THE LAST MILE

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This one has been rattling around my brain for a while, and the Edward Snowden incident managed to shake it loose. Unless you live under a rock, you probably have heard that an employee of Booz Allen Hamilton absconded to Hong Kong where he disclosed quite a bit about the government’s surveillance capabilities. It’s big news. It’s important news. I certainly don’t mean for this to be a political discussion (although those of you who know me can probably figure out where I stand on the issue)--no, what I want to talk about today is the sudden propensity of earthlings to want to completely eliminate risk.

Starting from the beginning, we have to go back to 9/11, which was a really bad day (I was there, as were a lot of readers), and we passed a lot of laws to prevent something like that from ever happening again. A lot of the laws probably seemed like a good idea at the time, to a lot of people. Some of those people have “evolved” over the years, and still others are gloating because they opposed the legislation to begin with. This is all politics, and I am not interested in politics (though I will point out that the hypocrisy meters are being pegged by both political parties).

What I really want to talk about is the idea that somehow we can prevent all terrorist attacks, or the idea that we can prevent all crime, or the idea that we can prevent all bad outcomes altogether. But hey, wouldn’t you want to live in a world without terrorist attacks? Wouldn’t you want to live in a world without crime? Wouldn’t that be an ideal place to be?

Actually, I think that a world without bad outcomes would be a horrifying place to be. It is an axiom that you can prevent 80-90% of bad outcomes for little cost, but preventing the last ten or twenty percent become prohibitively expensive. And I’m not just talking in terms of dollars and cents, I’m talking about the human cost of preventing bad outcomes.

There actually is such a thing as an “acceptable” amount of crime. What would it take to eliminate all crime? On the surface, it would take a lot more police, which might be unpleasant (see Tunisia). A more contemporary example would be that to eliminate all crime would take a lot of surveillance. I don’t think that most people would choose a world without crime if they understood what the trade-offs were going to be. To completely eliminate crime would be staggeringly expensive, not just in terms of money (although that, too).

There are lots of examples of this in the physical world. You have probably heard of the term “the last mile,” where it gets very expensive to connect the most rural house to the grid. I had this discussion with one of my students about privatizing the post office; she was complaining that FedEx and UPS would not deliver to the exceedingly rural community in a postal service-free world. I told her that I was okay with that. I’d like to see an analysis of how much of the post office’s budget goes into serving areas that are so rural as to be prohibitively expensive to deliver to.

The private sector understands this, and allocates costs accordingly. The airlines have been ratiocinating this for years, cutting routes to spoke airports, much to the chagrin of people who want to fly direct from places like Pittsburgh straight to places like Milwaukee. But the government does not understand this; the government does not do cost-benefit analysis well. To government, a 100% solution is the only acceptable solution, and that is the standard to which it holds itself.

Commercial banks understand this better than anyone. It is counterproductive, as a bank, to have zero loan losses. If, as a bank, you have no loans that go bad, it means that you are not making enough loans. If a bank has zero credit losses, it means that they are forgoing potentially very profitable lending just for the sake of having a clean balance sheet. It is impossible to take no risk. You have to take some risk.

Traders like us know that the 100% number does not exist and is a unicorn. You can get there within six sigmas, but you cannot have 100% success with anything. The problem is that, at least as it pertains to the surveillance state, you end up in a negative feedback loop. A lack of attacks is considered to be evidence of effective surveillance, but even one attack is used as justification for more surveillance. This is of course without even remotely dipping into the political thought behind surveillance, the Ben Franklin quote about liberty and security and all that; we are just talking about math here.

Eric Schmidt said something really profound recently, and I am paraphrasing: “Technology has made nobody’s life worse.” I’ve been thinking about that statement for weeks now, and I’m still not sure if he’s wrong or right, but one thing is for sure, it is that technology has made it easier to make the 100% solution seem attainable. But the joke is that it’s still not attainable, it just seems attainable, which encourages hubris and still more surveillance.

Crime is terrible and I sure would not like crime to be committed against me, but I am comfortable in a world with some crime. Would I feel differently if a personal, violent crime were committed against me? Probably. Would I go down to City Hall and campaign for more law enforcement? Maybe. If I did, I hope people wouldn’t listen to me. You see, human beings are smart and powerful but they are not omnipotent; they will never completely stop bad things from happening. Mayor Bloomberg wants to spend $20 billion (a lot of money, no matter how you slice it) to prevent floods, the year after the 100-year flood. It is possible that the cure is worse than the disease.

