Thursday updates

Blogging has been light; I spent the last two days catching up with folks in Wellington and attending the National Drug Policy Summit run by the New Zealand Drug Foundation, about which I'll blog properly later. A few bits of interest in the meantime:

• Westpac notes that LVR limits can have short term effects on house price inflation, but only short-term effects.
  • Duh
  • There are sensible justifications for this kind of policy based on prudential regulation and avoiding any situations where banks take on too risky a loan portfolio and downside risk winds up being borne by the government. Justifications based on curbing house price increases don't make any sense to me, whether or not it's the RBNZ comms team or the Governor making them. In that sense, it's no damning of the policy that it only has transitory effects on house prices. But it still reinforces the NZ econ blogosphere's "it's just dumb trying to justify LVR on the basis of house prices being too high." consensus position.


• Scott Sumner praises Finance Minister Bill English. Agreed. Some credit could go to Minister English's truly excellent economics adviser as well. 


• The New Zealand Police have decided that despite GCSB's having acted illegally in the DotCom surveillance, they will not press charges because there was no intent to act illegally. But:

  Intent to break the law is not an element of the charge of illegally intercepting private communications.
  — Graeme Edgeler (@GraemeEdgeler) August 29, 2013

  The government, through the new GCSB and TICS legislation, is giving us an expansion of GCSB's scope with increased nominal oversight, but no expectation that GCSB would ever be prosecuted for doing anything that was in fact illegal. Lovely. Big slow clap here for everyone involved. Meanwhile, here's Ars Technica on some of this mess.


• The insurers here argue for something sensible, and something for which I've argued before: have EQC effectively cover a large excess in case of natural disasters, and otherwise stay out of the darned way.

So endeth the closing of the browser tabs, so closeth the day.

Update: note that Edgeler also argues that lack of intent to break the law could be a decent reason not to go ahead with prosecution in this kind of case and reminds us that criminal penalties are not the only form of accountability. That's all true; I hope that everyone who has illegally been spied upon knows that it has happened so that they can launch civil suits.

Wednesday roundup

A few worthy items in the tabs:

• Matt Nolan over at TVHE rightly points out the rather large problems with the Reserve Bank of New Zealand's justification for its restriction on highly leveraged home loans - the Loan-to-Value Ratio regulation. It's fine to argue that the LVR regulations could reduce systemic risk: that's the RBNZ's job. But it isn't the RBNZ's job to protect potential homebuyers from price fluctuations; it's awfully strange for RBNZ to suggest that they could be providing such a benefit to first-home buyers by making it too hard for them to buy houses. I could as plausibly claim that I'm making everyone better off by banning them from listening to Coldplay because they're not likely to be "cool" for much longer.*

• Fairfax polling shows that Kiwis are pretty happy with the extension of powers to be granted to our spy agency this afternoon. National's likelihood of winning the next election hasn't dropped with any of the fooferah over the last couple of months; if anything, it's slightly up. ACT's chances of winning an electorate seat are down a bit; John Banks's likelihood of being ACT leader on nomination day is down a bit; ACT's predicted vote share is unchanged. ACT might be reading the tea leaves correctly on this one: few GCSB opponents would flip to ACT were ACT to switch its vote. Without a simultaneous change in leadership, it probably wouldn't be enough to bring enough civil libertarians over to get over the 5% threshold. Their main risk is that their support of the GCSB legislation leads to the creation of a liberal party. But, even then, the downside risk for ACT is small: Key is more likely to proffer an electorate seat to ACT than to a liberal party and there's little chance a liberal party would take 5% in 2014 given organisation costs and time.

• Now an older one, but my tabs stay open for a while. The Australian Christian Democrats have highlighted the inequality in incomes between same-sex and opposite-sex couples and promise to stop the oppression of "Mum and Dad taxpayers". Fitzroyalty points out the shoddiness of their numbers (language NSFW), but it's not implausible that same-sex couples would earn more on average than opposite-sex couples: they'd be likely to have both partners working if homosexual couples are less likely to have a child. I'm not sure quite how the Christian Democrats would equalise household incomes on this margin ... maybe banning gay couples from having children, giving more tax benefits to couples with children, then waving their hands about childless heterosexual couples? Another for the "which inequalities matter?" file.

* I don't know when Coldplay peaked. I make it a rule not to listen to any bands whose name are just two random words stuck together. Cold + play, Nickle + back, Silver + chair. Maybe I'm missing some good stuff, but it's a heuristic that's served me well on average. My Spotify starred items are here. No Coldplay, Nickleback, or Silverchair.

Ratings warning

I've done a fair bit of NZ cheerleading. Sadly, I have to warn of a potential downgrade of New Zealand immigration from a "buy" to a "hold".

Jason Sorens has moved, at reasonable personal cost, to New Hampshire, in pursuit of the free life and in support of the Free State project.

