Convergences

Facebook without Faces? Musings on Privacy and Change

That which is not explicitly permitted, is forbidden. That which is not explicitly forbidden, is permitted. Two competing models of thinking about policy and law. I find these interesting to bear in mind in considering the current policy debate about privacy online, which I rejoined on June 18 at the American Constitution Society’s 2011 Convention (they have video of the panel posted here).

The privacy debate has been going on now in full throttle for over a decade. In 1998 I wrote a fun paper on privacy, Privacy As Censorship:  A Skeptical View of Proposals to Regulate Privacy in the Private Sector. My post-ideological views of regulation today are somewhat different. Today, perhaps both the private sector and consumers would benefit somewhat from more clarity as to their rights and duties in this space. However, I agree with my past self in thinking that there is considerable tension between innovation and free speech on the one hand, and privacy on the other.

The current flap about Facebook’s rollout of technology that helps users tag their photos by recognizing faces is a case in point. Facial recognition technology seems kind of scary, as seen on tv. But much of this reaction is irrational. Every human being is in significant part a facial recognition device—being social animals, doing this sort of thing is important to us. Our own brains are designed to be quite good at it. Some details on the way it works in humans are covered at LiveScience and Science Daily.

Now, the rollout of the technological equivalent on a large scale has a different potential impact than facial recognition by biological humans, including a potential for mischief—but also potential to do good. Alas, the current coverage of the issue is such that speculation about potential harms is rampant—and the potential benefits almost entirely neglected. Alarmism sells better than good news. But this makes a poor basis for policy that affects innovation.

If one is bound to speculate about alternative futures, commitment to fairness and balance means devoting at least as much energy to possible positive outcomes (ranging from the trivial, such as time saved in tagging photos, to the nontrivial, such as use in identifying bad guys or abducted kids) as possible negative ones. Or hold off on speculation until real harms have been identified—along with the actual perpetrators. (And note that some of the pressure to push for more restrictive privacy rules for online services stems from the fact that enforcement against actual perpetrators of things like online fraud or stalking tends to need improvement).

Those who seem about to let a speculative parade of horribles drive innovation policy also rarely do so consistently. One panelist argued that Facebook should be held morally responsible for downstream abuses of their technology—even potential abuses. But if we are painting with the broad brush of moral culpability, well, what about others who work to advance facial recognition technology? There are all sorts of researchers who could be pilloried, unless one is bound on insisting, a la Plato, that researchers as “philosopher-kings” and should be exempt from the rules that govern the rest of us. One researcher mentioned by the panel ran an experiment showing that facial identification technology could be used to photographs to names and then to social security numbers (an example of similar research is here—not the same study discussed by the panel). But if someone might use Facebook’s technology to make mischief, well, someone might use such an academic paper as a nice blueprint for how to conduct identity theft. 1) If one is concerned with moral responsibility (rather than legal liability narrowly conceived) why a social networking service would be blamed for downstream abusers but a researcher not be makes little sense. Facebook’s rollout is commercial, certainly—but professors do not work for free, and many end up with lucrative consulting contracts related to their research.  2) Some might note that Facebook goes a step beyond the researchers in actually supplying the technology, often a distinction useful in considering legal liability, but in the vast array of other contexts in which online services do nothing more than supply platforms or tools capable of mischief—such as illegally distributing copyrighted content, for example—very few think that online services automatically should be liable for that, and none would impose liability when no actual harms have been reported.  If one is concerned with innovation policy, it makes little sense to support the development of new ideas only so long as they are not commercially developed. If one’s goal is gaining knowledge of the larger consequences of facial recognition technology, well, as much or more is likely to be learned from Facebook’s rollout than from academic research.

One might also think about the controversy as an illustration of the conflict between free speech and broad privacy rules. An advertiser-supported magazine article detailing exactly how to write facial recognition software or use it on Facebook images would be protected by the first amendment; several courts have ruled that software itself is a form of free speech. Facebook has in essence provided user with an editing and publishing tool, another angle on the free speech question. How exactly a court would view all this (commercial speech doctrine and all) is well beyond the scope of this blog—but that there is a fundamental conflict seems undeniable.

One set of questions legitimately raised by the rollout of new services by online sites involve contract law. How should we view changes to a site’s practices and policies that are introduced after one has signed up? Is it enough that one may cancel one’s account and that the EULA reserves the site’s right to make changes? Even if not, certainly in the online environment consumers are unlikely to benefit from a rule that a site’s first offerings are set in stone.