As human beings, we are exposed to all kinds of nasty things. In the old days, we used to get whacked by something, fall down, get up, rub some dirt on it, and keep going. On 9/11, a switch flipped in us, collectively. We decided that we could no longer accept adverse outcomes. And that includes adverse financial outcomes, which explains quantitative easing and just about all of central bank behavior over the last twelve years. If you could prevent recessions, would you? That is what we are trying to do, to make the business cycle a thing of the past. Just like we shouldn’t be playing God with the economy, we shouldn’t be playing God with people’s lives. Why? I’ve waited until this long into the paper to make the point, but I’ll make it now: once the system is in place, it is impossible to dislodge, without going through an unbelievable amount of pain. We won’t ever stop “emergency” monetary policy without going through an unbelievable amount of pain. We won’t dismantle our surveillance systems without going through an unbelievable amount of pain. The systems are robust, and the more you attack them, the stronger they get. After a while you start to fear the central bank more than you fear the recession, and you start to fear the law enforcement agent more than you do the crime.

 

Beautiful, I thought of this earlier too. More people need to understand the points, but as you say, whenever an act of crime or something bad happens to that individual (like a huge loss in financial loss) they will go out of their way to get security

 

Great post.

There are lots of people out there who agree with you. I think the longer we wait the worse it will get, and the more pain (as you said) we will have to experience to get out of it. Perhaps a good first step would be joining in on some of thse protests that a movement called restore the fourth is putting together on july 4th (www.restorethefourth.net). It likely won't fix the problem, but maybe will get more people to "shake loose what's been rattling in their brain" as well and take action through well written prose as you have.

Thanks for your thoughts.

 

It's the same thing with the drug war--in 1970 the federal government looked at the general population and found that 1% were habitual users addicted to drugs. 43 years, billions of dollars, and thousands of lives lost later.. 1% of the population is still addicted to drugs. It really comes down to the simple concept of marginal cost, but I like how you elucidated on it with the examples you used.

 
Therightcoast:

I feel like your point wasn't really backed by the paragraphs before them, which basically made it a FOX News style of journalism.

I lol'd at this nevertheless, i think the penumbra behind what he was saying was pretty clear from the very start, so i'd argue that it was kind of building up to the larger theme of "less regulation" from the very beginning

anyway, great post. fight the power

I'm not concerned with the very poor -Mitt Romney
 
Best Response

I've thought about these types of issues since the Snowden thing, and I think my feelings are basically as follows:

The 'worst-case' risks for society are higher than they've ever been, and they get higher every year. It used to be that when one person had to hurt another person they had to use their fists or simple weapons. Then there were guns. Then war machines. Then some countries got the nuclear bomb. Even worse, in the future it will be possible to produce super-viruses, and (even-worse) it will be cheap to. So rather than only countries having the ability to create massive catastrophe's individuals could have that ability.

I agree that some amount of crime in our lives is acceptable, and that we even are able to pick-up and carry-on after events like 9/11 or Pearl Harbor. However, I think we need to drive the chance of a catastrophe in any given year, way below 1 in 1000 (and yes I do believe that currently in any given year, the chance that a nuclear bomb or an equivalent weapon goes off somewhere in the world is greater than 1 in 1000). And like I say, it will only be worse in a couple decades when individuals have the ability to play with genetic engineering for a few thousand dollars tops.

So the questions is, what are the acceptable ways to combat these risks. I thought about it, and I actually don't think there's anything that fundamentally important to us about privacy. We all (knowingly) traded away a great amount of privacy when we signed up for Facebook. And I think we got more value from that trade than we lost. I know if I could 'get back' all the data out there on me, if only I quit Facebook for life, I'd stay on Facebook. I like being connected to my friends and acquaintances. I think over time, society will grow accustomed to less and less privacy and we'll deal with it.

Still, I think there is a very big risk with government surveillance, and that is that it can centralize power. I'm not that concerned with the fact that the NSA's being spying on us. What I'm concerned with is the fact that none of us knew about it until Snowden made it public - frankly at personal risk. Who voted to allow this practice? It's true that the NSA is still accountable to the people we elect, like the president, but how much do we as voters really know about our politician's stances on this issue. And if the government can do this without the approval of the people, what else can they do? Is it possible for an organization like the NSA to overrun the will of the government? Is it possible for the executive branch of government to overrun the other two branches? I think these are the big threats to democracy and the reason that while I think we should have significant surveillance, that surveillance must ultimately have transparecy/accountability to the people.

(and of course surveillance transparency has to be done without making security worse or damaging relationships with other nations, which is the challenge)

 

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