By Ethan Zuckerman, on June 14th, 2011
Latanya Sweeney urges us to rethink the challenges of privacy. She’s worked in the space for ten years and tells us that thinking about privacy in terms of the design of public spaces is a helpful and useful conceptual shift. We tend to look at the digital world in terms of physical spaces. In digital spaces, though, we can often look at someone from different perspectives in parallel spaces, and we can learn things about you that might be considered to be “private”, hidden behind some sort of a wall.
She prefers to talk about semi-public and semi-private spaces, and to consider the tension between privacy and utility. It’s not one or the other, but the sweet spot between the two. She’s rethinking privacy, particularly around the topic of big data: pharmacogenomics, computational social science, national health databases. This movement towards the analysis of huge data sets forces us to rethink within legacy environments. How do we de-identify data? What does informed constent and notice mean in these spaces? And we’re rethinking at architectural levels, too – moving towards a realm of open consent and privacy-protecting marketplaces.
Open consent has been popularized by George Church at the Harvard Medical School. Rather than asking consent or making promises or guarantees, he gives you a contract where you sign away liability, because considering future risks is simply too hard. It sounds kooky, but a thousand people have signed up. Another model is a trade secret model – what if I treat your genomic data as a trade secret? As long as I keep it private, you’re exempt from liability – release it and all bets are off. We might also think of data sharing marketplaces where we insulate participants from harm and compensate them when it occurs.
We need to think through these components:
Data subjects – we need to think through the possibility of economic harm to these actors, in part because humans tend to discount risks around privacy
Technology developers – some of these developers are her students, and she urges them to think about the power over privacy and technology decisions they exert. Video recorders record sound and video, and sound is hard to mute. As a result, videotaping often pushes us against wiretapping laws… and this could have been moderated with a $0.01 cost decision
Policymakers
Belief systems
Benefit structures
and Legacy environments
Zeynep Tufekci asks Sweeney to talk through the question of belief systems and false tradeoffs. She suggests that debates have a false belief that you’re trying to maximize privacy or utility – the key is a relationship between the two.
By Winton Bates, on May 23rd, 2011
I should begin by defining what I mean by a naïve economic model. The naïve model I have in mind is a conventional neoclassical model, with a few bells and whistles added. The bells and whistles are necessary because so called ‘rational economic man’ who is the basis of conventional neoclassical economics doesn’t practice altruism. There are probably still some economists who claim that everything everyone does is for a selfish reason, but I am not one of them. While I recognize that a lot of people do a lot of noble things for their own satisfaction, I see no reason to doubt people when they claim to be motivated by altruism.
So, in terms of the naïve model I have in mind, the objective functions that individuals follow in making choices take some account of the well-being of other people (i.e. I am assuming interdependent utilities). That means that individuals might volunteer to do something even if they perceive that this involves some cost to their own well-being. The extent that they do this would depend on the net cost in terms of loss of individual well-being and the extent that their actions affect the collective benefit they seek to obtain by volunteering. The main potential source of net loss of individual well-being would be the value to the individual of opportunities foregone from use of time in volunteering, which would be offset to the extent that the individual obtains satisfaction from volunteering, or from recognition of her efforts. The effect of individual actions on the collective benefit being sought would depend on the size of the group seeking the collective benefit. In a large groups the actions of each individual tend make a small contribution to the objective being sought, so there would be a greater incentive to free-ride on the efforts of others.
The naïve model suggests to me that people would tend to volunteer to a greater extent when they had fewer opportunities for paid employment. It therefore suggests that volunteering would tend to decline if workforce participation increased. It also suggests that volunteering would be a substitute for other forms of charitable giving – people with time on their hands would tend to volunteer their time and people in well-paying jobs that give them little leisure would be more inclined to put their hands in their pockets to make financial donations. It also suggests that people would tend to volunteer to a greater extent in small, well-defined communities (e.g. country towns) where their efforts are more likely to be recognized that in major urban centres where individuals are more likely to get lost in the crowd.
How well does this naïve model explain volunteering in Australia? Not particularly well. The first point I noticed when I looked at the relevant section of the Productivity Commission’s recent report on ‘Contribution of the Not-for-profit sector’, is that there has been a consistent upward trend in rates of volunteering across all age groups over the last decade, although this has been offset to some extent by a decline in the average number of hours volunteered. This has occurred at a time when labour force participation has continued to increase.