All for now.
-SS

Join Solveig Singleton at IPI for an IP panel 4/26

Next week, on April 26th, IPI is scheduled to release my paper entitled, "Traditional Knowledge in the Industrialized World," at their conference on "Intellectual Property: Protecting the Spark of Innovation." The paper is a series of case studies of products derived from North American traditional knowledge, as well as analysis and observations based on those case studies. It is intended to help shed light on some of the controversies that have arisen in the context of the adoption of intellectual property rules and the use of traditional knowledge in the developing world.  I will also be joining a morning panel on "Traditional Knowledge: Sharing and Commercializing the Benefits of Innovation" along with Dr. Mary Palmer, MD—Chief Executive Officer, ToxEM.

If you are interested in attending, you will find RSVP information on IPI's site (link above).

 

 

Traditional Knowledge: Sharing and Commercializing the Benefits of Innovation
Dr. Mary Palmer, MD—Chief Executive Officer, ToxEM
Solveig Singleton—IPI Adjunct FellowTraditional Knowledge: Sharing and Commercializing the Benefits of Innovation
Dr. Mary Palmer, MD—Chief Executive Officer, ToxEM
Solveig Singleton—IPI Adjunct Fellow 

Review of Paul Seabright's The Company of Strangers

Paul Seabright's book The Company of Strangers: A Natural History of Economic Life is one of the most interesting and thoughtful works I have read in decades, and I highly recommend it to anyone interested in public policy and economics, especially those working in international development, environmental studies, finance, or international relations.

Seabright begins by asking some fundamental questions about human economic life. One of the most puzzling of these is, given that it is almost unheard of for animals, including our own prehistoric ancestors, to cooperate with anyone outside of their own family, how are modern societies based on trust, in which one routinely deals with total strangers and non-relatives, possible? He goes on to explore the history of prehistoric and modern developments which make cooperation with non-relatives possible. In the course of this exploration he explores money, markets, property, military defense, agriculture, cities, language, writing, the banking system, and other vital institutions.

On the way, he develops the theme of human "tunnel vision," the tendency of individuals to act according to their own individual preferences, without regard for the consequences of this for the group as a whole. Sometimes these consequences are good, including, with the spread of trade and markets, rising standards of living even for the poor--and sometimes bad, like pollution. (Other economists, like James Buchanan and Viktor Vanberg, have developed similar themes in their paper on "action interest" versus "constitution interest," in which the individual's narrow self-interest is contrasted with the interest of the group as a whole. Adam Smith's "invisible hand," John Locke's concept of the "common good," and the concept of the "general welfare" referenced in the U.S. Constitution are working the same territory). 

As I proceeded through the chapters in this book, I became very curious to see where the author was going with all this. In wrapping up, he presents several main points. One of these is that globalization is the natural outcome of thousands of years of the evolution of the human mind and human institutions. The second is that although globalization has many benefits, it will also give rise to serious problems in some quarters--and human evolution does not naturally equip us to resolve these problems easily. Some new practices and institutions might be needed (he does not try to specify what these might look like). He also warns about the dangers of the current trends in the balance of power. With the United States so easily able to dominate the rest of the world in conventional military might, trust will be very hard to build and maintain. Thus in a nutshell, he cautiously defends globalization, and warns against overuse of military power. This is all very much worth thinking about and worthwhile.

Reading the book today, however, some years after it was written, I must say that the ideas he develops in the first part of the book about trust and human institutions, now lend themselves to speculation about political crises other than concern with globalization. One example is the trouble with balancing national budgets which has come to the fore in the past year or so. There is good bit of tunnel vision underlying this; everyone seeks to take from the federal coffers, as if they were bottomless--but the money must come from somewhere, and such a system is not sustainable in the long run. And, perhaps related to this, as if everyone were half expecting to be called on to pay this very large piper, there is a general crisis of trust.

One of the subjects that Seabright explores is the question and how problems that arise--crises in trust, pollution, unemployment--are resolved. Markets, though fragile, can be self-correcting at the micro level, though this can be painful. Sometimes, though, new institutions and rules evolve, and sometimes can be designed through an intellectual and political process. But the design process itself is a human one, beset with problems of tunnel vision.