I also understand why libertarians who are promoting the cause in their own careers would see a career change and a move to New Hampshire as a step back. But most of what I have done as an academic does not promote liberty directly, and I have come to question seriously the “trickle-down” model of social change widely adopted by libertarian organizations. The idea, following Hayek’s essay, “Socialism and the Intellectuals,” is that creating new academic research showing the benefits of liberty will filter down through journalists and other “secondhand dealers in ideas” to the general public, eventually resulting in a freer society. But academic economics has long leaned free-market, and journalists don’t seem to understand the key insights of that discipline. If anything, the general public’s views are worsening in key respects. People under 30 are more likely to favor socialism than capitalism. The enterprise of educating the public via secondhand dealers in ideas seems doomed on a national scale, but it could work on a small scale.

Eric Crampton says libertarians should move to New Zealand. If only we were all lucky enough to have employers willing to sponsor our emigration there! They won’t just let you move without a job, after all. In my view, New Zealand and Switzerland are the only places in the world with a long-term better prospect for liberty than the United States, and I understand why some libertarians might move to those places. But they aren’t realistic options for most of us.

I fully agree with Eric that libertarians need to put their money (and bodies) where their mouths are. If they view liberty as important, either as a means to the ends that one enjoys personally or as a moral imperative for society, then it should be valuable enough to move for. Is enjoying significantly greater liberty worth a smaller car, a smaller house, a less fancy phone, slightly slower Internet, no cable TV, Chinese rather than Swedish or American furniture, making dinners at home rather than going out, or all of the above? If you think that gross injustice exists, don’t you have a duty to do something that plausibly could stop it? American society falls far short in protecting the rights and dignity of all its members. We have a real opportunity to change that situation in one place, and we are changing it.

Alas, things here have gone downhill a bit since 2011. I haven't started appending #Emigrate hashtags to NZ news tweets because it sure isn't obvious where one could go. But the reasons for coming here aren't as strong as they were.

On lots of margins, New Zealand remains excellent. Most of what I'd written on the merits of moving to New Zealand continues to apply. On a fair few margins, we remain the Outside of the Asylum. Other great stuff: New Zealand has moved from a prohibition regime for new party drugs towards a regulatory regime allowing the sale to adults of products that pass a safety check. Alas, we've not followed Washington State and Colorado.

Factors affecting today's ratings warning? Most substantially, the GCSB / TICS legislation. At the same time as pressure is growing within the United States to make their internet spy agency, the NSA, a little less spooky, New Zealand's giving new powers to its spy agency, the GCSB.

Where we'd had a market opportunity to be the "Outside the Asylum" destination for American tech entrepreneurs looking to establish cloud services in which customers could have some expectation of privacy, we instead seem to be determined to be every bit as bad as America. I'd worried about this back in May; Ian Apperley's since tried putting some numbers on the cost. Susan Chalmers from InternetNZ has similar worries. I haven't fisked Apperly's figures, which seem predicated on a reasonably optimistic view of the New Zealand counterfactual. I'm not even sure we really can quantify things: there was some possibility that we could have drawn in substantial American tech investment, but I couldn't possibly tell you what that probability was. But imagine you had a lotto ticket that only paid out if you got all 7 numbers right. Five of the numbers have just come up in your favour. Do you tear up the ticket before finding out what the last two numbers are? Entries on Slashdot and Boing Boing about how we're turning GCSB into a low-rent client of the NSA are a great way of ripping up that lotto ticket.

And think that New Zealand would be above the petty thuggery that the UK today imposed on Glenn Greenwald's partner? We can hope so, but there were a couple of worrying stories last year about hassles for people thought to be Kim DotCom's friends.

There are also a few longer standing issues that have contributed to today's ratings warning.

• New Zealand's version of civil asset forfeiture kicks back seized funds to drug enforcement. We're certainly not as bad as the US on this one, and there's strong likelihood that the policy gets fixed before really bad stuff happens. But downside risks are substantial. 
• Our revised censorship legislation is fully "Inside the Asylum" stuff. See here and here. Justice Minister Judith Collins says it's all about the kiddie porn, but the definition of "objectionable materials" includes marijuana growing guides and a bunch of pornographic materials involving homosexuality that were deemed objectionable in the 70s and continue to be banned. A pile of comic books are banned. An online vendor, Fishpond, copped $4,200 in fines for distributing a couple of movies that are widely available in the United States. Our whole film classification regime is nuts. You have to pay $1000 to get a ruling from the film classification office on whether a movie meets the NZ guidelines. This kills legal distribution of long-tail films here. At the same time, failing to get a film classified can risk your getting years in jail if the Censor's Office then deems it objectionable. 
• The Christchurch earthquake was February 2011. Since then, the rebuild has been substantially hindered by regime and regulatory uncertainty caused by the government - both local and national, and the various acronyms now running the place. More worrying, very substantial problems both in the earthquake insurance scheme and in the regulatory regime around unsafe buildings have yet to be resolved for future earthquakes. This contributes to a ratings downgrade because, if you move to a part of New Zealand likely to be hit by substantial quakes while you're here, there are pretty substantial, foreseeable, preventable things that are going to happen despite their being substantial, foreseeable, and preventable:
• Buildings with unreinforced masonry will fall down and kill people. Deaths from earthquakes are pretty much unavoidable. But the combination in New Zealand of a zero-faulty liability regime for unsafe buildings combined with a regulatory regime giving building owners decades to get them up to scratch mean that, in the event of a quake, many people will die whose deaths could have been avoided at relatively low cost. And even if you've brought your property up to spec, you can still have problems if the absence of either liability or regulation encourages your neighbour to fail to take due caution. 
• You will have been compelled to pay for Earthquake Commission insurance with your private property insurance. The ability of EQC and private insurers to fob responsibility off on one another, combined with EQC's demonstrated incompetence in dealing with the volume of claims inherent in any large event, combined with the reinsurers' and government's need to constrain the total cost of claims regardless of whatever they promised to provide you in the insurance contracts you signed, mean you can't avoid having things drawn out for years and still wind up with less than your due. If you think that a government-run insurance company will not have every incentive to pretend that new damage is really a pre-existing condition, well, you haven't been paying attention to Christchurch.
• With no change to underlying riskiness, the government may decide after an earthquake event that the risk of rockfall facing your house in the event of additional earthquakes is too great for you to bear, even if you think the risk is eminently bearable and even if it would be cheaper to put in place earthworks or fencing to mitigate that risk. Or they could just faff about for two and a half years without telling you whether you're allowed to live in your house.

