Post-Scarcity Economics And The Basic Income Guarantee

Universal Basic Income

I’ve been hearing the term “post-scarcity economics” tossed around more frequently in recent memory, including by a lot of smart people, and usually in the same sentence as “basic income”. A college friend of mine (who I have economics debates with somewhat often) as well as the commenter “crocket” bring up post-scarcity quite often, and believe that this condition fundamentally changes the nature of our economic lives.

I must confess that I don’t fully understand what they mean when they refer to “post-scarcity”; having now done significantly more research into it, I can see that this is partly because the term is used inconsistently (some people even claim that we’ve already reached a post-scarcity world!). My initial reaction has always been: “Post-scarcity? There’s no such thing! Even if all goods and services became superabundant, there would still be scarcity in terms of time and space, so the laws of economics will still hold true! Ha!”

And yeah – to the straw man I had created in my head, this is still the correct response. But the actual arguments regarding post-scarcity are at least sometimes a bit more nuanced. In this article, I will explore this concept a little more thoroughly, with a particular emphasis on the alleged implications of a move towards a more post-scarcity world: massive technological unemployment and the need for a basic income guarantee (BIG – or universal basic income, UBI). While I will ultimately arrive at the same conclusions (that is, free markets are still the way to go), I will have to put in a little more effort to defeat those arguments and policy proposals.

 

What Does It Mean To Be In A “Post-Scarcity” World?

Here, I will attempt a sort of Ideological Turing Test with respect to arguments regarding post-scarcity economics. If I have not presented the arguments properly, my apologies – please leave a comment and let me know.

For a very rough idea of what a post-scarcity world would look like, consider Star Trek. Although far from a perfect example of a world beyond scarcity, a piece of technology called a replicator allows for the creation of any material good, quickly and easily, and at no cost. Want some beef tenderloin? Boom, you got it. How about a diamond-studded file cabinet? No problem. Why do you want that? Doesn’t matter.

Replicator Star Trek

It sounds implausible (and friggin awesome!), but it isn’t all that farfetched to think that as technology progresses, something close to a replicator may one day exist. Advances in nanotechnology are bringing us closer to that reality; as 3D printing gets more and more economical, it will certainly become cheaper and cheaper to produce nearly any material good, massively driving down scarcity. Perhaps in 100 years, individuals will be able to 3D print their own disposable private jets at a fraction of the cost of a flight today.

Ultimately, this could lead to a world where goods, services, and information are universally available to individuals without the need for employing capital or engaging in exchange with others in order to acquire them. But before getting carried away in fantasizing about this future, let’s consider what this would actually mean for real people. As manufacturing and services become automated, more and more of the jobs that people need to survive will disappear.

This is where people like me will usually chime in and accuse those espousing the idea of technological unemployment of succumbing to the Luddite fallacy. We argue that technological unemployment does not occur because, while automation may displace workers, the increase in productivity simultaneously leads to lower prices, which then stimulates demand in new industries, leading to the hiring of more workers. Clearly, this has been the case throughout most of human history. But automation is accelerating at an unprecedented pace (some estimate that 47% of jobs in the US will be automated within the next 20 years), so do we have any assurances that this will continue to hold true?

Scott Santens (thank you to “crocket” for pointing me to his articles) provides an example of this kind of acceleration:

“Web design is a newer job. It hasn’t been around very long. However, it’s already easier for people to create their own websites, and it’s also easy for someone in India or China to design a website at a much lower cost than others can possibly bid who have higher costs of living. A barber in the US doesn’t compete with barbers in India, but a website designer does. And the ease of website creation tools makes web designers less necessary, even though this was a job that was JUST created recently.”

Here’s my own formulation of this possible progression:

  1. Robots replace factory workers at creating some good.
  2. The price of that good decreases, leading to increased demand for all sorts of new things, leading to job creation in other industries. New workers need to be hired to design these robot workers as well.
  3. A robot-building robot is created, so the employees of the robotics company all lose their jobs too.

And even if the Luddite fallacy is correct and that, in the aggregate, jobs aren’t lost due to automation, there is still the issue of preventing the temporarily displaced workers from falling into poverty between jobs. When a new mousetrap is invented, how do we ensure that the employees at the obsolete mousetrap factory don’t starve? And what happens as better mousetraps are invented faster and faster?

First, let’s consider the nature of the new jobs that are created as technology progresses. If factory workers are displaced and robot-software writers are in higher demand, it’s not as though the low-skilled former factory worker will suddenly start designing robots. The new jobs may require certain skills – skills which the displaced workers won’t magically possess. This suggests things like unemployment insurance or retraining programs may be appropriate governmental responses.

Even that might be too optimistic, however. It assumes that the jobs that automation is destroying are low-skilled (and thus low paying) ones, and that more highly-skilled (and lucrative) jobs are being created. But what we’ve actually seen is that middle class jobs are largely disappearing, high-skilled jobs have been stagnant, and most job growth has been in low-skilled (and low-paid) industries – and those low-skilled jobs are at further risk of automation in the future anyways. In the meantime, of course, these low wage jobs aren’t necessarily the most satisfying ones. If technical progress is so great and not causing problems, then shouldn’t our lives be getting easier? Shouldn’t we be working less? After all, that was the case for most of history, where labor-saving technology has reduced working hours and increased standard of living.

But that doesn’t appear to be the case. Those who continue to work (and even that number is in decline) are working longer hours than before, as Scott Santens points out.

“The combined effects of technology and the globalization enabled by it are eating jobs, but for those left working (who are by and large earning less), they actually need to work more. Instead of jobs requiring the 5-6 hours of work a day they actually on average now require, we clock in more than 8 hours as a matter of survival. Instead of working one full-time job 40 hours a week, we work one full-time job 47 hours a week, or multiple part-time jobs even more than 50 hours per week to compensate for the lower pay.”

The solution that he proposes is to sever the connection between work and income – perhaps by instituting a basic income guarantee, where the government gives everyone some amount of money without any conditions or strings attached.

“If technology has reached the point where hardware and software are together doing much of our work for us, then we have to pay each other what our technology is not earning as income and not spending into the economy as a consumer. We have to give it to ourselves and spend it ourselves, because it’s not going to…We need to make sure everyone starts earning a non-work related income so that everyone can be consumers in an economy increasingly populated by non-human labor.”

Markets are sub-optimal under current conditions. People without money cannot “vote with their dollars” for the goods that they want, but a basic income could address this problem.

“Right now only those with the means to pay for bread have a voice for bread. We love to use the term, “voting with our dollars”. So is the outcome of that daily election accurate? Does everyone have a voice for bread? No, they don’t. There are people with no voice, because they have no dollars. The only way to make sure the market is working as efficiently and effectively as possible to determine what should be getting made, how much to make of it, and where to distribute it, is to make sure everyone has at the very minimum, the means to vote for bread. If they have that money and don’t buy bread, there’s no need to make and distribute that bread. If the bread is bought, that shows people actually want that bread.”

People such as myself often complain that a basic income would dramatically reduce work effort, but when tested, the reduction in employment or hours worked has been small.

“The findings from the accompanying large-scale experiments done in cities like Seattle and Denver found that surprisingly, hardly anyone actually stopped working, and instead reduced their hours slightly, with men reducing their hours the least – by a maximum of 8%. This slight reduction in hours was then replicated to even less of a degree in Canada’s Minimum Income (Mincome) experiment, with men choosing to work as little as 1% fewer hours.”

For a little while, the robotic revolution started to look bad – but with a basic income, it is something to be celebrated! We can work towards a future where jobs simply aren’t necessary. Everyone gets paid, everyone can afford to live, and time will be freed up for people to work on things they are passionate about. More art, more music, more leisure, more open-source collaboration….more creativity, in general. In other words, a basic income would help us truly usher in a more Star Trek-esque existence! From Rick Webb’s influential article on The Economics of Star Trek:

“Imagine there’s some level of welfare benefits in every country, including America. That’s easy. That’s true. Imagine that, as the economy became more efficient and wealthy, the society could afford to give more money in welfare benefits, and chooses to do so. Next, imagine that this kept happening until society could afford to give the equivalent of something like $10 million US dollars at current value to every man, woman and child. And imagine that, over the time that took to happen, society got its shit together on education, health, and the dignity of labor. Imagine if that self-same society frowned upon the conspicuous display of consumption and there was a large amount of societal pressure, though not laws, on people that evolved them into not being obsessed with wealth. Is any of that so crazy? Is it impossible?

“Citizens have no financial need to work, as their benefits are more than enough to provide a comfortable life, and there is, clearly, universal health care and education. The Federation has clearly taken the plunge to the other side of people’s fears about European socialist capitalism: yes, some people might not work. So What? Good for them. We think most still will.

“…presumably, you take whatever job you want, and your benefits allocations are adjusted accordingly. But by and large you just don’t care, because the base welfare allocation is more than enough. Some people might care, some people might still care about wealth, such as Carter Winston. More power to them. They can go try and be “rich” in some non-Federation-issued currency. But most people just don’t care. After all, if you were effectively “wealthy” why would you take a job to become wealthy? It pretty much becomes the least likely reason to take a job.”

Basic Income Robots Took My Job

But, as Marshall Brain argues, this is not inevitable, and we are at a fork in the road where society can either move towards this amazing future, or degenerate into a cesspool of inequality and poverty.

“With most of the rank and file employees replaced by robots and eliminated from the payroll, all of the money flowing into a large corporation has only one place to go — upward toward the executives and shareholders. The concentration of wealth will be dramatic when robots arrive.”

Workers will get none of this, because there will be no workers. The basic income will prevent the masses of unemployed from falling into abject poverty, while freeing people to innovate.

“It would be a huge boost to the American economy:

  • The economy would be strong because of all of the consumer spending.
  • The economy would be stable because income (and therefore spending) would be guaranteed.
  • With $25,000 per year to spend, innovators would no longer be forced to work — they could focus their energy on innovation, living off of the $25K per year they receive. Inventors would have time to invent, writers to write, entrepreneurs to breed new companies, etc. They could devote all of their time to innovation.
  • There would be billions of dollars for people to invest, especially in their own businesses. And investors would have a stable marketplace into which to introduce new products.

Most importantly, it would create a nation where the citizens are truly free. If every person had $25,000 per year in today’s dollars to spend, they would be able to live their lives even if they lost their jobs. If robots took their jobs it would not be catastrophic. People would be able to weather the robotic takeover, retrain and move into new careers.”

Of course, giving everyone $25k/year will be expensive – where will that money come from? He proposes a few suggestions, some better than others.