I hope that next, therefore, Seabright will tackle the question of whether the systems and forces he identifies have natural limits--whether there are some problems that will systematically fail of being corrected at any level. That is, it it would be comforting to think of the evolutionary process he describes (in which problems develop, followed by solutions at one level or another, followed by the next set of problems and solutions arising in turn) goes on forever, with the problems humanity must confront being of a progressively higher order. But it seems more likely, since the process of improvement is an accidental one, resulting from the fortunate confluence of a lot of factors, that at some point, at some level of complexity, at some scale, or at some scope, that human institutions like democracy and markets will reach the limits of their effectiveness, and we will be stuck with systemic problems that require a whole new order of solution to resolve.

Just how hard it is for human beings to escape their own situation of individual patterns and preferences, and the institutions that had adapted to cope with these patterns, I explored for myself in the weeks following my reading of this book, as a sort of thought experiment. As I went about my business during the day, I tried to be conscious of the larger consequences of my actions for others, particularly when my actions imposed costs on others without my directly being aware of them. The effect of this kind of consciousness can be, I found, at times quite paralyzing. Throwing away garbage, in particular, becomes a depressing act, but still unavoidable, as it certainly cannot stay in the house. Engagement in markets (aka shopping!)  was made more enjoyable; it is amusing to be more aware of the highly evolved levels of trust required for this seemingly simple act, and how it would go against the grain for other primates. 

On the whole, an excellent book, though for every insight it offers one finds a new cause of frustration. Understanding the origins of problems is only one small step towards fixing them. It sometimes seems as if humanity is more likely to happen upon effective rules and institutions mainly be accident, in an endless and brutal process of trial and error, than by deliberate design.

Biotech, IP, & Regime Uncertainty

The din over health care legislation obscures the subsidiary fights occurring at odd corners of the battlefield. One of these concerns data exclusivity for biotch research results, an important topic of passionate interest to the industries involved that gets no attention whatsoever from anyone else. (For a description of the issue, go here.)

The industry wants an exclusivity period of 12 years (well, it wants more, but will settle for 12), and it appears to have locked this into the existing legislation in both the House and Senate, over the opposition of House health baron Henry Waxman and the Administration, who think 7 years is enough. 

But nothing is over until its over, and Waxman and the Administration, and the generic manufacturers, have not quit trying to squeeze the period down, according to the AP. It could just be bargaining, notes the article. In the sink of corruption called DC, there is no particular reason to think the advocates of a shorter period believe actually this is pro bono publico:

The drug industry . . . is already under pressure to boost the $80 billion, 10-year contribution it agreed to make to the overhaul last year.

The effort to reduce biotech drug protections could be a way for the administration to pressure the industry to increase its contributions, or to make it easier for Obama to show the $80 billion deal with drugmakers will benefit consumers.

I favor more IP protection rather than less, for reasons explained in Bleeding Biotech.  However, whatever the outcome, it would be nice to have the decision made as a result of an assessment of the needs of the innovation system rather than on the basis of an auction of political support.

Fierce Biotech is afraid that all the work (if one can apply this name to massively expensive influence peddling) already done may be for nought. If health care does not pass, then this issue, like many other sub-problems, will be back to square one, and the incentives for innovation will continue to suffer from regime uncertainty. 

This is unfortunate, because the only realistic road to increasing the efficiency of the system goes through fostering innovation, not discouraging it.

FTC & Intel: Disco Isn't Dead

The Federal Trade Commission has filed a complaint against Intel charging it with maintaining a monopoly in computer Central Processing Units (CPUs) and trying to obtain a monopoly in Graphics Processing Units (GPUs).

A couple of points are immediately interesting.

One is that Intel is charged with bullying some of the world's most sophisticated tech companies into acting against their own long-term interest, a proposition that seems unlikely.

Second - the Commission relies primarily on Section 5 of the FTC Act, which gives it power over vague "unfair" acts or practices and "unfair" methods of competition, divorced from the doctrinal limits of the Sherman and Clayton Acts. Antitrust law as a whole is a mess; "unfairness" is a mess on stilts. 

In the 1970s, the Commission was burned when it tried to push too aggressively the authority over unfairness given it by the S&H case in 1972. The agency pulled back to more sensible limits after 1980, but now -- Disco is not dead!  Tom Rosch, who is now a Commissioner, was head of the Bureau of Consumer Protection during the 1970s, and was perhaps the most prominent proponent of the  attaque à outrance, so he may be motivated by the spirit of revanchism.  

Several decades ago, when I was an Assistant Director in the FTC, and during the sobering up process, I was part of a group that considered how to put some meaning and limits into the agency's unfairness powers. I do not recall that we got very far, though there were some papers and reports, copies of which reside in boxes in my basement.  Reading the FTC documents on the Intel matter is true deja vu.