If the GCSB and TICS legislation pass without substantial amendment, I'm moving New Zealand from a "buy" to a "hold". If worries about surveillance state issues weigh heavily in your utility function, and you're considering emigration from America because of it, parts of Europe are in much better shape than we are. Most importantly for those who consider the NSA mess to be a reason for leaving the US, it now looks like, whatever America does on surveillance, New Zealand will basically follow along. Maybe with fewer resources, maybe a bit less enthusiastically. But if you think that surveillance in America will get worse before it gets better, you should expect New Zealand to follow in lock-step.

But on plenty of margins we remain much more free than the United States. Our airports remain exceptionally sane: I can show up at the airport 20 minute before a domestic flight and, so long as I'm not checking luggage, just walk on up to the gate and board. Home brewing and distillation are legal. Prostitution is legal. Same-sex civil unions have been legal for years and the first full same-sex marriages were celebrated today.

And, even with the new GCSB legislation, I doubt we'll be worse on surveillance than America. We'll just all have to be far more diligent about secure computing.

Cashing in the chips

There comes a point when you start wondering what the point of a small-l liberal party is if it won't step up when it could really make a difference.

Politics always involves compromises and trade-offs. Usually, no small party can really achieve much. You can get some policy concessions after the election, and especially for the kinds of policies that your partner kinda likes anyway but on which it doesn't really want to lead the charge. After that, things are set. You know you don't have the leverage to do much else, and reneging on your partner spoils your chances of getting minor gains in the next coalition arrangement.

But sometimes an issue comes up that speaks to your party's core values, that wasn't anticipated at the time of the coalition arrangement, and that's coming through on a very thin majority. Thin enough where a one-vote defection from the coalition could actually change the outcome.

New Zealand is updating the legislation around its spy agency, the GCSB. At the same time, it's considering legislation around telecommunications providers that would make it harder for New Zealanders to use strong encryption and impose burdens on New Zealand internet service providers to ensure that GCSB is able to hack into any communications channel.

I do not doubt that there were problems in the 2003 legislation and that a redraft was necessary. But surely there is no crisis so pressing that we cannot take the time to get this right. And it's important that we get this one right.

Supporters of the Bill assure me that the Bill actually strengthens oversight on the GCSB relative to the status quo. The Law Society seems to disagree, and everyone who knows anything about tech seems to be screaming blue murder. I weigh those pretty heavily. If the actual deal gives more power to GCSB with more nominal oversight, I'm pretty sure that's a bad deal.

But even if the Bill does strengthen things relative to 2003, it also forecloses the option to come up with something better. Sometimes, the best should be the enemy of the merely ok. At the same time as New Zealand is moving to expand the powers available to the GCSB, we are getting daily updates on just how bad things are in the US with the NSA. There's growing pressure there for reform. Today we read that the NSA may have been funneling tips over to DEA about drug smugglers. It's scandalous there, but this is the exact kind of capability that John Key wants to give to our GCSB: he wants to make GCSB's spying apparatus legally available to the police and to the SIS for law enforcement purposes, supposedly to save on some duplication of capacity costs that have never anywhere been specified. There's an oversight procedure for it, but it isn't a normal limited judicial warrant for specific specified purpose and limited duration. We're also hearing reports from the UK that the NSA and the UK have been using their part of the partnership to route around each country's regulations against spying on its own citizens. The looser regs in the UK were valued by the NSA. I've been assured by someone who should know that this sort of thing doesn't happen here, but we were also assured it didn't happen in the UK.