  • Sell ad space on the back of dollar bills
  • As in Alaska, the revenue from government selling natural resources can be put towards basic income
  • Fining corporations for flouting regulations
  • Auctions of state property [I like this one!]
  • Lotteries [but then the money is coming from the rubes who buy into the lottery…doesn’t seem like much of a solution to me]
  • “Extreme” income taxes on wealth above some high amount
  • “Extreme” estate taxes
  • “Excessive” profit taxes
  • Sin taxes and/or taxes on luxury items
  • Selling copyright extensions
  • Selling naming rights
  • Punitive damages from lawsuits can go into a central fund and be disbursed to the people instead of going into government coffers [I kind of like this idea…but shouldn’t the punitive damages go to the victim, rather than everyone?]
  • A national mutual fund, owning shares in every corporation in the US and that every citizen has equal ownership. When a company incorporates, some percentage of its shares are automatically given to the fund. Or, when a corporation declares retained earnings, some of these are used to buy up shares and provide them to the national mutual fund.

Of course, much of the funding would come from dramatically reducing or eliminating other welfare programs and subsuming all aid under the basic income banner.

By the way, for a more “moderate” view of what to expect during the progress toward post-scarcity, I recommend reading the essay “Economics of the Future” by Melanie Swan.

 

The Real Path To Post-Scarcity

Okay, Ideological Turing Test over. Note that many if not most supporters of the basic income would not think of their position in the way described above – not everyone supports it on the basis of technological unemployment and post-scarcity. I suspect that the majority of progressives who support basic income do so because it “helps the poor” or some generic platitude like that. There are even a good number of libertarian supporters of basic income, including Matt Zwolinski and Peter Vallentyne, who think that it would be a better replacement for the bloated and inefficient welfare state.

It’s also becoming more important to address the arguments over basic income considering how it is becoming more significant politically, and will likely become a reality in some places in the near future. But before discussing the issues with a basic income, I want to make a few comments regarding the post-scarcity argument sketched above.

The otherwise brilliant Stephen Hawking essentially summarizes the argument as follows:

“If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality.”

But how does this make sense? If goods are superabundant, how can people be miserably poor? Presumably, the massive class of poor people would exist if all of the superabundant goods are owned by a wealthy elite who refuse to share (and if they have more than they know what to do with, why wouldn’t some of it get shared?). This seems like an odd conclusion to me, for a few reasons.

First, if technology makes most goods ridiculously cheap or even free, then these goods would be accessible even to poor people. In particular, the prices of the factors of production, such as robots or other automation technology, will go down dramatically as we move towards this world. As 3D printing gets cheaper and cheaper, we get closer to the world of “replicators”. Since the means of production are cheap, they are easily available to a wide segment of the population, which allows this large group to become effectively self-sufficient. I don’t really need a job if I have a machine that lets me print my food, clothing, etc. There’s no need for a basic income or any kind of wealth redistribution here.

Not only that, but the proliferation of machinery doesn’t preclude people from working in exchange for money. So long as an individual’s marginal productivity is greater than zero, there is something that they can do (unless government regulations like the minimum wage get in the way, of course). Machine ownership doesn’t eliminate gains from trade, so machine-owning people will still specialize in things and exchange goods and services with others. If there is economic activity like this, then people will be capable of supporting themselves – with a vastly higher standard of living.

In general, it seems like those who support the basic income on the basis of post-scarcity economics do so as a step on the path to a post-scarcity world, but find it somewhat irrelevant once we have reached post-scarcity, since goods are freely available. But there are certain goods or industries where we have already reached post-scarcity; for instance, digital goods (intellectual property laws merely get in the way of true post-scarcity here). If we’ve reached post-scarcity in some industries without basic income, why would it be necessary for ushering in post-scarcity in general?

The reality is that, absent government intervention, the path towards post-scarcity will be a wonderful one. It has already been happening since the advent of capitalism, despite the ways in which governments and their corporate allies collude to produce artificial scarcity. Poverty has dramatically declined over the previous two centuries.

absolute poverty reduction

As scarcity continues to be reduced over time via capital accumulation, people will become increasingly rich, just as we are incredibly wealthy now compared to people in the Middle Ages. Back in the day, the norm was subsistence living. Nowadays, most of those we consider poor have things that would have been considered luxuries 100 years ago, and are certainly not living in their own filth like the masses did prior to capitalism. I’m not saying it’s great to be poor today (plus, there are still some living in truly abject poverty, but mostly in the third world), but the life of today’s poor is incomparably better than that of nearly everyone before capitalism and (relatively) free markets led to capital accumulation.

So, moving forward, what happens as this process of technological advancement and capital accumulation accelerates dramatically? Does technological unemployment become the serious issue that post-scarcity theorists (and Stephen Hawking) imagine?

More likely, as we got closer and closer to replicator-like devices, production costs would drop dramatically faster than wages would, such that real incomes would skyrocket. If a year’s worth of food costs a dollar, people would be willing to work for dramatically lower nominal wages. Someone making “merely” a dollar per day in this world would have access to more real resources than most of us are used to. Who cares if 90% of today’s jobs are wiped out by automation? Anyone would be happy to work for a dollar per day (or less), and anyone who does have resources would hire them to do whatever – perhaps things like creating art, music, and literature to increase culture in this post-scarcity world. What about the “worst” case scenario where machines replace all our jobs? That would be fantastic! We could just sit around and enjoy it!

The upshot is that robots and automation will make us incredibly wealthy, and our lives vastly easier. Comfort and even luxury will be available to the masses. This could very well reduce the “need” to work or “eliminate jobs” in a certain sense. It will allow people to pursue whatever they want – writing, making music, inventing things, coding, etc., with far less pressure to survive, and far more freedom. This is a fantastic thing, and does not require basic income at all. It makes surviving and thriving even without a basic income that much easier. In fact, a basic income is liable to delay or even prevent this future from occurring.

Let’s keep in mind that we will not reach post-scarcity due simply to technological advances alone. While necessary, the accumulation of sufficient capital is also necessary to allow us to utilize these technologies. And capital accumulation is far from a given – government policies that discourage production, savings, and investment will all slow it down, or even lead to capital destruction. The basic income discourages work, and thus production. It also discourages saving and investment, due to the higher taxes involved as well as the existence of a safety net which would leave little incentive to save. Those who argue for basic income seem to believe that production just happens on its own, and has nothing to do with the existing institutional structure.

Ultimately, technological unemployment comes from automation advancing more quickly than people can learn new skills. But perhaps technological advances will close this gap as well. Brain-computer interfaces could allow us to more directly upgrade the human mind so that we can easily adapt to new job demands as they crop up, should we so desire. This would arguably make the whole discussion moot.

 

Basic Income Problems

Basic Income Bad Time

The favored policy proposal of those futurists looking to usher in a post-scarcity world is some variation of basic income. I say “variation” because most of what has actually been tested in the real world is a negative income tax (NIT), something a little different from the basic income, which is just a flat payment for everybody. The NIT would be a single payment that supplements the income of the unemployed or low-paid, and gradually decreases as income rises. Both policies share the quality of providing a minimum income for everyone. In practice, the two are essentially the same, since basic income proponents generally concede that it would be necessary to “claw-back” some funding from the rich through the tax system in order to make it affordable. The NIT provides an amount of money that varies by income, and the basic income provides the same amount to everyone but taxes different amounts to make it back. As such, I will largely consider the two policies interchangeable in this section (and use the term “basic income” to mean either, unless otherwise specified), though technical details differ.

Supporters of basic income proposals often point to several experiments that were done during the 20th century and showed, according to them, that the primary fear of basic income detractors – reduced work hours and employment – did not materialize. Unfortunately for its proponents, these basic income experiments need not be interpreted so generously, and contain methodological flaws that are even more damaging. A great summary of some of these experiments is provided by John Goodman:

“The experiments were all controlled. Randomly selected people were assigned to a “control group” and an “experimental group.” The latter received a guaranteed income, and the program even used Milton Friedman’s term for it: a negative income tax. The largest, longest and best-evaluated of these experiments was SIME/DIME (Seattle Income Maintenance Experiment/Denver Income Maintenance Experiment) in Seattle and Denver. And the results were not pretty. To the dismay of the researchers, they largely confirmed what conventional wisdom had thought all along. As I reported in “Privatizing the Welfare State“:

  • The number of hours worked dropped 9% for husbands and 20% for wives, relative to the control group. For young male adults it dropped 43% more.
  • The length of unemployment increased 27% among husbands and 42% for wives, relative to the control group. For single female heads of households it increased 60% more.
  • Divorce increased 36% more among whites and 42% more among blacks. (In a New Jersey experiment, the divorce rate was 84% higher among Hispanics.)

BTW, these results have been studied and studied over and over again and there is a large literature on them ― almost all of it written by researchers who detested the outcomes. Good summaries are provided by Charles Murray and Martin Anderson.

Both authors point out that the results are even worse than they appear at first. For one thing, the “control group” had access to conventional welfare available in the 60s and 70s. So this was by no means a pure (welfare free) control group. Also, the enrollees were given different instructions about how long they could expect their guaranteed income to last. It turns out that the longer the guarantee, the worse the negative effects.” [emphasis mine]

In other words, these basic income experiments demonstrate what us detractors most fear – a demonstrable loss of work effort. Many of the post-scarcity writers look at this as a positive, but as we saw above, we need people to continue working and producing if we are ever to achieve this post-scarcity dream. 

A basic income supporter, Philip K Robins, analyzed the consensus estimate of labor supply effects of these negative income tax experiments. The conclusion is that males and heads of households worked two fewer weeks less per year, wives and single women head-of-households lost three weeks per year, and youths supplied four fewer weeks of labor. Since women and young people generally work fewer hours than men, the percentage decrease in their labor supply was dramatically greater. What social effects might this have, as youth grow up and become heads of households, but have significantly less work experience?

These estimates of labor supply lost may not seem catastrophic, but methodological issues with these studies suggest that the effects of basic income policies could be substantially worse. These experiments take place over a very limited time and space, so peoples’ expectations about the future of the program are very different. If the basic income experiment only exists in your town and for only a couple years, you know you will need to work in a few years or if you move, so you are more likely to continue working now in order to keep up your skills and employability (though in some experiments, recipients continued receiving benefits even if they did move). But if a basic income were widely applied, people wouldn’t expect to need to work a year later. In other words, the basic income experiments are heavily biased. Research (Halla et al) demonstrates that the effects of the welfare state take time to kick in, so these experiments that only lasted for a limited period of time are not accounting for the full employment effects.

