[e-cvs] cvs commit: e/doc/talks/pisa/paper index.html
markm@eros.cs.jhu.edu
markm@eros.cs.jhu.edu
Thu, 27 Dec 2001 03:29:42 -0500
markm 01/12/27 03:29:42
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<p>Despite this negative example, we can expect the new technological laws
produced by the Net to be, on the whole, beneficial. Interaction through
the Net is inherently coercionless: no one can point a gun at you through
- your monitor screen. You could send someone a virus, and under today's
- law that would be considered a use of force. After all, the virus does
- cause harm to the recipient. But sending viruses is also a form of free
- speech, and under the technological law of the Net, ultimately cannot
+ your monitor screen. You could <i>send</i> someone a virus, and under
+ today's law that would be considered a use of force. After all, the virus
+ does cause harm to the recipient. But sending viruses is also a form of
+ free speech, and under the technological law of the Net, ultimately cannot
be constrained. The logic of John Stuart Mill's defense of free speech
[<a href="#Mill69">Mill69</a>] applies perfectly to this situation.</p>
<p>John Stuart Mill never claimed that "bad" speech could not
harm the listener. Rather, he observed a crucial difference between the
harm done by speech and the harm done by force. Speech does harm only
- by virtue of how the listener reacts to the speech. If the speaker learns
- to react differently to a certain pattern of speech, that pattern is rendered
- harmless. After all, it's only information; it cannot by itself cause
- damage. The only effective answer to bad speech is more speech, as only
- this enables gullibility and cynicism to grow into skepticism.</p>
+ by virtue of the reaction of the listener. If the listener learns to react
+ differently to a certain pattern of speech, that pattern is rendered harmless.
+ After all, it's only information; it cannot by itself cause damage. The
+ only effective answer to bad speech is more speech, as only this enables
+ the listener to grow from gullibility and cynicism into skepticism.</p>
<p>Likewise, the Net only transmits information -- including viruses. A
virus can only do harm based on the reaction -- the means of processing
and operation -- of the computer receiving the virus [<a href="#Hardy99">Hardy99</a>],
- and its user [<a href="#Stiegler98">Stiegler98</a>, <a href="#Walker">Walker</a>].
+ and of its user [<a href="#Stiegler98">Stiegler98</a>, <a href="#Walker">Walker</a>].
The good news is that the damage done by computer viruses (or any malicious
bit pattern) is not a technological law, since computer security is possible.
- Since the disemmination of viruses cannot be prevented, the only response
- to their bad bits are other bits -- the software of virus-invulnerable
+ The disemmination of viruses cannot be prevented, so the only effective
+ response to their bad bits are other bits -- the software of virus-invulnerable
secure operating systems [<a href="#Hardy85">Hardy85</a>, <a href="#Shapiro99">Shapiro99</a>],
programming languages [<a href="#Hewitt73">Hewitt73</a>, <a href="#Tribble95">Tribble95</a>,
- <a href="#Rees96">Rees96</a>, <a href="#Stiegler98">Stiegler98</a>], and
- user interfaces [<a href="#Walker">Walker</a>]. Only such software enables
+ <a href="#Rees96">Rees96</a>, <a href="#Miller00">Miller00</a>], and user
+ interfaces [<a href="#Walker">Walker</a>]. Only such software enables
our computers to grow from fatal gullibility or safe-but-useless seclusion
into rich cooperation-without-vulnerability with the rest of the electronic
world. This growth in turn will enable the removal of the next brick.</p>
- <p>(In contrast to a common misunderstanding, the cited systems demonstrate
- that secure systems need not be less capable or harder to use than insecure
- systems. Indeed, it seems the only significant comparative cost paid for
- security is incompatibility with the installed base. Although this cost
- is not to be underestimated, the current situation, in which 13 years
- old easily compromise hundreds of fatally gullible computers used by others,
- may not be stable, once knowledge of an alternative becomes widespread.)</p>
+ <p>(In contrast to a common misunderstanding, the cited works demonstrate
+ that secure computer systems need not be less capable or harder to use
+ than insecure systems. Indeed, it seems the only significant comparative
+ cost paid for security is incompatibility with the installed base. Although
+ this cost is not to be underestimated, the current situation -- in which