The time pressure seems to have come from the Government's desire to retrospectively legalise the GCSB's illegal surveillance of Kim Dotcom to cleanse itself of that embarrassment. When I complain about this stuff to people I know in Wellington, they just can't see what the big deal is. We trust the government in New Zealand, the GCSB wouldn't do anything nasty, so what's the issue?

Well, we can't simply run a spy agency on trust. And we especially can't run it on trust when the Executive here seems determined to prove that they view journalists as the enemy. They've built such a culture within Parliamentary Services that folks there just automatically hand over reporters' phone records over to inquiries. I doubt that the Prime Minister's office directed them to do it, but look at the culture that our Prime Minister has encouraged within GCSB and Parliamentary Services and NZDF. They bend over backwards to do that which might please, legal or not. Those on the right who oppose this legislation like to point out that we might not like what happens when Labour gets its hands on a more powerful GCSB; I don't like it with John Key running it either!

ACT emphasizes the importance of law and order. They're often right to do so. But the rule of law requires that the agents of law enforcement also be bounded in their powers lest they become tyrants.

A few patches to the legislation via a nullity preamble seem inadequate to the task here. The whole thing needs to be re-done, ground up, with substantial input from the New Zealand tech community. Instead of aiming for a good-enough patch, set up something we can be proud of. If the 2003 legislation is flawed, we've lived with it for a decade. Another six months isn't a big deal. The lost opportunity is a big deal.

What's the lost opportunity? In the midst of the biggest and most salient crisis of confidence in American cloud computing courtesy of the NSA disclosures, we seem to determined to absolutely kill any chance that hosts could wish to relocate to New Zealand and base services here. The American tech sector seemed to have a bit of a warm spot for New Zealand. We've got a great base foundation: decent patent law without software patents, free trade, easy migration for skilled individuals, and a time zone that makes working with California pretty easy. It's a great place to live with decent civil liberties. There's a civil libertarianism among the American tech community that makes New Zealand a pretty appealing place.

When we should be throwing out the welcome mat, putting up legislation demonstrating that while we take international security concerns seriously, we also put strict controls on our spy agencies such that NSA-style "we spy on everybody, all the time" could never ever happen here, we instead push hard to make our security apparatus at least as bad as that in the US. It's nuts.

I know that ACT's leader, John Banks, is far more conservative than liberal. But parts of the party, and especially the party's youth wing, have been able to pull him in liberal directions before.

I know there are people in ACT who'd say that the legislation isn't as bad as is made out and that the critics don't understand the law. I know I don't understand the law that well, and especially the incremental changes relative to 2003. For that, I look to the Law Society and to lawyers who care about civil liberties. They don't seem to think that the legislation improves things. But even if they were wrong and the governing coalition were right that nobody except for the governing coalition understands the law, that doesn't much help things where the very strong perception is that the legislation basically is a way of letting the NSA spy on everybody in New Zealand. What's the point of a tech firm's relocating to NZ if they believe that we're basically part of the NSA? Fix it from the ground up, with substantive input from the tech community, so that the legislation both protects civil liberties and is seen to do so.

If the strategic thought within ACT is that sticking with National gets them support to come back in 2014, just look at the betting markets. ACT is already predicted to die in the next election. There's a 61% chance that ACT returns zero electorate MPs in the next election. Unless they move from an expected 1.2% vote share to a 5% vote share, the Party has greater than a 60% chance of dying in 2014.

If you're going to die in 2014 anyway, jump on this grenade while you're doing it. Die in a blaze of liberal glory, killing the GCSB legislation at third reading and forcing them to take the whole thing back to the drawing board. It might make it harder to get into coalition with National next time round if you do get back, but it could also start drawing in votes from that part of the electorate that cares about civil rights and tech freedom but shrinks in horror from the thought of Russel Norman being anywhere near the Treasury benches.

If you can't do that, please have the courtesy to actually die in 2014 so that a liberal party might emerge. Lead, follow, or get out of the way, they say. Absent changes, ACT does more to prevent the emergence of a liberal party than to advance liberal values. GCSB and TICS is a great place to start if you've any intentions of leading.

Previously:

• Staying outside the Asylum
• Make your list
• GCSB Redux
• Is ACT liberal?
• The depressing state of New Zealand politics
• ACT Redux

Related:

• Human Rights Commission on GCSB, TICS, and surveillance
• TechLiberty NZ on GCSB and TICS; submission on TICS.
• John Banks on the GCSB legislation. Summary: the 2003 legislation was bad, we had to do something. This is something, so we support it.
• NZ Law Society on GCSB and on TICS

That of which we here are a part and complicit

From Snowden's interview with Jacob Appelbaum and Laura Poitras:

Interviewer: What are some of the big surveillance programs that are active today and how do international partners aid the NSA?