“Our findings corroborate the theoretical literature which assumes that disincentive effects of a generous welfare state materialize only with some time lag. In particular we show that a high level of public social expenditures and a high unemployment rate are associated with small positive (or no) immediate impact on benefit morale, which is crowded out by adverse medium and long run effects…Our results are consistent with the fundamental supposition that individuals do not response [sic] to changes in economic incentives immediately, since they are constrained by social norms for some time. Essentially, our results suggest that the welfare state destroys its own (economic) foundation and we have to approve the hypothesis of the self-destructive welfare state.”

For what it’s worth, there is some empirical evidence that a basic income, as opposed to a negative income tax (the above experiments used a NIT), is likely to cause even greater labor supply issues. As the fraction of negative income tax recipients increases in a population, the number of labor hours decreases. The basic income, of course, raises that fraction to 100%.

In addition, these experiments do not create “closed” systems, where the costs of the program are borne in aggregate by the same group who benefits. The tax revenue for a larger geographic area is used to fund an experiment over a small subset of it, so only the positive aspects of basic income are studied, without looking at the costs. In other words, if the town where the experiment was conducted saw an uptick in economic activity, this is because they sucked money out of other areas. A properly run experiment would have Seattle taxpayers funding the Seattle basic income.

A study by the Boston Fed analyzed the basic income/negative income tax experiments in more detail, both positive and negative effects. Here are a few:

  • “As much as 40 to 58 percent of the added transfers for two-parent families would be offset by earnings reductions on the part of husbands and wives. The problem is less severe in the case of single mothers, where earnings would fall by only 16 to 20 percent of additional costs.”
  • Luckily, recipients did not squander their money on fancy cars and drugs, like some conservatives fear: “Consumption rose modestly, as would be expected with a slight rise in income, but the pattern of expenditures remained unchanged from that which existed in the absence of the payments.”
  • Youths spent additional time and money on education, at least during the experimental period. However, scholastic performance did not improve.
  • There was no beneficial impact on healthcare outcomes or psychological well-being.

The study also noted some issues with the experimental design.

“Arnold Zellner and Peter Rossi touched off a heated debate with their sharp criticism of the goals, design, execution, and analysis of the income maintenance experiments. In their opinion, inadequate attention was devoted to formulating clear-cut objectives. For example, to the extent that the goal was to estimate the cost of alternative negative income tax plans, the experiments were not really designed to provide the appropriate information. Feasibility studies or pilot projects were generally nonexistent. Serious measurement problems were not adequately resolved. Design statisticians, survey experts, and other specialists did not play an active enough role in the planning and execution of the experiments. Management and administration procedures were not completely satisfactory, Policymakers and researchers did not share clearly stated objectives. The experimental designs and the models on which they were based were frequently inadequate. Finally, the quality of reporting of results left much to be desired.”

“Charles Murray added three other reasons why the experiments failed to determine whether the negative income tax was good policy. First, no minimum baseline income standard exists that will enable everyone to have a decent standard of living. The conventional poverty index is meaningless, because it cannot discriminate between living a low-income life in the inner city and in a small town. A family at the poverty line might live decently in a civilized, functioning community, such as a small town in Missouri or Colorado, but be unable to survive on two or three times that amount in the South Bronx. Second, no one has considered what happens after a negative income tax is introduced nationwide and some people still have inadequate food and shelter; the merits of an income maintenance scheme that supplants the current system are very different from one that supplements it. Finally, the experiments were forced to focus on measurable outcomes and therefore provide no insights on noneconomic rewards, such as the psychic gains that people receive from earning their own income.” [emphasis mine]

There was an actual historical instance in Speenhamland, England, where a basic income guarantee was instituted which is far more instructive than looking at these flawed experiments.

“The experiment was the Speenhamland system, which was implemented in England 1795 and dismantled in 1834, was intended to make sure that country laborers had enough income to live. It was intended as an emergency measure to help the poor when grain prices had risen sharply due to meager harvests. The justices of Berkshire decided to offer income support to supplement wages, with the amount set in relation to the price of bread and the number of children in the household, so that the destitute would have a minimum income no matter what they earned.

Even though it was never codified as law, the Speenhamland approach was adopted in country towns all across England and in a weaker form in some factory towns. It was widely seen as a “right to live.” It was neither universal nor consistently implemented, but it nevertheless appears to have been fairly widespread. It reached its peak during the Napoleonic Wars, and was wound down in many small towns before it was effectively abolished by the new Poor Law of 1834. Not surprisingly, the Speenhamland system existed in its strongest and most durable embodiment in areas where the threat of violence by the impoverished was real. But another reason it lasted as long as it did despite the costs it imposed on local landlords was it kept the poor in place with their wages fixed at a bare subsistence level. Rural property owners wanted to keep workers from decamping to towns and cities in search of better paid employment. A smaller pool of local laborers would lead to higher wage levels.” [emphasis mine]

The basic income also dramatically reduced productivity. Quoting Karl Polanyi,

“Under the Speenhamland Law, a man was relieved even if he was in employment, as long as his wages amounted to less than the family income granted to him by the scale. Hence no laborer had any financial interest in satisfying his employer….Within a few years, the productivity of labor declined to pauper level, thus providing an added reason for employers not to raise wages above the scale. For once the intensity of labor, the care and efficiency with which it was performed, dropped below a definite level, it became indistinguishable from “boondogling”…” [emphasis mine]

How is this more humanitarian? How would this help usher in the prosperous, post-scarcity world that we seek? The effect was to make people complacent, but remain living at a subsistence level – while simultaneously decreasing overall productivity in the economy as a whole. Clearly, this result would hamper progress towards post-scarcity.

That being said, there are admittedly both pros and cons to a guaranteed basic income. Michael Tanner of the Cato Institute performed an analysis. Some advantages include

  • More transparency than our current system
  • Potential savings on administrative costs
  • It is less intrusive and paternalistic to the poor than the existing hodgepodge of programs.
  • If administered properly, it could replace some of the disincentive to work that current welfare programs provide, by not penalizing individuals who do choose to work. For more on this, see Ed Dolan’s articles here and here.
  • It could reduce the bias against marriage that current welfare schemes have.

Done properly, I believe that a libertarian could reasonably support a basic income if it completely substituted the awful welfare programs that already exist. However, it is poor policy on its own, and it is far from certain that it would end up replacing welfare rather than just getting added on top of it.

The cost of implementing a basic income would be enormous, particularly if it didn’t replace Social Security and Medicare – programs that, politically, would be vastly more difficult to replace than the standard welfare programs.

“The current poverty level for a single nonelderly individual is $12,316. Spread over 296 million U.S. citizens, the cost of such a program would be nearly $4.4 trillion, more than our entire federal budget today, and more than 4 times our current welfare expenditure (including both federal and state welfare spending). Even if the guaranteed national income replaced every existing anti-poverty program, we would still be some $3.4 trillion short.

“According to the most recent Congressional Budget Office estimates for the cost of federal programs, eliminating all income transfer programs—the entire edifice of the American welfare state—including Social Security, Medicare, Medicaid, unemployment insurance, and so forth (but excluding tax expenditures), would yield only $2.13 trillion. If we also included so-called tax expenditures such as the mortgage interest deduction and the exclusion of employer contributions, as well as Social Security, and EITC and CTC related tax expenditures, we could add an additional $393 billion for a total of $2.5 trillion. That still wouldn’t be enough.” [emphasis mine]

The basic income would also provide an absurdly large windfall for families with lots of children. Each marginal child costs significantly less to raise, so large families could be raking in far more than the poverty level, particularly compared to single individuals. Surely, there would be abuses – parents who have children solely to collect the extra money, but don’t actually take care of their kids. Of course, this issue could be eliminated by only giving adults the benefit, rather than everyone. If payments were restricted in this way, the cost of the program would decrease to a “mere” $2.7 trillion, which is still too high (and the added complexity of the program would require further administrative costs).

income tax

As an aside, there are some who, following Georgist philosophy, believe that funding from natural resource rents could be used to provide a livable income for everyone. These people grossly overestimate the value of these rents. I will not go into detail here, but the interested reader can check out this and this.

Other factors will add to the practical complexity and difficulty in implementing a basic income guarantee. What is to be done about immigration? If the US had a basic income, the borders would need to be locked down in order to stem the influx of immigrants from poor countries, or else see the costs of the program skyrocket further. But a primary argument in favor of basic income is the humanitarian one of making sure everyone can live a life without abject poverty. It seems, to me at least, that excluding foreigners who most likely need that money more would run counter to this intent.

And what about people with disabilities? Are they paid the same amount as everyone else, despite clearly having a higher need? Do we need to bring disability insurance back into the overall welfare scheme? It seems highly unlikely that a basic income would actually be as simple as its proponents claim, or that it would eliminate all other welfare benefits. And all of this added complexity, of course, adds further administrative costs. Think of it this way: if someone gets sick, did not purchase health insurance, and requires more health care than they can afford with the basic income, do you honestly think people will just say “okay, it’s time for you to die now!”

There will also be regional differences in what a livable income would be, so payments could not simply be the same for everyone. A livable income for someone in rural Montana might be four times less than someone living in a major city. And what happens when people move? Or for people who travel frequently? Again, more administrative costs.

Political pressure will likely lead to increases in the per person expenditure as well, making the program more and more costly over time, more prone to special interests, and could add further complexity and administrative costs to the program.

A paper by Peter Boettke and Adam Martin explored the political issues surrounding a basic income. Making major changes to any redistributive program would lead to disharmonies of interests, and thus winners and losers…and the concomitant lobbying efforts to capture the benefits or avoid the losses that a basic income guarantee would entail. Either taxes need to be raised, or existing programs would need to be cut, or both; in any case, rent-seeking will surely occur.

“If the BIG were to be funded by new taxes, they would in all probability be progressive. Tax burdens apportioned “progressively” by definition fall asymmetrically across the population, laying the groundwork for both rent-seeking and countervailing distributional forces to work from the bottom up (c.f. Wagner 1989, Ch. 4). A tax burden concentrated on the rich creates a strong incentive for a small group to lobby to introduce various loopholes and provisions to offset the burden.”

There would be some small groups where a disproportionate share of the cost of the basic income would fall. These groups clearly have an incentive to lobby for restrictions on who receives the money. How long before former convicts are excluded? Or drug tests become mandatory?

How long before some opportunistic politicians are calling for a suspension in basic income payments to the wealthy, particularly during a fiscal crisis (and given the expense of a basic income, there surely will be some)? How long before that politician proposes that payments to the poor increase when the economy is doing poorly? It’s easy to see either of these measures succeeding, and they would both create interest groups that are likely to engage in rent-seeking.

