Go’ Represents The Best Of Capitalism. My point here is to highlight the values embedded in economic orthodoxy, which I sometimes find dubious, as I prefer individual liberty.

Appeals Court Approves Net Neutrality Rules

The United States Court of Appeals for the District of Columbia upheld on Tuesday June 14, 2016 so called “net neutrality” rules issues by the Federal Communications Commission in February 2015.  Two previous attempts by the FCC to regulate the internet under different sections of the Telecommunications Act were overturned by the same court in 2010 and 2014 reflecting the traditional policy distinction between heavily regulated traditional telephone landline service and so-called information services involving computers that were not regulated.

The rule issued by the FCC in 2015 reclassified internet services as falling under the same legal regime as traditional telephone service.  Yesterday’s Appeal Court decision accepts that reclassification and the legal authority that goes with it.

Regulation has published four articles in the last two years year criticizing traditional public utility regulation of the internet.  Christopher Yoo from the University of Pennsylvania argues that traditional telephone regulation envisions a monopoly service and government oversight ostensibly intended to limit prices and expand service provision. But the expansion of wireless high-speed Internet has allowed multiple competitive providers to provide service to a large majority of American consumers while restraining capital costs.  “What Hath the FCC Wrought”, by former FCC chief economist Gerald Faulhaber, argues that service quality will suffer to the extent that internet access providers can’t charge more for streams that impose greater costs on the system. Kansas State professor Dennis Weisman argues that internet regulation will likely protect competitors from competition rather than serve consumer interests just like the old telephone regulatory scheme. And Larry Downes from the Georgetown Center for Business and Public Policy argues that the movement to re-regulate telecom is propelled by some firms’ quest for rents under new regulation, and by Federal Communications Commission attempt to regain political power and the benefits that come with it. 

Uber and Lyft Flee Austin, Less Safe Alternative Emerges

Something unsurprising but very interesting is happening in Austin, Texas. Last month, voters in Austin voted against Proposition 1, which would have repealed regulations mandating that wannabe rideshare drivers include fingerprints as part of their applications. Uber and Lyft left the city in the wake of the vote. Predictably, drivers and passengers have turned to social media to keep ridesharing going in a city without Uber and Lyft. While it’s nice to see drivers and passengers trying to adapt to Uber and Lyft leaving Austin, the approach does pose some privacy and safety concerns.

Austin residents looking for a ride need not resort to taxis. Rather, they can join the Facebook group “Arcade City Austin/Request a Ride.” Members of the group can request rides. These requests includes arrival and pickup locations as well as preferred times. Drivers in the group interested in driving the passenger can comment on the request with a phone number, fare, and “brochure” showing that Uber and Lyft had approved them to drive.

As Arcade City notes, their approach removes “corporations” (read: Uber) and other institutions that act as middlemen in popular ridesharing services. There is no Uber or Lyft connecting passengers with drivers, the two parties voluntarily submit information to one-another in order to make each other better off.

What Massachusetts Needs Is a Legislature More Like the U.S. Congress, Said No One Ever

The Massachusetts legislature is currently debating the state government’s budget for the new fiscal year which begins July 1st. This phenomenon—finalizing a spending plan before the beginning of the fiscal year—is something rarely seen in the U.S. Congress any more. Kudos, Bay State, for surpassing the low bar set in Washington, D.C.

But the General Court of Massachusetts is taking one page from the U.S. Congress’s tattered playbook. According to WRAL news, it may attach national ID compliance legislation to the budget bill.

That’s how Congress passed the ill-conceived REAL ID Act back in 2005. There were no hearings on the national ID issue or the bill that gave us one. Instead, the Republican House leadership attached the national ID law to a must-pass spending bill and rammed it past the Senate to President Bush, leaving states to grapple with implementation challenges and Department of Homeland Security belligerence ever since.

As in many states, the U.S. DHS has been telling Massachusetts legislators that they have to get on board with the national ID law, issuing licenses and ID cards according to federal standards, or see their residents refused at TSA’s airport checkpoints.

The threat of federal enforcement in 2016 was broadcast loud and clear last fall. Then in January DHS kicked the deadline a few more years down the road. It’s hard to keep track of the number of times DHS has set a REAL ID deadline, then let it slide when elected state officials have declined to obey the instructions of unelected DHS bureaucrats.

Minnesota has had a similar experience. Last winter, its legislature was spooked into creating a special “Legislative Working Group on REAL ID Compliance.” But Minnesota just ended its legislative season without passing REAL ID compliance legislation. There are a few people there who recognize the demerits of joining the national ID system, and Minnesota elected officials may have figured out that when DHS bureaucrats say “Jump!” they do not have to ask “How high?”

The General Court has done better than the U.S. Congress on REAL ID by holding hearings before acting. In 2007, then-Massachusetts Attorney General Martha Coakley testified before the Joint Committee on Veterans and Federal Affairs.