Snowden: In some cases, the so-called Five Eye Partners go beyond what NSA itself does. For instance, the UK's General Communications Headquarters (GCHQ) has a system called TEMPORA. TEMPORA is the signals intelligence community's first "full-take" Internet buffer that doesn't care about content type and pays only marginal attention to the Human Rights Act. It snarfs everything, in a rolling buffer to allow retroactive investigation without missing a single bit. Right now the buffer can hold three days of traffic, but that's being improved. Three days may not sound like much, but remember that that's not metadata. "Full-take" means it doesn't miss anything, and ingests the entirety of each circuit's capacity. If you send a single ICMP packet and it routes through the UK, we get it. If you download something and the CDN (Content Delivery Network) happens to serve from the UK, we get it. If your sick daughter's medical records get processed at a London call center … well, you get the idea.

Interviewer: Is there a way of circumventing that?

Snowden: As a general rule, so long as you have any choice at all, you should never route through or peer with the UK under any circumstances. Their fibers are radioactive, and even the Queen's selfies to the pool boy get logged.

Interviewer: Do the NSA and its partners across the globe do full dragnet data collection for telephone calls, text and data?

Snowden: Yes, but how much they get depends on the capabilities of the individual collection sites -- i.e., some circuits have fat pipes but tiny collection systems, so they have to be selective. This is more of a problem for overseas collection sites than domestic ones, which is what makes domestic collection so terrifying. NSA isn't limited by power, space and cooling PSC constraints.

Recall that Five Eyes is the US, UK, Canada, Australia and NZ.

Speculation: In the tent, eventually NSA kits up GCSB to be able to do what GCHQ can do. It'll be lower priority as we're a rump loop of the cable at the end of the world whereas Britain's pretty central. But we'll get there. Out of the tent, I'd expect NSA would stick a box at the Australian or US termination ends of our cables and start doing it faster.

GCSB Redux

I really wish that the Law Society's submission on the GCSB bill had been available prior to the submissions deadline. I suspect that I'm not the only one who failed to submit on the Bill because the precise changes from the status quo ex ante, and whether the changes were from the de facto or the de jure status quo, were, to a non-lawyer, sufficiently impenetrable to require several days' effort to decipher.

The Law Society instead makes it all nicely explicit for us. We are transforming a foreign intelligence agency into a domestic intelligence agency with minimal effective supervision. That's what it had looked like, but I sure wasn't qualified to say so. And so I didn't submit.

The Law Society notes that the Telecommunications Interception Capability and Security Bill violates basic rights to natural justice at common law because too low a threshold is established for the Courts to be able to prevent defendants from hearing evidence against them.

Their statement on the GCSB Bill is blunter than I'd expected. A few excerpts:

The Bill is intrusive. It would empower the GCSB to spy on New Zealand citizens and residents, and to provide intelligence to other government agencies in respect of those persons. It is inconsistent with the rights to freedom of expression and freedom from unreasonable search or seizure under NZBORA and with privacy interests recognised by New Zealand law.
...

Given the intrusive nature of the reforms and the fact that they prima facie conflict with established rights, they should be demonstrably justifiable, and be accompanied by appropriate safeguards. The Law Society has sought to undertake a proportionality analysis of the legislation to ascertain whether the intrusion on rights protected by NZBORA as a result of these measures is justified, and whether there are sufficient checks and balances on the powers the Bill proposes.

It is difficult to identify the pressing and substantial concerns that the Bill purports to remedy or address. It is not possible to identify any tangible or meaningful concerns from the Explanatory Note to the Bill and the accompanying ministerial press release, beyond an allusion to helping the GCSB “get on with the job of helping New Zealand public and private sector entities deal with the growing threat of cyber-attack”

David Farrar suggests that, if the GCSB legislation fails, we'll just have the Police enhancing their wiretapping capabilities when it has a warrant to engage in such things. But the Law Society notes:

Furthermore, it would appear that if the GCSB is called upon to assist another specified agency (such as the Police) by performing activities instead of that other agency, the activities performed by the GCSB in that capacity will receive the imprimatur and secrecy and immunity protections of the GCSB Act, when the same activities engaged in by the specified other agency itself would not do so in terms of the other agency’s empowering legislation. In that way, enlistment of GCSB “co-operation” may confer on the activities undertaken a protected legal status which they would not otherwise receive. Indeed, the very fact of GCSB involvement may mean that the activity in question is never disclosed to those affected. This outcome is unacceptable and inconsistent with the rule of law.

I far prefer the Police doing this kind of job under warrant. I like warrants. Again, here's the Law Society:

Indeed, the section 16 power to intercept without warrant or authorisation can no longer be
justified, given the greatly expanded scope of this warrantless power (having regard to the expansive definition of “information infrastructure” and the expanded scope of operations beyond “foreign intelligence”, canvassed above so that domestic as well as foreign intelligence is to be targeted by the GCSB). This power must now be considered as overly invasive of NZBORA rights, and/or as a disproportionate conferral of power, given the available alternatives (including the range of powers of interception already possessed by the New Zealand Security Intelligence Service and others).

Had this analysis been publicly available earlier on, and it likely would have been but for the Government's incomprehensible desire to push this through under urgency and thereby prevent public debate, I would have submitted in opposition to the Bill. I wouldn't have done it with my economist hat on, because I can't quantify any of this. It would be my Mont Pelerin Civil Rights Libertarian hat instead, though informed by the economist side.