+ 13 years olds easily compromise hundreds of fatally gullible computers
+ used by others -- may not be stable, once knowledge of an alternative
+ becomes widespread.)</p>
<h3><b><img src="images/3-hubs.gif" width="347" height="212" align="right"></b><a name="nohubs"></a>The
Brick of Missing Hubs</h3>
<p>So many bricks have been removed, how can third world poverty remain
@@ -258,7 +259,7 @@
world, and that we normally take for granted.</p>
<p>Trust relationships can be thought of as analogous to the airport hub
and spoke pattern (Figure 3). Many small local networks are interconnected
- on the wider scale through major hubs. Although this pattern is a partial
+ on a wider scale through major hubs. Although this pattern is a partial
centralization, it is not a hierarchy -- there is, for example, no central
hub of hubs. Logically, it is peer to peer, but it is built with a backbone
architecture due to the economics of the system. The Net itself has mostly
@@ -273,8 +274,8 @@
risks that these strangers face from each other, sometimes requiring it
to absorb some of these risk onto itself. The economies of scale available
to a WTII can help tremendously with these risks. Historically, western
- societies have developed specialized WTIIs that bundle trust with another
- other expertise: one trusts Citibank not only because Citibank has a demonstrated
+ societies have developed specialized WTIIs that bundle trust with other
+ expertise: one trusts Citibank not only because Citibank has a demonstrated
history of reliably backing their loans, but also because they are experts
in loan and risk management, which are necessary elements of reliability
in that field: an organization that attempted to engage in banking without
@@ -309,78 +310,119 @@
a long time for us to do it. If they must do it on their own, it will
take them a long time, a time during which desperate poverty will remorselessly
prevail. What enablers are available now that were unavailable when the
- west made this transition? How might these be used to help accelerate
- them through this part of the process of capital formation?</p>
- <h3>The Crucial Trust Specialty</h3>
- <p>In fact, while all these trust institutions are valuable to the construction
- of advanced societies, not all are equally crucial. de Soto's analysis
- suggests that the institution which most needs trust, which is most lacking
- in trust in the third world, are the title agencies. It is through trustworthy
- title agencies that banks can become confident that the collateral against
- which they make a loan will indeed become theirs in the event of default.
- Title registries with this level of reliability enable <i>rights transfer
+ west made this transition? Might these be used to help accelerate them
+ through this part of the process of capital formation?</p>
+ <h3><a name="title"></a>The Special Role of Title</h3>
+ <p>In <i>The Other Path</i>, de Soto explained the informal economy and
+ its lack of institutions in general. Eleven years later, after much investigation
+ both of the phenomenon of persistent poverty, and an extraordinary uncovering
+ of the history of how the west overcame these problems, in <i>The Mystery
+ of Capital</i> de Soto has narrowed his focus to the crucial role played
+ by the institution of title.</p>
+ <p>While all these WTIIs are valuable for the fomation of wealth creating
+ societies, not all are equally crucial. De Soto's analysis suggests that
+ the institution most needed to get the ball rolling, and which are most
+ painfully absent in the informal sectors of the third world, are credible
+ systems of title transfer. It is through widely trusted title agencies
+ that banks can become confident that the collateral against which they
+ make a loan will indeed become theirs in the event of default. This requires
+ not just trust in the title company itself, but credibility that a transfer
+ of title on the books will be honored as a transfer of ownership in reality.
+ Title registries with this level of credibility enable <i>rights transfer
at a distance</i>: people who have never met one another and probably
never will can engage in asset transfers and capital formation with the
confidence that they will acquire the goods specified in the contract.</p>
- <h3><a name="govt"></a>The Government Solution</h3>
- <p>The obvious--though not necessarily most trustworthy--organization to
- fill this crucial titling role in a nation is the government itself. This
- is the strategy de Soto has adopted, converting extra-legal assets, village
- by village, into officially acknowledged parts of the formal economy.