“The same forces that make concentrate gains on special interests in the current system will be at play in any attempt to reform the system. But regardless of whether BIG replaced or were added to other policies, its passage would be at the mercy of special interests in order for it to be passed at all. How long would the debate proceed before a proposal like “supplements” to basic income for the needy or the deserving (i.e., public employees such as teachers) were proposed?”

I suppose, in theory, a constitutional amendment establishing basic income could reduce some of these problems. But then, how could all the complexity that IS necessary (for instance, regional differences) in a basic income policy be enshrined in the hard-to-alter constitution? How would any necessary changes be implemented effectively? And, perhaps most importantly, the constitutional has proven itself time and again insufficient for protecting the rights of Americans.

 

Conclusion

The dream of a post-scarcity world is an alluring one. The future may be filled with Star Trek-like replicators, allowing us to be live in comfort, free from the need to work, and with the time to pursue our personal interests at our leisure. Many futurologists and progressives believe that we are at a fork in the road – either adopt a basic income and move towards this fantastic post-scarcity world, or live in a dystopian world with a tiny elite that own all the machines and a mass of unemployed living in poverty.

These theorists lack a basic grasp of economics. We may one day approach something like that post-scarcity world, but it will require capital accumulation to get there. A basic income would result in a loss of productivity from a decreased work effort and withdrawal from the labor force. This could lead to the consumption of capital, or at least slow its growth; in either case, the basic income takes us further away from post-scarcity.

Bitcoin: The Ultimate Guerrilla Guide

 

Bitcoin symbol

Bitcoin…

There’s a good chance you’ve heard of it by now. Maybe one of your friends has been calling it “the most revolutionary technology since the Internet.” Or “buttcoin.” Or just a fad. Or a horrible thing used to do illegal stuff.

I’d like to clarify what Bitcoin is, why people believe it is a big friggin deal, and how to get started using it.

In this post you’ll learn:

  • How Bitcoin works
  • Why Bitcoin is the coolest thing since the Internet
  • Bitcoin myths
  • How to get your first bitcoin

Before diving into the meat of this post, it will be helpful to have an understanding of what Bitcoin is and how it works.

 

What Is Bitcoin?

Put simply, Bitcoin is a payment system, or a means of transferring value. The technology was proposed by an individual or group of developers under the pseudonym Satoshi Nakamoto in 2008 (read the white paper that originally described Bitcoin here), and implemented in 2009

Question: We already have payment systems – credit card processors, PayPal, the ACH system, the SWIFT system, and newcomers like Apple Pay, Venmo, and so on. Why and how is bitcoin special??

To answer this question, it helps to know how Bitcoin works. The Bitcoin protocol is a peer-to-peer network of nodes where transactions are verified by “miners” and then recorded in a distributed ledger called the “blockchain”. Yes, I know this sounds complicated, but in practice it’s simple.

As a peer to peer network, Bitcoin does not rely on a central authority to work properly. If I want to pay you with a credit card, there must be an entity that will actually process that transaction. With Bitcoin, there is no one corporation, government, bank, or server that must process it. That means there is no entity or “gatekeeper” that can cheat you or screw up when you are trying to hold or transfer value.

If there is no central authority that processes transactions on the Bitcoin network, then who or what does? This is where the miners come in. The non-technical explanation is that these miners compete with each other to solve very difficult math problems. The solution to these math problems supplies the “proof-of-work” necessary to say that a transaction has been verified. This adds a new “block” of transactions to the blockchain. For supplying this computing power, the miner is rewarded with newly created bitcoins. This is the cryptographic equivalent of mining gold or any other resource. Instead of using machines to dig into the ground, separate the resource from the useless stuff around it, and bring it to surface, bitcoin miners use machines to solve these math problems.

The blockchain is a ledger of all transactions that have ever happened on the Bitcoin network. Transaction details are stored in a block, and each block connected to the previous one in a chain that stretches back to the creation of the first bitcoin. But unlike your average ledger, the blockchain is distributed over, copied to, and maintained by thousands of nodes (instances of the software that are downloaded and running) that are operated independently. If you destroy my copy of it, the blockchain will continue to exist. If you try to change it, you will need to muster more computer power than the rest of the network, which is not easy.

Because of the way Bitcoin works, it has many unique advantages as a currency and payment system. Here are four main ones::

  • Low fees. Credit cards charge 2-3% per transaction, and remittance services like Western Union often charge 10% or more to move money around. Many Bitcoin transactions are free, and nearly all of them cost under 40 cents.
  • Irreversible transactions. Once you send bitcoin to somebody else, the transaction cannot be undone. This eliminates a lot of fraud and chargeback risks, which cost merchants almost $200 billion in 2009.
  • Limited supply. There will only ever be 21 million bitcoin, and they are being created on a set schedule known in advance. This means that the value of bitcoin compared to fiat (government created, unbacked) currencies is inclined to increase over time. It also means that you need not worry about inflation, which is endemic to fiat currencies.
  • Pseudonymity. Bitcoin is the most transparent payment system in existence. All relevant information is stored on the blockchain and can’t be tampered with, so it is easier to create more accountable systems off of it. But because it is pseudonymous, it also offers privacy benefits that legacy payment systems don’t have. If you use a credit card to pay for something, you surrender information that can easily be used to identify you (and possibly steal your identity or money). If you send bitcoin, you do not run this risk.

 

Why Bitcoin Technology Will Change Everything

what people think about bitcoin

Many people will compare Bitcoin to the Internet in the early 1990s. Early adopters considered the internet revolutionary, but most people didn’t have an adequate answer to that most important question: so what?

My dad recently told me that in the early days of computers the most vocal defenders of the technology predicted they would be used to store recipes and manage checkbooks. Perhaps the applications of Bitcoin may far surpass even what its proponents claim.

And as with the Internet, there is a ridiculous amount of venture capital being thrown into Bitcoin and blockchain startups. A whopping $314.7 million was invested in Bitcoin startups in 2014, which is three times more than the previous year. In 2015, we’ve already seen Coinbase rake in $75 million, and 21 Inc get $116 million (see this for a list of VC funding rounds).

This money is going towards building a maturer Bitcoin ecosystem. These companies are creating services that make Bitcoin easier to use, more secure, and more awesome. They are creating some of the applications that will enable us to do spectacular things on top of the blockchain.

Note: Not everything described in this section is happening specifically with Bitcoin, but all of this was made possible by technological advances initiated by Bitcoin.

The Underbanked and the Overbanked

Before getting into the revolutionary applications of this new technology, I’d like to give another reason why you should fully expect (and root for!) Bitcoin to keep growing.

Over half of the world’s adult population, or 2.5 billion people, do not have a bank account. These are primarily poor people in poor countries. Mobile phones, however, are far more widespread. This is how the innovative payment system, M-Pesa, has taken off in Kenya in just a couple years: it basically turns your phone into a wallet. Bitcoin should appeal to the same underbanked demographic, but is both cheaper and not dependent on a single entity that must be trusted. It also isn’t liable to the delays, fraud, and chargeback risks that M-Pesa is subject to.

While people in the third world may benefit the most from Bitcoin, millennials are another large group that seems poised to adopt and use it. According to a recent survey by Goldman Sachs, 33% of millennials don’t expect to need a bank in five years, and only half said they expect to use cash on a weekly basis by 2020. Another GS survey had 22% of millennials saying they already use bitcoin and would use it again, plus an additional 22% that hasn’t used it but intends to. There is a deep distrust of traditional banking and financial institutions, and using bitcoin lets people “be their own bank.” It is transparent, with no hidden fees, doesn’t require giving up tons of personal info, and doesn’t come with the limitations and capital controls of standard banking.

Remittances And International Payments

Probably the most obvious sector that Bitcoin is poised to disrupt is remittances, or migrant workers sending money back to people in their home country. According to the World Bank, global remittances topped $580 billion in 2014, so this is big money.

The average remittance fee paid is over 8%, and can be as high as 20%! Contrast this with the cost of sending bitcoin, which is generally somewhere between free or practically free. In fact, someone moved $150 million in bitcoin, and didn’t pay a transaction fee at all!

As a related benefit, the ease of sending money across state borders makes bitcoin ideal for charity aid work in emergencies, such as the recent earthquake in Nepal.

Identity Management and Trust

The blockchain is effectively immutable. As a result, it completely changes the dynamic of trust in society. Instead of trusting governments, corporations, and other third party entities, we can trust the mathematics that powers the blockchain. Distributed ledgers like the Bitcoin blockchain allow us to record things and know for sure that they are correct.

You can already have your identity verified on the blockchain and use it to gain access to websites, and soon enough you’ll be able to use that identity to unlock the doors of your house. You can think of this as essentially an impossible to forge key to the things you want to keep secured. Username and password combinations can be hacked or stolen, and keys can be spoofed and copied, but a blockchain ID cannot be faked.

This might not sound super exciting, but things change when you consider how many of the things we do that rely on trusting others, and how the blockchain can make that friction disappear. All the websites you log into, all the traveling you do, all the property you own, all the domain names you register or visit, all the bars you enter – all of these things could be handled instantaneously, cheaply, and with no risk of identity theft.

Honduras, a nation plagued with costly land disputes, is already beginning to experiment with managing their land registry on the Bitcoin blockchain. This could have massive ramifications for reducing corruption (officials could easily change the land registry and give themselves some prime beachfront property) and its effects on the poor by giving them recourse in land disputes.

There are all sorts of other services that the blockchain’s enhanced identity management can provide, including better medical record management for increased privacy and transparency on product supply chains.

Micropayments

What I find most exciting about bitcoin is that it allows for micropayments. Because bitcoin transactions involve trivial fees (and because a bitcoin is divided into 10 million units, called “Satoshis”), it is suddenly possible to transfer tiny amounts of money efficiently.

This may not sound all that impressive, but the implications are enormous. What if social networks and email systems wouldn’t accept incoming messages unless a tiny amount of bitcoin was included with it? The price would be trivial to the sender, but would deter spammers who can send a gazillion messages today for free.

Something that is already catching on is tipping. If you thought someone made a brilliant post on Reddit, you could send them $5, or $1, or a few cents’ worth of bitcoin. Or you can tip a particularly nice customer service rep, the guy who let you turn at that tough intersection, or anyone else you’d like to thank.

Micropayments could also change the way content monetization works, making it much easier for content producers to make money without relying on large advertisers. Marc Andreessen, a major figure in the Bitcoin community, writes:

One reason media businesses such as newspapers struggle to charge for content is because they need to charge either all (pay the entire subscription fee for all the content) or nothing (which then results in all those terrible banner ads everywhere on the web). All of a sudden, with Bitcoin, there is an economically viable way to charge arbitrarily small amounts of money per article, or per section, or per hour, or per video play, or per archive access, or per news alert.