I would have taken the Law Society's analysis as baseline, then noted that New Zealand's main apparent economic comparative advantage is in having a robust policy environment that weighs heavily the civil rights of its citizens and residents. That we're a bastion of sanity where policy doesn't over-react to perceived security threats. That we're the place that very sensibly adopted the only realistically effective airport security precaution subsequent to an attempted hijacking by a deranged woman: harden the cockpit doors against entry. We haven't gone for American airport security theatre. We haven't started having roadside checkpoints where people are commanded to present their papers and prove that they're not in the country illegally. And that this comparative advantage matters all the more as America and the UK get worse: the Outside of the Asylum is more attractive when the Inside of the Asylum gets that much nuttier.

Imagine an alternative world where, as America started seeing just what the NSA has been doing to them, we were instead implementing the kind of digital rights amendment suggested by Fab Rojas for the States:

The right of the people to be secure in their transactions made through electronic media and other forms of communication,  and in the data generated by such transactions, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. The people will retain the right to review such warrants and challenge them in the courts.

The US and OECD have been cracking down on so-called tax-havens; would that New Zealand could be excoriated by the Surveillance States as a rights-haven: a little dark blot on their surveillance maps where you have to get a real warrant from a real judge to be able to wiretap people, and to prove that there's a damned good reason for it. And be a place of refuge for those few who care enough about those kinds of freedoms to vote with their feet.

I wonder what the tech scene here could look like, in a decade's time, if some of the folks in Silicon Valley who do care about these things saw New Zealand as safe haven.

Peter Cresswell points to what we need to do to start protecting ourselves, if we're to be inside the asylum.

Faint hope

Reason's Nick Gillespie explains what it'll take to curb the American surveillance state given that both Democrats and Republicans are totally cool with surveillance whenever their team's guy is in the White House:

More to the point, though, the virtually unyielding preference for partisanship over principle explains why regardless of which party controls the government, the surveillance state continues to grow. It’s totally different, don’t you see, when my guy is running the show!

That same dynamic also helps to explain what is arguably the single-most important political trend over the past 40, 50, or even 70 years: the rise in the percentage of voters who flatly refuse to identify with either the Republican or Democratic Party. In 2012, more voters—38 percent—called themselves independent than admitted to being Democrat (32 percent) or Republican (24 percent).
And it points to the only place from where actual relief from an ever-bigger, ever-more-intrusive surveillance state is going to come: oddball, ad hoc coalitions formed not by party apparatchiks but by rogue elements that somehow sneak into power and are buoyed by the plurality of Americans who refuse to be cowed by party politics. It is characters such as Sens. Bernie Sanders (I-VT), Rand Paul (R-KY.), Ron Wyden (D-OR), Mark Udall (D-CO.) and Reps. Justin Amash (R-MI.), Thomas Massie (R-KY.), and Jason Chaffetz (R-UT) who are lobbying for more government transparency, accountability, and restraint.

This crew has virtually nothing in common other than an inspiring streak of ideological independence that mirrors the plurality of American voters. (Paul, who has co-sponsored legislation with Wyden, did not even thank the Republican Party on election night in 2012, choosing instead to thank the “Tea Party.”) They will doubtless find themselves on different sides of the barricades when it comes to questions of taxes, regulation, and spending. But it is impossible to imagine any of them shifting their positions on ubiquitous surveillance of Americans or kill lists or torture simply based on which party controls the White House or Congress. Which, sad to say, is a relief in the current political climate. And the reason their efforts deserve not just our sincere thanks but our vocal support.

Yeah, I put maybe 25% chance on that panning out. Those odds drop to 5% if it doesn't come in the wake of the current and ongoing NSA revelations.

My normal line here is to recommend emigration. But where could you go? If anything, being outside of the NSA / Five Eyes arrangement could make things worse rather than better.

A loyal reader who should know about these things rather strongly insists that NZ's leaving that partnership would make it much easier for NSA to snoop on Kiwis. I expect that he's right. Our pulling out of that arrangement would likely result (my guess, not his) in a snooping box being installed somewhere along the line after the termination ends of the undersea cables that connect us to the world. NZ has direct connections only to Sydney and Hawaii.

Here's Tech Liberty's submission on the Telcommunications (Interception Capability & Security) Bill. I really hope that the Select Committee moves to fix things.

Staying outside the Asylum

Dairy's great. But long term, New Zealand's ticket, I've reckoned, is being islands of sanity as the rest of the world entrenches the Asylum. The physical limits on dairy increase can't be that far off: we eventually run out of water for irrigation or hit a wall where we need a step-change in effluent dispersal technology before increased dairy density is tolerated.

We found New Zealand really attractive because it didn't seem to be doing all of the dumb things that the US and Canada were doing. Airport security was reasonable; flying is actually enjoyable. If you want to be a hairdresser, you hang out your shingle rather than have to submit to nutty occupational licensing regimes. The police remain, by default, unarmed; Armed Offenders Squad call-outs are rare enough that they'll make national news. Asset forfeiture has only recently been introduced; hopefully, we avoid its worst effects. Tariffs are low and on their way to zero. The GST makes sense. Though the government was tempted to implement software patents, the techies made a good case and the government changed course.