As might be expected, ABS data show that volunteering rates are higher among women than among men. The difference is confined mainly to the 35-44 year age group – when most female volunteering could be expected to be associated with school canteens etc. People with young children are the group most likely to volunteer regularly, but they spend fewer hours per week volunteering than do people with older children and older people without children.
Again, as expected, the rate of volunteering is higher outside capital cities than within capital cities. But the difference is not huge. The rate for regular participation in voluntary work was 19% in capital cities and 23% outside capital cities in 2006.
The naïve model would not predict that employed people would be more likely to volunteer than unemployed people. For women, although those in full-time employment had the lowest rates of regular volunteering, those who were employed part-time had higher rates of regular volunteering than those classified as unemployed. For men, rates of volunteering for those in full-time and part-time employment were the same and higher than for those who were unemployed.
The most surprising departure from the naïve model relates to donations of money as a substitute for donation of time. I know such substitution does occur, but it doesn’t show up in the ABS survey data. Volunteers are much more likely to have donated money or contributed financial assistance to someone outside the family in the last 12 months than non-volunteers.
In order to explain non-volunteering we seem to need a model of behaviour that recognizes that volunteers and non-volunteers have different personal characteristics. It seems that non-volunteers tend to have relatively weak links to the community in general. The evidence suggests that they are much less likely to have attended a community event recently. They are also less likely to agree with the proposition that most people can be trusted.
By Winton Bates, on December 13th, 2010
There are some fairly obvious reasons why societies characterized by low levels of inter-personal trust tend to be highly regulated. In a society where people tend not to trust each other there is likely to be less adherence to social conventions and there is likely to be more political pressure for the use of government regulation to deter anti-social behaviour. Causation can also be expected to work in the other direction. In a society where it is impossible to conduct market transactions without breaching some regulation it is only to be expected that many people will wonder whether those with whom they are dealing can be trusted not to dob them in to the authorities. Regulation promotes low trust.
So, what is likely to happen to levels of inter-personal trust following substantial deregulation in a highly regulated, low-trust society. As a general rule I think it would be reasonable to expect that greater reliance on market disciplines would generally promote more trustworthy behaviour. Individuals and firms would find that it pays to develop a reputation for trustworthiness and this would result in higher levels of inter-personal trust. Such attitudes could be expected to be associated with public support for deregulation policies.
However, evidence presented in a paper by Philippe Aghion et al, entitled ‘Regulation and Distrust’, suggests that an opposite tendency was more common in countries undergoing transitions away from socialism in the 1990s. Data from the World Values survey indicates that levels of inter-personal distrust increased in most of these countries during that period. There were also substantial increases in distrust of civil servants, justice systems and business. Most households perceived that corruption had increased. The surveys suggested that there was also an increase in tolerance of corruption (bribe taking) and a reduction in the proportion of the populations who considered tolerance and unselfishness to be important attributes to teach children. Not surprisingly, there was also an increase in the proportion of the populations who disliked competition and private ownership of firms.
The authors suggest that those findings are a consequence of low levels of social trust prior to transition. Their model predicts that in a low trust society entrepreneurs will tend to be less civic-minded (because they need to pay bribes in order to enter the business) so liberalization of entrepreneurial activity will tend to result in an increase in negative externalities (e.g. pollution) and an increase in corruption. They conclude: ‘Liberalization of entrepreneurial activity starting from a low level of social capital has increased corruption, invited a demand for greater state control of economic activity, and reduced trust’. At the end of their paper the authors suggest that public education might provide a way forward for transition economies by leading the way toward greater ‘civicness’, lower regulation and higher productivity.
One of the merits of the model put forward by Aghion et al is that it is capable of explaining why many people in countries with bad governments may want more government intervention. The benefits of liberalization of entrepreneurial activity are perceived to be outweighed by the costs.
I am not convinced, however, that the poor outcomes of reforms in transitional economies should be attributed to low levels of social trust prior to transition. An alternative explanation is that the reform process was poorly managed so that instead of a transition from socialism to competitive markets – permitting mutually beneficial exchange that had previously been prevented – these countries underwent a transition from socialism to crony capitalism following the collapse of communist governments. The evolution of attitudes to business may reflect the rent-seeking entrepreneurship to which people were exposed. Under the prevailing circumstance it may not have been possible for the reform process to have been better managed in the transitional economies, but this means that their experience may not be of much relevance to other low trust, high regulation countries.
Rather than focusing on the transitional economies as a group it might be interesting to consider whether different reform strategies adopted in different countries (including other countries such as China and India in the analysis) have had different effects on levels of social trust.