This may help make the media more objective by reducing the influence of large advertisers.

Another  area where bitcoin micropayments could be revolutionary is in integrating with the Internet of Things, or the trend where all sorts of electronics and appliances are being connected to the Internet. What if you could use a smart meter that gave you real-time access to the sensor that measures energy usage and allowed you to only pay for exactly what you use? What if you could connect to a Wi-Fi network for just the few minutes you need and pay for that miniscule amount?

Startup 21 Inc is working on making that a reality. They have developed a bitcoin mining chip that can be included in most devices, which will turn spare power from wall sockets into bitcoin, which can then be spent on things like extra bandwidth and ad-free access to things.

Smart Contracts

Things start getting really wild once you consider the ramifications of smart contracts: programmable contracts that automatically execute when their conditions are met. In other words, smart contracts are like any other computer program – except that they can interact with real-world assets.

How might this look? Let me borrow an example from Jay Cassano’s great article on smart contracts:

Imagine if allocating your assets after your death was as simple as moving an adjustable slider that determines who gets how much…once the smart contract can verify the triggering condition—in this case, your death—the contract goes into effect and your assets are divvied up.

When combined with the Internet of Things, smart contracts look even more interesting.

Let’s say all the locks are Internet-enabled and they’ve all got network connections. When you make a bitcoin transaction for the rent, the smart contract you and I agreed to automatically unlocks the house for you. You just go in using keys stored on your smartphone.

In this way, smart contracts could help poor people get better access to legal services. For those who cannot afford lawyers, smart contracts could be a great boon.

There are an infinite number of applications for this. Almost anything where a lawyer or accountant would be necessary can be done automatically on the blockchain.

Smart contracts can also allow you to “be your own Kickstarter” and run a decentralized crowdfunding campaign. Backers can send their bitcoin into escrow, and they will be released to you when you hit your goal, or returned if you do not. This practically nullifies the idea of public goods – goods where nonpayers cannot be excluded from its benefits – via technology!

Finally, the blockchain allows for decentralized governance and voting. This could allow for provably fair democratic elections (political or otherwise). Different rules could be written in a fully transparent way (certain people get a higher stake, for instance), and the result of the election can be automatically enforced via smart contract.

Polling and surveys can easily be done and the data won’t get fudged. Corporate governance can be done transparently (shareholders electing the board of directors, for instance). Stakeholders in any given decision can vote on how to proceed, with the decision executing automatically with no funny business. An example of this is the Dash cryptocurrency, where large stakeholders get to vote on what new features should be developed, and funding is automatically released to the developers to work on them.

The political, social, and economic ramifications are enormous.

The Libertarian/Political Angle

There is a perception that bitcoin is a toy for white male libertarians. There are strong reasons why a libertarian would support bitcoin, but some on the left also favor bitcoin for its political implications.

Before diving into how bitcoin may radically alter political relations, I’d like to emphasize that there is nothing inherently political about bitcoin.

Nevertheless, bitcoin is a cypherpunk or crypto-anarchist’s wet dream. It has the potential to disrupt modern power structures in ways that are difficult for most to even comprehend.

The most obvious thing Bitcoin does is take power away from the elite central bankers by returning control of the money supply to the people. The Federal Reserve and other central banks have monopoly powers that grant them the privilege of debasing currencies at will, which is done to promote warfare and militarism, leading to inflation. Bitcoin can destroy this most important lever of control.

Similarly, bitcoin and other cryptocurrencies are resistant to capital controls, a feature that has been giving bitcoin some attention recently because of events in Greece, where the government is defaulting on its loans. The Greek government’s heavy-handed response included closing the banks for several weeks, making it illegal to move money out of the country, and imposing a 60 euro daily limit on ATM withdrawals. Bitcoin makes it harder for law enforcement and the tax man to steal people’s money, prevent transactions (think Silk Road), or apply sanctions against other states or individuals.

It also creates new and immutable ways of preventing censorship. Decentralized, peer-to-peer communication technologies are already being built on the blockchain. For instance, there is Twister, which is basically Twitter – except that third parties can’t access the data, you can communicate in a private and encrypted way, and it cannot be shut down by governments or other malicious actors. A similar project worth following is Synereo, which provides vastly more privacy than Facebook. These are just two of several applications making communication “NSA-proof”. Bitcoin may even enable efficient “homomorphic encryption,” which would let people share data on the cloud without it ever being unencrypted and vulnerable.

The blockchain can benefit free speech in other ways; it can be used to create a historical record that cannot be manipulated by the powers that be. And it can be used to fund dissident organizations – it was bitcoin donations that kept WikiLeaks alive when all other payment processors boycotted them.

By now, it should be obvious that Bitcoin is an incredible boon for women, minorities, the poor, and the persecuted, and yet it is still popular to view bitcoin as a plaything for white patriarchy. This view is dangerously misguided. Bitcoin has yet to catch on with much of the black community, but it would help marginalized African-Americans secure easier access to loans, microloans, and financial services in general, allowing black neighborhoods to better support themselves. Bitcoin has already empowered tens of thousands of women in the developing world, where women are often excluded from the financial system entirely. And soon enough, smart contracts will improve legal access for those who wouldn’t normally have much recourse to the justice system. Without central control, everyone has equal access, so people won’t be able to be excluded due to racism, sexism, ageism, or any other –ism.

The best part is that this process is nearly unstoppable. Soon there will be trusted, decentralized cryptocurrency exchanges built on the blockchain, which will make it impossible to prevent people from buying into bitcoin and other cryptocurrencies. A small example of this already exists with Multigateway.

Banning Bitcoin

There will also be decentralized markets, where individuals can meet in a secure, peer-to-peer environment to buy and sell whatever they wish – and unlike the Silk Road, the infamous online drug market taken down by the FBI in 2013, a decentralized market can’t be shut down. Well known projects in this space include OpenBazaar and the NXT FreeMarket, but there are several others.

Once decentralized exchanges and markets begin to take off, it will be literally impossible to stop the spread of crypto-anarchy short of a nuclear war or worldwide EMP blast.

As these technologies expand, it will become increasingly obvious to a growing segment of the population that there is no need for governments or traditional nation-states; society can be organized in a more voluntary, peaceful manner. In my opinion, this could lead to a rapid decline in the state as an institution, leaving behind a decentralized, voluntaryist world. As Nozomi Hayase wrote:

Bitcoin is the world’s first stateless currency that transcends borders in a similar way as the Internet. Its unmediated flow delivers more power to the periphery. As a result it could dissolve the hegemony of U.S. empire and end the monarchy of the petrodollar that controls flows of oil, finance and global geopolitics. This could potentially shrink the wealth gap between the Global South and the North. For the first time in history, humanity has the option to really heal the wound of long history of brutal colonization; to end major wars, transform poverty and inequality and move toward a more humane world. Humanity has a chance to embark on a new path, where technology of Western society is used to serve for the wisdom of indigenous cultures and together create a new civilization.

 

Doesn’t Bitcoin Get Hacked All The Time?

A common concern when dealing with bitcoin is that of security. If I had a Satoshi for every time I’ve heard that “Bitcoin has been hacked!!!1!1!” I would probably have a bit by now (sorry, bitcoin humor).

This is understandable, given the high-profile thefts from places like Mt. Gox and Bitstamp. But what is important is that these are third party services that have been hacked, NOT Bitcoin itself. In fact, in the six years that Bitcoin has existed, it has never been hacked. For anyone who works with software at all, this is ridiculously impressive. With each passing day, it becomes less and less likely that there is some “fatal flaw” in the Bitcoin protocol. By comparison, at least 527 banks have failed since 2008.

And when exchanges and other services become more decentralized, much of the issue of security becomes moot – without a centralized exchange, there is no target for hackers.

That said,, there are potential weaknesses in the Bitcoin protocol. Most are not serious, but one in particular, the 51% attack, deserves mention. If an attacker controls the majority of the network’s computing power, he will gain the ability to potentially double-spend transactions and deny other transactions from being confirmed by the network. While technically possible, this attack is highly unlikely, and does not give the attacker that much power. It would be a bad thing, but it is not an existential threat to Bitcoin.

Another empty critique of note is that, Bitcoin is bad for the environment and unsustainable. On the contrary, emissions from Bitcoin network are a miniscule fraction of current payment systems.

And finally, there are hundreds of other cryptocurrencies (“altcoins”) that work in different ways or rely on different codebases to Bitcoin. If there does happen to be some kind of “fatal flaw” with Bitcoin, one or many of these altcoins could be used instead.

In a nutshell: cryptocurrency is secure and here to stay.

Securing Your Bitcoin: Best Practices

All Bitcoin users should be conscious of how to keep their own bitcoin secure. If your bitcoin are stolen, I don’t think you’ll feel any better knowing that it was due to your ignorance rather than the Bitcoin protocol itself.

The bitcoin you own is stored in what is called a wallet, and is defined by a secret number called the private key. Whoever controls this key controls your bitcoin. The aim of securing your bitcoin is to make it as difficult as possible for a malicious actor to access to this private key.

There are different wallets you can have, each with unique security ramifications. In a moment, I will recommend an online wallet, but the bulk of your bitcoin should be stored offline. Numerous exchanges have been hacked, so leaving your bitcoin there is risky. Online wallets are convenient, but leave the control of your private key in a third party’s hands – that means a hacker, malicious employee, or government subpoena could get access to it. If you use an online wallet, make sure you use a strong password (ideally 20+ randomly generated characters) and 2-factor authentication.

For privacy and security, you’ll also want a local wallet on your phone or computer. If they are stolen, your house burns down, or your hard drive crashes, you’ll want to have backups of your local wallets. Have extra backups on USB keys, CDs, or hard drives. You should encrypt your wallet with a strong passphrase, and keep all your software up to date.

Here are a few more ways to keep your bitcoin secure:

  • Keep your coins in cold storage. You can keep your “savings account” that you don’t plan to use offline, away from the malware and hackers of the Internet. See guides on how to do this here and here.
  • Hardware wallets will cost you some money ($30-$200), but they turn your wallets into bitcoin fortresses. Malware can’t be installed on them, and some have their own keypads for you to enter your passphrases in case there are keyloggers or screen reading malware on your computer.
  • A “brainwallet” essentially lets you secure your bitcoin in your mind. You have to memorize a (strong!) passphrase, and this passphrase can generate your public and private keys via strong cryptographic protocols. Use a method such as Diceware to create your passphrase – DO NOT come up with it yourself. Seriously, I can’t emphasize this enough: if you create your passphrase yourself, it will be terrible, and your bitcoin WILL be stolen. If you set up your brainwallet properly, the only attack vector that could succeed is if someone put a gun to your head and forced you to reveal the passphrase. To counter this, create a decoy brainwallet with a smaller bitcoin balance that you are willing to give up in this situation. Instructions on how to create a brainwallet are here. This method is only recommended for advanced users.
  • A paper wallet stores bitcoin offline as a physical document, safe from hackers. It’s like a brainwallet, but instead of protecting a passphrase, you protect a document. Here are instructions on how to create a secure a paper wallet, and this page contains more paper wallet security tips and offers a way to do so.
  • Multi-signature transactions are a more “advanced” security feature. These can require more than one person to sign off on a transaction before it begins. For instance, you could specify that both the husband and wife must sign off on the transaction, but neither party can disburse funds individually. A little more technical info on multi-signature can be found in this article.