Once Again, REAL ID Is a National ID

A small pro-national-ID group called “Keep Identities Safe” is dancing a little jig because New Hampshire Governor Maggie Hassan (R) has signed legislation to move her state closer to compliance with our national ID law, the REAL ID Act.

In a blog post—apparently their first ever (so that link will be broken if they blog again)—they try to declare the end of the REAL ID Rebellion. I often say it was founded when Rep. Neal Kurk (R-Weare) inveighed against the national ID law in a 2006 speech on the floor of the New Hampshire House of Representatives.

But the heart of the matter is the denial that REAL ID is a national ID law. The New Hampshire legislation says, “Any records received pursuant to this paragraph shall not be used, further transferred, or otherwise made available to any other person or entity for the purpose of creating or enhancing a federal identification database.”

How can New Hampshire offer a REAL ID option and not participate in a national identification database?

It’s a good question, so I’ll cite again directly to the terms of the REAL ID law, which requires states to:

(12) Provide electronic access to all other States to information contained in the motor vehicle database of the State.

(13) Maintain a State motor vehicle database that contains, at a minimum –

(A) all data fields printed on drivers’ licenses and identification cards issued by the State; and
(B) motor vehicle drivers’ histories, including motor vehicle violations, suspensions, and points on licenses.

The U.S. Department of Homeland Security has temporarily written that requirement out of the law in an effort to get states committed to REAL ID. When enough states are in the tank, the agency will move the compliance goalposts and require states to begin sharing their drivers’ data via the nationwide database system that the law specifically requires. The American Association of Motor Vehicle Administrators is currently touting on its website that Iowa has signed up to its “State-to-State Verification Service.”

The New Hampshire legislation also suffers from poor draftsmanship. New Hampshire’s motor vehicle bureaucrats can sign their state up to AAMVA’s information-sharing system simply by allowing themselves to believe that they are not doing so “for the purpose of creating or enhancing a federal identification database.” Governor Hassan has left New Hampshirites unprotected from seeing their data shared nationally.

Notably, the REAL ID law does not exempt “non-federal” licenses from the information-sharing requirement. New Hampshirites who choose that option will still have their information shared nationally.

Has the REAL ID Rebellion ended? Perhaps. DMV bureaucrats and their pro-national-ID allies at “Keep Identities Safe” have been working for years to wear down and evade state legislatures’ resistance to the national ID law. They have had some success in growing the power of the federal government in yet another direction.

Should this be a source of pride? A national ID is a poor security tool that wastes taxpayer dollars, upsets the constitutionally prescribed state-federal balance of power, and compromises law-abiding Americans’ privacy and liberties. The move toward national ID compliance in New Hampshire is probably not something to dance a jig about.

The Boundaries of Westphalia

The Peace of Westphalia in the mid-17th Century established the idea of state sovereignty. Under Westphalian principles, each state has exclusive authority over its territory and domestic affairs.  That’s been pretty good for kings, ruling elites, and the lucky few who live in top-class democracies or benevolent dictatorships.

But Westphalia is on the way out. Individual sovereignty is coming in.

Territorial state sovereignty is just one way to organize human affairs. It was probably an improvement on constant tribal war, but it’s not the last step in political evolution. It’s exciting to see how the boundaries of Westphalia can be surpassed in favor of individual empowerment. People are increasingly able to conduct their intellectual affairs—speaking, transacting, and so on—without reference to nation-states.

I’m reminded of this far-sighted (or far-out) notion by a relatively practical observation from identity expert and former Utah CIO Phil Windley. In “Self-Sovereign Identity and Legal Identity” Phil says:

We’ve finally gotten to a place where self-sovereign identities are technically possible. This is a huge milestone. The next hurdle is getting organizations, including governments to allow the use of self-sovereign identities as the basis for their administrative identities.

The National ID Social Season Is Underway

The American Association of Motor Vehicle Administrators is the umbrella group for DMV bureaucrats across the nation. It’s a non-profit group, but it does more than earnestly educate government officials and the public about the nuances of driver licensing. Since the 1930s, it has advocated for increased government spending on licensing bureaucracy—and it has advocated against driver’s rights. (It’s all discussed in my book Identity Crisis.) That doesn’t mean AAMVA can’t have fun. Indeed, AAMVA’s social season gets underway next week.

You see, AAMVA is a growing business. A decade ago, when the Capitol Hill staffer with lead responsibility for the REAL ID Act came through AAMVA’s revolving door, I noted the dollar-per-driver fee it collects in the Commercial Driver Licensing system. That $13 million in revenue has surely grown since then.

AAMVA’s revenues will grow far more when it runs the back-end of the REAL ID system, potentially pulling in from three-and-a-quarter cents to five cents per driver in the United States. At 210 million licensed drivers, AAMVA could make upwards of ten million dollars per year.

To help that business flow, every year AAMVA holds not one, but five lavish conferences, each of which has its own awards ceremonies aimed at saluting DMV officials and workers. There, AAMVA leadership, vendors, and officials from government agencies both state and federal gather to toast their successes in advancing their cause, including progress in implementating our national ID law, the REAL ID Act.