By Bron Suchecki, on August 3rd, 2010
I have a book in my library called The Social Construction of Reality. Its basic thesis is that reality is socially constructed, or to put it another way, reality is what people believe it is. For example, if you moved to a new town and a rumor was circulated that you were an axe murderer, then you can imagine that people would avoid you, police would monitor you and if there was a murder, you would be an immediate suspect. Even though it was not true, you would in effect be experiencing the life of an axe murderer, at least in how people related to you. For you it would become reality because the social group believed it to be true.
You said “But if “smart” dollars of size (or let’s just say all dollars of size) are not getting a bid from real physical gold of size… and only “idiot” dollars are getting a bid from “paper gold”… can we really say the gold basis is reflecting reality?”
My contention is that if the social belief is that paper gold is as good as physical gold then for all intents and purposes it is. As a result the basis reflects that and does not go into backwardation because people are accepting paper gold bids for their dollars. Saying this does not mean I condone it, but while the social belief continues, what the real “level of physical gold’s bid for dollars” is does not matter regarding price.
There is little proof I have for my claim that we are still in phase two of the Degrees of Distrust as the gold market is opaque by nature. One fact I do have is the recent revelation by the Financial Times that the 346t of gold for the BIS swap “came mainly from investors’ deposit accounts at the European commercial banks”. That is 346t of trust by those investors and indicates there are a lot of people who still believe in the system.
I can’t 100% sure where we are at, but would caution against too much optimism. If we are still in phase two then a lot of education is still called for. I think the mass market is still not into gold in any major way and when it does it needs to be directed into products that take real physical off the market. We have to ensure investors are properly informed, that they understand the true “gold reality”. 
By Bron Suchecki, on July 30th, 2010
My last blog was ultimately about trust and that maybe the basis is telling us that there is still trust in the system. After writing it I remembered the presentation I made to the 2009 Gold Standard Institute seminar in Canberra. Below is the conclusion from that presentation, where I proposed four phases, or degrees of distrust:
1st Phase
We start to see increasing investment in gold reflected by increasing balances in COMEX or ETFs or GoldMoney etc, but the majority of people still hold fiat and stocks/shares. In respect of gold, people have no problem with storing their metal in “the system”.
2nd Phase
We start to see occassional backwardation which comes and goes and it usually only between cash and shorter futures/maturities – 1 to 2 months. This backwardation is arbitraged away by longs who still have belief in the system(s) so are willing to take the risk to make a profit. Gold is still held in the system but growth in reported balances is slowing.
3rd Phase
We see more backwardation periods, prolonged and now not just shorter maturities but maybe 3 month going to small backwardation. It demonstrates less interest by longs to take the risk. Possibly start to see reported balances of ETFs and less reputable custodians starting to stablise even though gold price still rising, which would puzzle ignorant commentators. A physical squeeze is developing.
4th Phase
Now backwardation persists, it is a permanent state in shorter maturities, increasing to longer maturities. Reported ETF balances are declining. A clear signal not all is well. Gold is being pulled and stored outside the system. The strong hands are in the majority, the squeeze is really on.
I’d say we are just starting in the 2nd Phase.
By Bron Suchecki, on April 23rd, 2010
A couple of quotes from Andy Smith’s Precious Thoughts commentary 19 April 2010 I like:
“the euro, still, arguably the most toxic structured product built by man”
“But this [SEC vs Goldman Sachs] is a never-ending story: The Inquisition -> Salem -> McCarthy -> Spitzer -> and here we are. It’s about politics/power/control. Guilt/innocence bit players.”
“Goldman were arguably the hub in the wheel [or at least the ball bearings; so this is not Lehman 2, but Lehman *2?]. Big Gov is about to put a boot in the hub. Watch what happens to the spokes: – ‘Counterparty’ a dirty word? We are closer to that Indian village end-game; extended families the only circle of trust, assets you can sleep nights over and on, in your mattress, the only rational investible products. The opposite of ‘synthetic’ is ‘real’.”
If indeed counterparty becomes a dirty word, and people won’t trust gold ETFs/GoldMoney/Perth Mint Depository or any other custodial facility, the problem is that the minting and refining industry as a whole does not have the production capacity to meet retail/mass market demand for coins and bars in my view. Look forward to high premiums and/or rationing of production. See my posts:
FUD. Fear, uncertainty, doubt. and
Why are there not enough coins?
Remembering that the ones who made money from the gold rushes were those selling picks and shovels to the prospectors, then if I am right the smartest investment will not be gold, but minters and refiners of gold. 
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