- The strategy has been wildly successful by traditional standards of success
- in bringing the poor into the modern world: over ??? years, de Soto's
- organization has formalized ??? worth of assets for ???? people, creating
- ??? amount of capital and ??? of new tax revenues for the governments
- that have embraced the methodology.</p>
- <p>But stating that this is a wild success when measured by the traditional
- standards of success in this endeavor hides as big a truth as it reveals:
- working through governments is an exhausting, manpower intensive, expensive,
- slow process. Remarkable as his victory has been, children enter the impoverished
- third world at a vastly higher rate than the rate at which de Soto is
- currently lifting them out. </p>
- <p>Why is this? Though each village has a carefully worked out understanding
- of the property rights enjoyed by each member of the community, and an
- understanding of when and how an individual can transfer his assets to
- another individual within the village, each village's "property law"
- is idiosyncratic and unique. Attempts by governments to simply discard
- local traditions about the rules of property are simply ignored: such
- attempts had been made repeatedly by governments before de Soto, and always
- ended in futility. de Soto's special insight in this situation has been
- that the government must respect the local laws, and work out, at considerable
- cost in time and effort, a way to integrate those local laws with the
- national systems. </p>
+ <p>Although de Soto documents the independent creation of title companies
+ in the informal sector, these do not currently seem to be able to provide
+ the credibility at a distance needed for this transition.</p>
+ <h3><a name="govt"></a>The Governmental Paths</h3>
+ <p>Among currently existing choices, perhaps the only organization that
+ can fill this crucial titling role in a nation is the government itself.
+ This is the strategy de Soto has adopted, converting extra-legal assets,
+ village by village, into officially acknowledged parts of the formal economy.
+ The strategy has been wildly successful in bringing the poor into the
+ modern world. Working with the government of Peru, over four years, de
+ Soto's organization has formalized ??? worth of assets for a quarter of
+ a million people, creating ??? amount of capital and $2.1 billion of new
+ tax revenues for the government of Peru. One may hope and expect that
+ these demonstrated tax revenues, if nothing else, will tempt other governments
+ to follow suit.</p>
+ <p>De Soto's isn't the first attempt to title the informal's property and
+ bring them into the formal sector, but it is the first such attempt in
+ the third world to work. De Soto documents previous well intentioned efforts,
+ with surveyors, geographic information systems, interviews of informals
+ to ascertain who owns what, and formal title registries backed by the
+ formal legal system -- all the obviously necessary ingredients. Why did
+ these previous attempts all fail? </p>
+ <p>Because the formals did not appreciate that the informals already had
+ worked out system of law, rights, and obligations, negotiated over time
+ and idiosyncratic village by village -- <i>the people's law</i>. Instead,
+ the formals approach to the situation was <i>We have a legal system. You
+ don't. Take ours. </i>Although the title listings reflected a snapshot
+ of who-owns-what, the legal system governing these title listing did nothing
+ to reflect the complex negotiated informal arrangements needed to understand
+ what rights someone actually held to a particular asset. Given this mismatch,
+ the informals proceeded to ignore the formal title registries and trade
+ assets in the way they always had. The title registries were not updated
+ to reflect changes of actual ownership, and so rapidly became even more
+ irrelevant. De Soto's special insight in this situation has been that
+ the government must discover and respect the local laws, and work out,
+ at considerable cost in time and effort, a way to integrate those local
+ laws with the national systems.</p>
+ <p> The difficulty comes from an inherent tension between local knowledge
+ and global credibility -- local knowledge of the idiosyncratic people's
+ law, conventions, and negotiated arrangements in force in each village,
+ <i>vs.</i> the need to move the governance of title transfer to WTIIs,
+ whose wide scope requires them to operate from a more homogenized set
+ of rules. This tension is acute on the governmental path, because the
+ homogenized set of rules is not even per title company, but rather the
+ official legal system itself. Governmental legal systems are not the wonders
+ of adaptability de Soto's program would seem to require. However, he offers
+ no alternative. Though difficult, he shows that this path can work, and
+ he documents that it did work when the U.S. absorbed the wild west.</p>
<p>As if this work were not difficult enough, this whole process faces enormous
obstacles from many different factions, notably bureaucracies and lawyers
within the national sphere that see this as an assault on their prerogatives.