 

Bitcoin and Anonymity

Bitcoin is NOT anonymous. It is pseudonymous – the activity of a particular Bitcoin address can be tracked precisely on the blockchain, but finding the real identity corresponding to that address is complex but can be done fairly easily if you know how.

For general identity protection, I strongly suggest you use a different bitcoin address for every transaction (your wallet should let you do this). In addition, it’s a good idea to use different wallets for different purposes. You can have a more anonymous wallet to hide from your soon-to-be-ex-wife’s divorce lawyer, and then a less anonymous one for everyday transactions.

If you want to anonymize some bitcoin, you can use a service called a “mixer” which will hold deposits from you and others, and then send you different coins than the ones you put in. It’s basically cryptographic money laundering. Even better, by avoiding exchanges and using certain other services, you can acquire bitcoin anonymously in the first place, usually for a premium. If you really want to remain anonymous while using bitcoin, read through this guide.

 

Getting Started With Bitcoin

There are so many ways to get started with Bitcoin, and I think this leads to “analysis paralysis” for potential new bitcoiners. There are dozens of different wallets out there with different features, and numerous exchanges off of which you can buy bitcoin.

It is worth your time to educate yourself on these matters. My recommendation is to get started using the easiest method possible, and then begin incorporating other wallets, exchanges, and even other cryptocurrencies into your portfolio. The quickest way to get bitcoin securely is via a web wallet, such as Coinbase.

(Disclaimer: I am a former Coinbase employee.)

You should think of your Coinbase account as your “on ramp” to the Bitcoin universe. You can use them both as a wallet (send, receive, and store bitcoin) as well as an exchange (buy and sell bitcoin). Here’s how:

  1. To get started, go here. As of the date of publication of this post, Coinbase is running a referral program such that if you sign up for an account from the link I provided and then convert $100 into bitcoin, we each receive a $10 bonus in bitcoin.
  2. You will need to verify an email address, a phone number, and link a bank account before you can buy or sell bitcoin. If you have difficulty verifying your bank account, check out this guide.
  3. Once your bank account is verified, you’ll be able to place your first purchase at this page. It normally takes 4 business days for the buy order to complete, but you can verify a credit card to enable instant purchases.

If you have any troubles with this process, check the support page to see if your question has been answered.

It really is that simple to get started. At this point, you should start exploring the more “advanced” things you can do. For instance, if you are particularly security conscious, Coinbase offers a multisig vault so that you don’t need to trust anyone else to control your bitcoin. If Coinbase is ever offline or goes out of business, you can use this open-source tool to recover your bitcoin from the multisig vault. In addition, ALL users should have 2-factor authentication enabled to secure their account further.

I’ve focused on Coinbase, but there are plenty of other wallet providers and exchange services. You should learn about these alternatives as well, and ultimately split your bitcoin balance up into multiple wallets. I suggest reading this guide for more basic information on getting started with Bitcoin, and bitcoin.org has many trusted resources.

Not sure what to do with your new bitcoin? Go create an account with Purse, and then get 20% discounts on anything you buy off of Amazon when you use bitcoin. I’ve saved hundreds of dollars this way.

 

Where Can You Learn More?

The world of Bitcoin is massive and growing. Although this post was long, it was only just an introduction.

If this article has intrigued you, I recommend you do some research on your own. Besides the mountains of information on the Internet, there are a few books I would recommend for learning more:

Given the likelihood of Bitcoin radically changing the world as we know it, you would be doing yourself a favor by educating yourself about it and by getting involved.

The American Panopticon: Why A Free Society Can’t Have Mass Surveillance

Panopticon

If you knew you were being watched, would you behave differently? Would you not second guess your natural inclinations or tendencies? Perhaps you would act like a totally different person – more subdued, more “average”, and less likely to rock the boat.

A situation in which everyone felt as though they were being watched all the time may be terrifying to many, but there are situations where one might feel this is a feature and not a bug. For instance, a prison. Take Jeremy Bentham’s idea of the Panopticon:

“The Panopticon is a type of institutional building designed by the English philosopher and social theorist Jeremy Bentham in the late 18th century. The concept of the design is to allow a single watchman to observe (-opticon) all (pan-) inmates of an institution without the inmates being able to tell whether or not they are being watched. Although it is physically impossible for the single watchman to observe all cells at once, the fact that the inmates cannot know when they are being watched means that all inmates must act as though they are watched at all times, effectively controlling their own behaviour constantly.”

In a prison, being able to have everyone feel as though they are constantly under surveillance will lead to self-regulation of behavior among the inmates, making them far easier to control. When dealing with violent criminals, there are some obvious advantages to this.

The Panopticon was designed to be a physical structure, but it would be appropriate to treat it as a metaphor for modern disciplinary society, or the inclination to observe everyone as much as possible and to “normalize” their behavior. Some readers may think it a stretch to make this comparison, but modern day America is becoming a Panopticon of sorts with nearly unlimited warrantless surveillance, big data, and the coming Internet of Things.

Mass surveillance has always been an issue – and in fact, is one of the common things that Americans loathe about other totalitarian countries. If you ask any American about the Soviet Union, they will invariably know about the KGB, people being “disappeared” to the gulag, and so on. We tend to juxtapose our society with theirs, and claim that America is “a free country.”

I intend to argue in this post that a society with persistent, mass surveillance cannot be considered “free”. In addition, I plan to show that the United States government either has already created a Panopticon-like country, or is frighteningly close to it.

After the Edward Snowden revelations, it is hard to believe there are people who don’t already understand this. William Binney, the highest ranking NSA whistleblower of all time (Technical Leader) has said that the goal of the NSA is “total population control.”

Warning: This is going to be a very lengthy post. I have left no stone untouched, and wanted to create a full picture of the totalitarian Panopticon that is forming around us all. So grab a cup of coffee, sit back, and get ready.

“The man who is compelled to live every minute of his life among others and whose every need, thought, desire, fancy, or gratification is subject to public scrutiny, has been deprived of his individuality and human dignity. Such an individual merges with the mass. His opinions, being public, tend always to be conventionally accepted ones; his feelings, being openly exhibited, tend to lose their quality of unique personal warmth and to become the feelings of every man. Such a being, although sentient, in fungible; he is not an individual.” – Edward Bloustein, former Rutgers University President

 

But I Have Nothing To Hide

“If you’ve got nothing to hide, you’ve got nothing to fear.”

This is the single most common response of most people who are not as terribly afraid of the American Panopticon as they ought to be. Most are likely to be blissfully unaware that this quote was in fact attributed to Joseph Goebbels, the Nazi propagandist.

How might this argument go in practice? Daniel Solove, in his brilliant refutation of this common argument, frames it like this:

“The NSA surveillance, data mining, or other government information-gathering programs will result in the disclosure of particular pieces of information to a few government officials, or perhaps only to government computers. This very limited disclosure of the particular information involved is not likely to be threatening to the privacy of law-abiding citizens. Only those who are engaged in illegal activities have a reason to hide this information. Although there may be some cases in which the information might be sensitive or embarrassing to law-abiding citizens, the limited disclosure lessens the threat to privacy. Moreover, the security interest in detecting, investigating, and preventing terrorist attacks is very high and outweighs whatever minimal or moderate privacy interests law-abiding citizens may have in these particular pieces of information.”

The underlying assumption of this argument is that privacy is about hiding “bad” things. Those who say they “have nothing to hide” are arguing from the faulty premise that privacy is only about hiding negative or embarrassing things.

Many issues result from this faulty premise. Surveillance and privacy violations are a serious problem, even if there is no information gathered that people wouldn’t want uncovered. It can lead to Kafkaesque scenarios where the citizen is completely powerless and vulnerable because the oppressor has vast amounts of data on him, and he has no influence on the process. As Solove said:

“The harms consist of those created by bureaucracies – indifference, errors, abuses, frustration, and lack of transparency and accountability.”

Because there is so little transparency in the data mining going on, it would be impossible to say that NSA surveillance won’t uncover information that people may want to hide. Furthermore, one of the major purposes of all this data is to make predictions about future behavior. All sorts of information is being gathered about you, without you knowing precisely what, and then that information is used to create a profile on you and your likely future actions. It’s easy to imagine how this could be used improperly – and all with it being information that you were willing to give away.

Nothing To Hide

Ultimately, this creates are very clear power imbalance between you and the government. Why should the NSA and those who control it, largely unaccountable to the public and shielded from scrutiny, have such a large advantage over citizens? A government that possesses so much information could wield immense power over the public. If you have any appreciation for the history of totalitarianism in the 20th century, then this thought should make you cringe.

Perhaps you believe that even if there is all this information gathered, it will only be used in strictly lawful ways. You can’t imagine the information being used against you if, say, it could only be accessed for the sake of “national security.” Not so, says the Electronic Frontier Foundation (EFF). According to them, government powers that were legally only supposed to be used to prevent terrorism have been used for more routine law enforcement purposes.

“Law enforcement made 47 sneak-and-peek searches nationwide from September 2001 to April 2003. The 2010 report reveals 3,970 total requests were processed. Within three years that number jumped to 11,129. That’s an increase of over 7,000 requests. Exactly what privacy advocates argued in 2001 is happening: sneak and peak warrants are not just being used in exceptional circumstances—which was their original intent—but as an everyday investigative tool.”

“Out of the 3,970 total requests from October 1, 2009 to September 30, 2010, 3,034 were for narcotics cases and only 37 for terrorism cases (about .9%). Since then, the numbers get worse. The 2011 report reveals a total of 6,775 requests. 5,093 were used for drugs, while only 31 (or .5%) were used for terrorism cases. The 2012 report follows a similar pattern: Only .6%, or 58 requests, dealt with terrorism cases. The 2013 report confirms the incredibly low numbers. Out of 11,129 reports only 51, or .5%, of requests were used for terrorism. The majority of requests were overwhelmingly for narcotics cases, which tapped out at 9,401 requests.”