Here is the standard by which Intel will be judged, per the Supreme Court:

Thus, legislative and judicial authorities alike convince us that the Federal Trade Commission does not arrogate excessive power to itself if, in measuring a practice against the elusive, but congressionally mandated standard of fairness, it, like a court of equity, considers public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws.

Biotech & Data

FierceBiotech says that the Health Care Reform draft includes a 12-year data exclusivity provision for biosimilars, thus following the Senate, and dealing a loss to Henry Waxman.

However, passage of Health Care Reform in the near future seems improbable, so the data exclusivity issue will still be open. The House Health Committee is solidly in favor of the longer period, though.

Also, FB's John Carroll notes:

At some point, rising costs may force lawmakers to actually get tough with drugmakers, and that would have an effect on biotech--the de facto R&D arm of the global drug industry. So far along, the industry has managed to dodge a bullet. But something tells me that the war over drug prices won't be ended by this reform bill.

Bleeding Biotech

At The American, a new article Bleeding Biotech, arguing for better protection of intellectual property in data. I frame the question as

In the end, we will never be able to arrive at agreement on the perfect period for data protection for biological research. There is still no agreement on the proper period for patent protection, and that system has been around for hundreds of years. A 20-year period was picked for patents, and it seems to work well enough, so the failure to achieve perfection is not of great concern.

With regard to biotechnology and data exclusivity, we are and will remain similarly ignorant. So the question is actually quite simple: what are the costs of error in each direction?

The answer is that the costs of too much protection are low, or non-existent; the costs of too little are very high. Which should make the decision easy.

In re Bilski: Business methods, software patents, and beyond.

The deadline for filing amicus briefs in support of the Federal Circuit's attempt to trim back business method patents in Bilski passed on October 2. Many briefs have been filed, and much fuss has been made in the tech community, for business method patents are linked to the problem of software patents. Many software patents, such as Amazon's 1-click order patent, are for business methods.

If the courts ultimately trim back business method patents, will this take some of the software-patent-related pressure off both tech and the patent system? Not as much as many in the tech community or the patent community would hope, for reasons I examine below. Patent reform is now being driven by business constituencies, and these constituencies are not good at all at working on big picture institutional problems. There, in short, is a not-seeing-forest-for trees problem.

State of Biotech

To the extent that the health care debate thinks about biotech, the focus is on how quickly generics can be introduced so as to cut immediate costs.

Back in the real world, investors seem dubious about the industry. Xconomy is running a series and concluded:  "Luke did a massive analysis of the financial health of all the public biotech companies we follow the Boston area and the news… Well, it wasn’t good." The situation:

Even though jobs have been cut, drug candidates have been shelved, and some last-ditch partnerships have been struck, all that frenzied activity didn’t really add up to a strengthened financial future for a majority of the region’s money-losing companies. The cash crunch has prompted a couple of Massachusetts companies to fold this year . . .  a couple more to sell out for a pittance . . .  and one company that actually improved its financial position to move to Wisconsin . . . .

Rather than worrying about sharing the wealth, the political system should be worrying more about how to produce the wealth in the first place. The Xconomy report is not exactly a harbinger of Spring.

Health Care & Innovation

Anything written by Reason science correspondence Ronald Bailey is worth reading, and his "Does High-Tech Medicine Mean Higher Health Care Costs?" is no exception.

He analyzes a new study by economist Frank Lichtenberg published by the NBER and finds that the answer is "no." 

FIrst of all:  "[L]ife expectancy increased faster in states that more rapidly adopted advanced diagnostic imaging techniques, newer drugs, and attracted an increasing proportion of doctors from top medical schools." But: there was no correlation between increases in spending on high-tech and new drugs and increases in per capital health care expenditures.

Lichtenberg's tentative explanation is that "while newer diagnostic procedures and drugs are more expensive than their older counterparts, they may reduce the need for costly additional medical treatment."

Bailey's translation:  "In other words, high-tech medicine may initially cost more, but it reduces spending in the long run, while increasing the life expectancies of patients."

So contrary to the fashionable CW, innovation in pharmaceuticals and devices is a remedy for the cost inflation, not a cause.

P.S. Shrinkwrapped also likes Bailey's article, and adds:

[K]eep in mind that every government run healthcare system treats innovations as expenses to be minimized rather than as opportunities to enhance life.  This is inevitable and one of my major reasons for opposing the current plans for fundamental reform in how we finance our healthcare.

I concur - see Saving the Goose: Intellectual Property and Follow-On Biologics (FOB) (pp.13-14).