New Zealand keeps ranking at or near the top of the various indices of economic and social freedoms. We could do well by encouraging greater immigration of American techies fed up with that the American government seems to be archiving and storing just about everything for later searches. Just show them Novopay as example of how we couldn't, even if we wanted to.

Alas, we're not immune to the shenanigans going on elsewhere. Our NSA, the GCSB, is getting a legislative redraft. Thomas Beagle of TechLiberty summarises; NoRightTurn has a few additional comments. I'm not a lawyer - maybe things aren't as bad as they seem. David Farrar is considerably less concerned.

Where the GCSB acts under judicial warrant, I can't see that there's much difference between a wiretap being done by GCSB and one being done by the SIS; on that, I'm with David. But Thomas warns that the GCSB's powers will go a little beyond that. On his read of the legislation, we'll have to have back doors built into everything.

I don't understand why there's any particular rush to change the GCSB legislation other than that they beclowned themselves in the Kim DotCom prosecution. Wouldn't it have been rather better to have spent a bit of time with the tech community after the Kitteridge Report came out and sorted things out while drafting the legislation? The government's initial hamfistedness on software patents, and subsequent revision after consultation, might have suggested that some ex ante consultation was the better approach.

When the US seems to be doing everything it can to convince its tech guys that the government really does want to be spying on everybody, and that the IRS wants to know everything you talk about at political meetings if you have small-government leanings, the last thing we need are headlines suggesting we're heading down similar paths if the legislation doesn't actually do that. And if it does, it does need changing.

Penalties

The economic model of suicide: when the expected future utility stream turns negative and looks to be persistently so, or negative enough for a short period, you set it to zero instead. You can add in lots of stuff about how depression or mental illness can bias the expected future utility stream, or about irrationality in response to short term shocks, but my first-cut thought on hearing of suicide is to wonder what made the expected future utility stream seem sufficiently terrible that setting it to zero was preferable.

In the Aaron Swartz case, which has been ably and thoroughly discussed by people far closer to the case than me, it seems to have been the prospect of prison: a bullying prosecutor was insisting on a prison sentence for a relatively minor transgression, likely to make a point about how the State-Is-The-Boss-Of-You-And-Don't-You-Dare-Think-Otherwise.

I've seen lots of very appropriate wondering about prosecutorial discretion and just what the American justice system is turning into if a guy like Swartz could have been up for a prison sentence.

But what about everybody else - people who weren't as heroic as Swartz and not as worthy of laudatory accounts from around the web? Any justice system will accidentally convict at least a few innocent people. Should prison conditions really be such that gentle people can prefer suicide?

I wonder if we ought not give greater consideration to Peter Moskos's modest proposal for penal reform. I hope that the system is fixed so that cases like Swartz's do not lead to prosecutorial bullying. But even absent that kind of bullying, and it's best-case thinking to think it can be eliminated, peaceful people will continue to be jailed for small mistakes, or for things that ought not be considered crimes in the first place. And we have decent evidence (ungated version) that harsher prison conditions worsen recidivism anyway.

The conditions that Swartz seems to have deemed worse than death are home to about 1.6 million Americans.

Things could be worse though; at least real-world prisons don't have Azkaban's Dementors. Yudkowski nicely makes the case for penal reform of Magical Britain in Harry Potter and the Methods of Rationality - about two thirds of the way through Chapter 62...

NBER roundup [updated]

The late-night NZ-time twitter feed occasionally brings American morning delights. Tonight, it's the new NBER working papers. In the queue for when I'm back on campus and can read the NBER subscription papers:*

• Callison and Kaestner find tobacco consumption less price sensitive than previously thought; they reckon it would take a 100% tax increase to get a 5% drop in consumption. This would be estimated around American tax levels, which are rather below NZ ones; I'd need to back that out into price elasticity estimates to translate it into effects of NZ tax increases. From the abstract:
  

  ...we focus on recent, large tax changes, which provide the best opportunity to empirically observe a response in cigarette consumption, and employ a novel paired difference-in-differences technique to estimate the association between tax increases and cigarette consumption. Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small and not usually statistically significant. Our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases, on the order of 100%, to decrease adult smoking by as much as 5%.

  If that's right, Turia's tax increases are more regressive than we'd expected.
  