In addition, both the DEA and IRS are given data that the NSA has gathered, which is then used as evidence in drug or tax crimes. These agencies then use “parallel reconstruction” and pretend that they gathered the evidence via other methods, a clearly unconstitutional practice. In other words, these organizations act completely above the law, and not to stop terrorism.

Perhaps you are still not concerned; after all, you don’t use drugs! But the specific use isn’t the point. The data that is gathered could theoretically be used for anything that is illegal. Considering how some reputable estimates suggest that the average American commits three felonies per day, this should be a concern to everyone. In addition, you do not know how long this data will be stored; in some programs, this is legally specified, and in others it is not. Often times, data is required to be stored for many years. And as the cost of data storage continues getting cheaper, it is quite feasible to think that it will be stored and searchable for many, many years. There are quite a few examples of people who may have believed they had “nothing to hide”, but have suffered serious consequences regardless, often due to something as mundane as a bureaucratic error (mistaken drug tests, misidentification, and my favorite, being convicted for violating a law that didn’t exist).

All sorts of bad things could happen to you due to the kinds of mass surveillance happening nowadays. On the more “mundane” side, there are numerous documented and confirmed instances where NSA employees used their access in order to spy on lovers, ex-girlfriends, and the like, which is jokingly referred to as LOVEINT, a play off of SIGINT, or signals intelligence. While those cases are disturbing, they pale in comparison to these other situations, as mentioned by Solove:

“Most privacy problems and harms lack dead bodies. Of course, there are exceptional cases such as the murders of Rebecca Shaeffer and Amy Boyer. Rebecca Shaeffer was an actress killed when a stalker obtained her address from a Department of Motor Vehicles record. This incident prompted Congress to pass the Driver’s Privacy Protection Act of 1994. Likewise, Amy Boyer was murdered by a stalker who obtained her personal information, including her work address and Social Security Number, from a database company.”

You may have done nothing wrong in your life, but that doesn’t mean that you shouldn’t be afraid of mass data collection.

 

Why Privacy Matters

There are many more reasons why you ought to be concerned about privacy and the negative effects of mass surveillance, some more subtle, and some with terrifying and dangerous implications. I will begin with the more subtle before moving on to the most direct reasons why privacy is critical.

Bathroom surveillance

Privacy Is Important To Our Relationships

In an interesting paper by James Rachels (“Why Privacy is Important”, 1975), an often overlooked aspect of privacy was mentioned. A key part of privacy is in how we manage our social relationships. Different relationships have different characters; we put on “masks”, so to speak, depending on who we are around. Losing privacy causes us to lose this separation between different kinds of relationships: business, marriage, kids, friendships, acquaintances, etc. This point requires some elaboration. Consider this example:

“First, consider what happens when two close friends are joined by a casual acquaintance. The character of the group changes; and one of the changes is that conversation about intimate matters is now out of order. Then suppose these friends could never be alone; suppose there were always third parties (let us say casual acquaintances or strangers) intruding. Then they could do either of two things. They could carry on as close friends do, sharing confidences, freely ex-pressing their feelings about things, and so on. But this would mean violating their sense of how it is appropriate to behave around casual acquaintances or strangers. Or they could avoid doing or saying anything which they think inappropriate to do or say around a third party. But this would mean that they could no longer behave with one another in the way that friends do and further that, eventually, they would no longer be close friends.”

Obama Spying

This implies that our associations with others need to be separate or compartmentalized to some degree. In order to have control over our relationships with others, we must have control over the access that other people have to us (and our information).

“We now have an explanation of the value of privacy in ordinary situations in which we have nothing to hide. The explanation is that, even in the most common and unremarkable circumstances, we regulate our behavior according to the kinds of relationships we have with the people around us. If we cannot control who has access to us, sometimes including and sometimes excluding various people, then we cannot control the patterns of behavior we need to adopt (this is one reason why privacy is an aspect of liberty) or the kinds of relations with other people that we will have.”

Personal Growth And Maturity Become Stunted

Losing control of your relationships with others is one thing. But when your privacy is consistently violated, you end up losing something even more important – your sense of self.

Forgot Password

When people consistently have their privacy violated, they are kept in a more childish state. Constant surveillance trains us to behave more “normally”, and acting in an unconventional way becomes more challenging and less common. As people consistently act conventionally, they begin to think and feel conventionally as well; the inner “spark” that makes us each unique in some way shines less and less brightly. People lose their capacity for self-discovery and creativity. Over time, the more rebellious, different, and unconventional ideas that are perfectly normal for people to have will never come to exist. There will be no need for a despotic government to even try to suppress these inclinations – a “Brave New World” scenario becomes more and more like reality.

How does this happen? For one thing, people become less spontaneous when they know that whatever they do is being tracked or recorded. I’m not just driving from place X to place Y at time T; I’m driving from place X to place Y at time T and creating a record of it. The difference may seem trivial at first, but when everything is being recorded, your life must become more measured and thought out. What if you knew that every time you were having sex, you were being recorded?

When thought of that way, it is clear that invasions of privacy are insults, because they deny an individual’s ownership of himself. Mass surveillance is like having a permanent, ever-present Peeping Tom in everyone’s lives; if you have a problem with voyeurism directed at yourself, why would you not have a proportionately greater objection to mass surveillance?

Growing up in the American Panopticon will make it more difficult for people to develop a strong conception of “self” or self-ownership. You no longer have personal sovereignty if all of your data is collected and visible from some single point outside of you. You become mere data to the Leviathan. You no longer have the authority to withdraw yourself from public view and scrutiny, and in that way, you are symbolically losing your “self” to some centralized institution. As Jeffrey Reiman wrote (“Driving to the Panopticon”, 1995):

“But, of course, what is symbolic is almost never merely symbolic. By such symbols do we come to acquire our self-conceptions. They shape the way we identify ourselves to ourselves and to one another, and thus they shape our identities themselves. Growing up in the informational panopticon, people will be less likely to acquire selves that think of themselves as owning themselves. They will say mine with less authority, and yours with less respect. And I think that selves that think of themselves as owning themselves are precisely what we understand as “moral selves”. They are selves that naturally accept ownership of their actions and thus responsibility for them. They naturally insist on ownership of their destinies and thus on the right to choose their own way. Here the loss of privacy threatens an incalculable loss. What will it be worth if a man should gain the world but lose his soul?”

In other words, the loss of identity that comes with mass surveillance will also reduce peoples’ feelings of moral responsibility. If you think this is farfetched, consider an analogy to the way people tend to look at reducing poverty these days. To many, it is the responsibility of the state to alleviate poverty. It would be easy enough for most individuals to give a dollar to the homeless man that they pass on the street, but instead, they view that as the responsibility of the collective, the state. Most millennials feel zero guilt ignoring the homeless person and continuing to stare at one of their many screens. They need not help out their fellow man, an individual; after all, that’s the government’s job! If anything, they consider their time better spent lobbying the government to take more money from other people in order to aid the homeless.

Suppression Of Free Speech And Chilling Effects

Now we begin to get into the less abstract and more scary things that a loss of privacy entails. The most obvious effect is the loss of free speech.

You're Being Watched

It’s not hard to imagine how mass surveillance curtails peoples’ freedom of speech. Most Americans will somewhat regularly juxtapose America with banana republics like North Korea which have very overt controls on speech and association. It is commonly assumed that “it could never happen here.” And perhaps it never will become quite that bad – but even without the direct control of speech (say the wrong thing and go to jail), surveillance still creates a strong form of social control and self-censorship (say the wrong thing and get blacklisted from jobs, sued, marginalized, etc.).

It is quite clear that at the very least, there is already a chilling effect going on in America. Surveys have shown that, in our post-Snowden world, people are becoming more unwilling to discuss surveillance issues online due to fears of the NSA. But we don’t even need surveys or research to know that this is an effect. I’m sure almost every one of us has at one point or other censored ourselves while discussing something online. I have been told by family members that I should stop writing this blog because of the potential ramifications of my unorthodox thought. The suggestions are well-meaning and appreciated (and perhaps even the right decision from a personal/selfish standpoint), but they just further prove my point.

The chilling effect is not merely on speech; it also affects what you read or purchase, and who you associate with. If you know that the books you take out from the library are being recorded, perhaps you are less likely to take out, say, the Qur’an, or a history of revolutionary thought. You may try to avoid being affiliated with certain organizations; if the country grew more tyrannical, you may not want to be receiving a newsletter from the ACLU.

Other kinds of behavior become chilled as well. People who live unorthodox lifestyles or who do unconventional things may feel the need to repress those things. People often try to oppress those who live unconventional lifestyles. The best example I can think of here would be homosexuality; many governments throughout the world have very dangerous policies with regards to homosexuals, and being outed could be a death sentence in some countries. Other examples could include pornography use, gambling, possession of certain taboo plants or chemicals, and so on.

Some of you may not consider this a big deal, because you yourself believe those activities to be immoral. But as I’ve stated before, anything could become illegal, and you could become the victim of this yourself. What about the children who are suffering from awful diseases because they don’t have access to medical marijuana? Some parents will go to the trouble of moving to a new state for ease of access, but others may not. They have had their behavior chilled, and their child is the unfortunate victim.

As our world becomes increasingly politicized, more and more behaviors begin to fall into this category. For instance, the more socialized medicine becomes, the more people will feel justified intruding into your health decisions. What if every time you swiped your credit card at a fast food restaurant, this information went out to a database somewhere and bureaucrats (or even nosy neighbors) started to hound you for making medical costs higher for everyone?

Now, not everyone will be intimidated or really experience the chilling affect personally. That being said, it is still dangerous. Here is what Solove has to say about the subject:

“Even surveillance of legal activities can inhibit people from engaging in them. It might be that particular people may not be chilled by surveillance – indeed, probably most people will not be except those engaging in particularly unpopular speech or associating with disfavored groups. The value of protecting against such chilling is not measured simply in terms of the value to those particular individuals. Chilling effects harm society because, among other things, they reduce the range of viewpoints being expressed and the degree of freedom with which to engage in political activity.”

Regardless of how you personally respond to mass surveillance, there are negative effects to society on the whole because there will be less intellectual diversity. Almost every brilliant thought was at one point radical, but it is the more radical or outlandish thoughts that people will avoid expressing.

Finally, even if you think that outright suppression of speech “couldn’t happen here” (let’s ignore the fact that it already does happen here; for instance, the French government just took down several websites they claimed promote or advocate terrorism, Holocaust denial is illegal in much of Europe, etc.), one of the Snowden revelations was that the GCHQ, Britain’s equivalent of the NSA, is specifically targeting journalists. And let’s not forget about COINTELPRO, the FBI’s 1956-1971 (perhaps it has continued for longer under a different name) program which monitored, infiltrated, and subverted domestic political organizations. And it is becoming increasingly frequent that people in the US and UK are being charged for crimes based entirely off social media postings (generally when they are anti-war or anti-police), rather than actually committing a real crime against other people. In other words, people are going to jail for expressing their views.