The process never becomes easy: each village is another major upheaval
in the perceptions and preferences of entrenched groups dedicated to protecting
the status quo. </p>
- <h3><a name="bootstrapping"></a><img src="images/5-bootstrap.gif" width="366" height="214" align="right">The
- Digital Path</h3>
- <p>How can we sidestep this brutally painful process? Perhaps with the Net.</p>
- <p><font color="#000000">For goods that can be exchanged electronically,
- the Net has wiped out geography and jurisdiction. If the function provided
- by WTIIs can be supplied as a purely electronic service, then the existing
- first world trust hubs--especially first world title agencies--can bootstrap
- the third world on a global scale through the new medium. (See Picture).</font></p>
+ <h3><a name="bootstrapping"></a>The Digital Path</h3>
+ <p align="center"><i>National borders aren't even speed bumps on the information
+ superhighway.</i></p>
+ <p align="right"><i>--Tim May</i></p>
+ <p>Can we sidestep this brutally painful process? Perhaps eventually with
+ the Net. </p>
+ <p><font color="#000000"><img src="images/5-bootstrap.gif" width="366" height="214" align="right">For
+ e-goods and e-services that can be provided purely electronically, due
+ to the Net, these can now be purchased from across the world as easily
+ as from next door. The providers and consumers of these e-goods and e-services
+ have escaped the old limits of geography and jurisdiction. If the functions
+ provided by various WTIIs, including title and contract enforcement, can
+ be supplied as purely electronic services, then existing first world trust
+ hubs could bootstrap the third world on a global scale through the new
+ medium. (Figure 5)</font></p>
<p><font color="#000000">Many first world trust hubs are already trusted
in the third world because of the frenetic distribution efforts of the
traditional broadcasting media such as television: shows ranging from
CNN to Dallas and Baywatch have granted an aura of respectability to first
- world organizations that most third world governments can only envy. Using
- first world WTIIs, villages on a global scale can in principle become
- part of a global trust network. For example, if a person in village A
- wants to sell a tractor to a person in village D, a couple of villages
- away, they could in principle use a title registry run by Citibank in
- New York to execute the transfer. In a similar fashion, the tractor may
- be securitized, transforming it into capital. And in a state such as Russia,
- a title listing with Citibank would, ironically, have more legitimacy
- than a title listed by the government.</font> </p>
+ world organizations that most governments can only envy. (However one
+ may feel about this process, it is occurring, so it may as well be put
+ to good use.) Using first world WTIIs, villages on a global scale can
+ in principle become part of a global trust network. For example, if a
+ person in village A wants to sell a tractor to a person in village D,
+ a couple of villages away, they could easily reach across the Net to a
+ title registry run by Citibank in New York to execute the transfer. In
+ a similar fashion, the tractor may be securitized, transforming it into
+ capital. And in a state such as Russia, a title listing with Citibank
+ would, ironically, have more legitimacy than a title listed by their own
+ government.</font> </p>
<p><font color="#000000">As an additional bonus, once the villages of the
- world join this global village, it is much easier to grow the "local"
- (i.e., national) high-trust hubs as well: an entity becomes high-trust
- simply by consistently performing in accordance with the contracts being
- managed by first-world WTIIs. </font></p>
+ world join this global village, it is much easier to grow local high-trust
+ hubs as well: an entity becomes widely trusted by consistently and visibly
+ performing in accordance with the contracts being managed by hubs that
+ are already widely trusted. A working trust backbone gives highly trustworthy
+ behavior the visibility it needs to more rapidly accumulate its own reputation-capital.
+ </font></p>
<h3><font color="#000000"><a name="smart-contracts"></a>Smart Contracts</font></h3>
<p>How would such WTIIs deal with the idiosyncracies of local village tradition,
the idiosyncracies that sabotage traditional governmental attempts to