  Update: Oh wow. Read this bit from the full paper:

  Using this method, we found that for adult smokers ages 18 to 74, a 10% tax increase is associated with between a 0.3% to a 0.6% decrease in smoking participation and a 0.3% to a 0.4% decrease in smoking intensity. More surprisingly, given past research suggesting that youth smoking is more sensitive to taxes and prices, we find very little difference by age in the association between cigarette taxes and cigarette consumption. A 10% increase in state cigarette tax is associated with: between a 0.3% to a 0.7% decrease in smoking participation for those ages 18 to 34; between a 0.2% to a 0.4% decrease in smoking participation for those ages 35 to 54; and between a 0.3% to a 0.6% decrease in smoking participation for those ages 55 to 74. Similarly a 10% increase in state cigarette tax is associated with: between a 0.3% and a 0.5% decrease in smoking intensity for those ages 18 to 34; a 0.3% decrease in smoking intensity for those ages 35 to 54; and between a 0.3% and a 0.4% decrease in smoking intensity for those ages 55 to 74. Finally, standard errors of estimates are of a magnitude that rule out cigarette tax elasticities with respect to smoking participation (intensity) among adults greater (more negative) than -0.12 (-0.13).
  ...
  It is notable that estimates in Table 3 provide no evidence to support the hypothesis that smoking behavior is more responsive to taxes (prices) among younger persons than older persons.

  There may be effects in encouraging kids younger than 18 to avoid starting smoking; the analysis here is restricted to adults. But if this is right, it means that whatever benefits come from Turia's Tax will be over a very long time horizon while the costs on low decile households through reduced net-of-smoking disposable income will be very large for a rather long time. I probably ought to pull this up to being its own post. There are rather a few careful controls in here that need more discussion.


• Reyes gives more evidence that banning leaded gasoline, and other restrictions on environmental lead, was a very good idea. From the abstract:

  The paper finds that elevated levels of blood lead in early childhood adversely impact standardized test performance, even when controlling for community and school characteristics. The results imply that public health policy that reduced childhood lead levels in the 1990s was responsible for modest but statistically significant improvements in test performance in the 2000s, lowering the share of children scoring unsatisfactory on standardized tests by 1 to 2 percentage points. Public health policy targeting lead thus has clear potential to improve academic performance, with particular promise for children in low income communities.

  Reyes previously estimated that reductions in environmental lead can account for a 56% reduction in violent crime in the 1990s.
  
  Update: The paper gives some nice benchmarking of the effects of lead reduction: the improvement in test scores that came of the reduction in the proportion of low income kids with high blood lead concentrations would be comparable to the improvement in test scores you'd expect if per capita incomes improved by 15% in low income communities - a rather substantial effect.


• Hastings et al provide more evidence that kids winning lotteries allowing them to attend the school of their choice enjoy better outcomes. 


• Fergusson, Robinson, Torvik and Vargas set up a model testing an Orwellian idea: that leaders whose power is augmented by warmaking have little incentive to let the war end. They test against Colombian data. From the abstract:

  We find that after the three largest victories against the FARC rebel group, the government reduced its efforts to eliminate the group and did so differentially in politically salient municipalities. Our results therefore support the notion that such politicians need enemies to maintain their political advantage and act so as to keep the enemy alive.

  War is the health of the state...


• And, finally, Lacetera et al on compensation for marrow and organ donation. The abstract:

  In an attempt to alleviate the shortfall in organs and bone marrow available for transplants, many U.S. states passed legislation providing leave to organ and bone marrow donors and/or tax benefits for live and deceased organ and bone marrow donations and to employers of donors. We exploit cross-state variation in the timing and passage of such legislation to analyze its impact on organ donations by living and deceased persons, on measures of the quality of the organs transplanted, and on the number of bone marrow donations. We find that these provisions did not have a significant impact on the quantity of organs donated. The leave legislation, however, did have a positive impact on bone marrow donations. We also find some evidence of a positive impact on the quality of organ transplants, measured by post-transplant survival rates. Our results suggest that these types of legislation work for moderately invasive procedures such as bone marrow donation, but may be too low for organ donation, which is riskier and more burdensome to the donor.

  Becker and Elias reckoned it would take about $15k in compensation to encourage kidney donation. If the tax benefits added up to less than that, it would have been surprising if there had been large effects on live donation rates. The data appendices (free access; the article is gated) shows no state provided more than $10k as tax deduction. Note that a $10k tax deduction isn't $10k in hand: it's $10k that you get to remove from your taxable income total. So it's only worth $10k times your marginal tax rate - in other words, very unlikely to motivate donation from the cohorts more likely otherwise there to be price sensitive.
  
  Update: A few neat bits on seeing the paper rather than just the abstract:
  • Where some worry that paying for organs worsens quality, the authors found instead weak evidence of quality improvement.
  • The authors seem to have reached the same conclusion: the payment levels via tax deductions are likely below the reservation price for live kidney donation.

* I've only caught the abstracts of these thus far; if there are grievous errors in method that aren't obvious from the abstracts, my apologies.

Providing a positive externality

So it seems Skype's now likely to have built-in government surveillance back doors.

It really doesn't much bother me if people listen in on our regular chats with my parents back in Canada. But there's a positive externality to those who really need secure privacy if everyone who doesn't need it also chooses secure channels - it increases the amount of noise that a government agency needs to wade through before it's able to crack the channel in which they're really interested.

So, if I want to provide that positive externality, and I want a system my parents can easily install on a Windows-based system with no technical support, and that won't bog up their older computer or impose too-heavy of bandwidth constraints, what's recommended if anything?