Manipulation And Social Control

The most terrifying part of the growth in the unchecked surveillance state is the way that it can be used to manipulate the political process on behalf of powerful actors, and to manipulate the public to go along with it.

As stated above, the purpose of NSA mass surveillance is “total population control.” Relatively new technologies, primarily social media, provide the NSA with unprecedented abilities to achieve this goal.

DARPA is spending millions of dollars on research regarding social media and how messages are spread and adopted. As The Guardian reports (far more detail at that link):

“The project list includes a study of how activists with the Occupy movement used Twitter as well as a range of research on tracking internet memes and some about understanding how influence behaviour (liking, following, retweeting) happens on a range of popular social media platforms like Pinterest, Twitter, Kickstarter, Digg and Reddit.”

One such study was performed by Facebook on over 600,000 users without their knowledge. Facebook changed the content of these users’ news feeds by giving people more negative emotional content to see how moods can be manipulated en masse. This research was connected to the Minerva Initiative, a Department of Defense project which funds research on modeling the “dynamics, risks, and tipping points for large-scale civil unrest across the world.”

Additional research is being done on “informational cascades,” or how social network behavior is shaped by each other’s decisions resulting in a “cascade” of behavior that people may not have otherwise taken. For instance, “liking” something on Facebook because other people have already liked it. The research being done is deliberately focusing on how to maximize the number of “favorable” decisions. The information is being specifically used to better understand “the formation of opinions” and “the evolution of new cultural norms.” I don’t think I need to elaborate on how this type of knowledge could be used for evil purposes (or even to attempt to topple foreign governments, like Cuba’s).

…okay, fine, I’ll elaborate just a little bit. Documents released by Edward Snowden have revealed that the government is encouraging the use of a technique they call the “Counter Reset” in order to disrupt the momentum that unfavorable articles may generate online. For instance, if The Powers That Be dislike a story, they can do a Counter Reset, and suddenly the article will have zero upvotes, likes, or retweets. This will help decrease the number of eyeballs that see an unfavorable story. In fact, this was done on Reddit, somewhat ironically, to decrease the momentum of the story where these techniques were revealed by Snowden – a story I will go into in just a moment.

The Snowden revelations, outlined by Glenn Greenwald in this article, are primarily about the GCHQ and its JTRIG group, but likely apply to the NSA as well. Here is a quick summary:

“Among the core self-identified purposes of JTRIG are two tactics: (1) to inject all sorts of false material onto the internet in order to destroy the reputation of its targets; and (2) to use social sciences and other techniques to manipulate online discourse and activism to generate outcomes it considers desirable. To see how extremist these programs are, just consider the tactics they boast of using to achieve those ends: “false flag operations” (posting material to the internet and falsely attributing it to someone else), fake victim blog posts (pretending to be a victim of the individual whose reputation they want to destroy), and posting “negative information” on various forums.”

GCHQ descredit target

GCHQ discredit company

It’s easy to see why people would want this story suppressed, right? These techniques aren’t just being used against hostile governments, terrorists, and the like; they are being used against people who are merely suspected of being involved in ordinary crimes. The key word is “suspected”; targets need not be actually charged or convicted of any crimes. Surveillance agencies have given themselves the power to ruin innocent peoples’ reputations and to disrupt political activity online without cause. As Greenwald concludes:

“Who would possibly trust a government to exercise these powers at all, let alone do so in secret, with virtually no oversight, and outside of any cognizable legal framework?”

Excellent question. But the manipulation of the public is only one part of the problem. What if surveillance was being used against more powerful people or politicians in order to control them? Many readers may be inclined to dismiss this as a paranoid “conspiracy theory,” but it is simply a documented fact that this is going on. We know that the NSA has monitored the phone calls of at least 35 world leaders (likely as a means to keep the empire’s vassal states in line), but it is far harder for many to accept that this is done domestically as well.

But please, accept it. This is not just a theoretical problem. For instance, the CIA was caught spying on members of Congress in the lead up to the release of the famous torture report. The NSA has indirectly admitted that it spies on Congress. Russell Tice, a former NSA employee turned whistleblower, has revealed many people that the NSA has spied on:

  • Members of Congress, both House and Senate, and particularly those who are on the Intelligence, Armed Services, and Judiciary committees.
  • A current Supreme Court judge
  • Two former FISA judges (these are the people who rubber stamp intelligence gathering operations)
  • State Department officials
  • Barack Obama, while he was in the Senate
  • White House spokesman Scott McClellan
  • General David Petraeus (who was also formerly the head of the CIA) and other Generals

There is plenty of precedent for this. The NSA previously had spied on Senators Frank Church and Howard Baker, who were investigating the intelligence community and Watergate, respectively. And J. Edgar Hoover at the FBI compiled dossiers on everyone in politics, specifically for the purpose of blackmail. With the NSA currently spying on peoples’ porn habits, is it so hard to believe that this information could be used to blackmail and control politicians and other highly placed people?

It is clear that this information could be used to the benefit of secretive, powerful interests within the National Security State. This surveillance helps concentrate power into fewer and fewer hands, to those who control the information flow. It is also quite clear that this could very easily subvert constitutional checks and balances. As this process continues, the US government becomes more and more like the tyrannical governments that are considered a joke in modern American discourse. And whether you have “something to hide” or not, the government gets closer and closer to being the kind of regime that will go after you regardless. Excusing mass surveillance in what was once a relatively free country leads to that country becoming despotic, which ought to raise the hair on the back of everyone’s necks.

 

Guilty Until Proven Innocent: Turning Every American Into A Threat

It is a common saying and a major precept of our justice system that people are “innocent until proven guilty.” Unfortunately, mass surveillance has turned this on its head.

Big Data

By definition, mass surveillance is not targeted to those who have committed crimes. There is a tendency to regard the entire citizenry as the enemy; who knows what kind of undesirables could be hiding in plain sight?! To distill this into a simple mathematical formula: mass surveillance = mass suspicion.

This can easily be seen with the proliferation of government watchlists that have exploded in use and size since 9/11. These lists are gigantic and growing – and once on the list, it is very difficult to get off. An important and fascinating report by Hina Shamsi and Matthew Harwood of the ACLU delves deeply into this subject, and we will borrow much of their research for this analysis.

When police encounter someone who they believe may in some way be connected to terrorism, they fill out a “suspicious activity report,” or SAR. Similarly, the government is instilling fear in Americans and encouraging them to snitch on their fellow citizens with the slogan “if you see something, say something.”

“FBI Director James Comey asked the public to report any suspicions they have to authorities. “When the hair on the back of your neck stands, listen to that instinct and just tell somebody,” said Comey.”

This is one of the most Orwellian slogans imaginable, and there are some deep, fundamental problems with it. Sometimes if I hear a noise at night, the hair on the back of my neck will stand – I really don’t think this is a reasonable standard for suspicion. Despite their clear attempts at creating a “Minority Report“-esque system, it is not easy to predict who is going to be a threat before people have actually committed any crime, particularly when based on such a flimsy standard.

Of course, determining who ought to be added to the SAR database requires some clear definition of what a “suspicious activity” actually looks like. The government has a list of 16 behaviors that qualify; nine of these behaviors have nothing whatsoever to do with criminal activity. Do you really think someone ought to be added to a terrorism watchlist because they are taking photographs, asking questions “beyond mere curiosity,” taking notes, or looking at stuff through binoculars?

(As an aside, while not directly related to the SAR program, it is very easy to be considered an “extremist” or a “suspicious” person by the US government. For instance, the FBI considers people who care about online privacy to be potentially suspicious of terrorist activity, and even likened pro-privacy supporters of Edward Snowden to a “digital al-Qaeda.” And here is a list of 72 ways the government can consider you an “extremist” in America, including talking about individual liberties, wanting to make the world a better place, being a returning veteran, and believing in a right to bear arms. They all really make the hair on the back of my neck stand!)

As you can imagine, the SAR database, based as it is on these ridiculous standards of (constitutionally protected) behavior, is likely not particularly effective. In fact, a Government Accountability Office report says that the FBI doesn’t even track whether the SARs that are uploaded to their database actually help thwart terrorism or lead to arrests or convictions. And for your viewing pleasure, the ACLU has collected a bunch of these SARs and revealed their contents:

“A number of reports were concerned with “ME” — Middle Eastern — males. One headline proclaimed, “Suspicious ME Males Buy Several Large Pallets of Water at REDACTED.” Another read, “Suspicious Activities by a ME Male in Lodi, CA.” And just what was so suspicious about this male? Read into the document and you discover that a sergeant at the Elk Grove Police Department had long been “concerned about a residence in his neighborhood occupied by a Middle Eastern male adult physician who is very unfriendly.” And it’s not just “Middle Eastern males” who provoke such suspicion. Get involved in a civil rights protest against the police and California law enforcement might report you, too. A June 2012 SAR was headlined “Demonstration Against Law Enforcement Use of Excessive Force” and reported that “a scheduled protest” by demonstrators “concerned about the use of excessive force by law enforcement officers” was about to occur.”

So, if you are of Middle Eastern descent, are “unfriendly,” or are concerned about police brutality, you are probably a terrorist.

And then there is the dreaded no-fly list. On 9/11, the no-fly list had only 16 names, but by 2013, this had gone up by 293,650% to 47,000 people, including 800 U.S. citizens and legal permanent residents. These people are considered “known or suspected terrorists,” and cannot fly to, from, or over the United States. These kinds of restrictions, as you can imagine, could be very disruptive to any innocent people who get added to the list. But surely it is easy to get removed, right? Wrong.

“In 2007, the Department of Homeland Security established the Traveler Redress Inquiry Program through which those who believe they are wrongly blacklisted can theoretically attempt to correct the government’s error. But banned flyers quickly find themselves frustrated because they have to guess what evidence they must produce to refute the government’s unrevealed basis for watchlisting them in the first place. Redress then becomes a grim bureaucratic wonderland. In response to queries, blacklisted people receive a letter from the DHS that gives no explanation for why they were not allowed to board a plane, no confirmation of whether they are actually on the no-fly list, and no certainty about whether they can fly in the future. In the end, the only recourse for such victims is to roll the dice by buying a ticket, going to the airport, and hoping for the best.”

Lists, lists, and more lists! In addition to the SAR database and the no-fly list, there is also a secret “master watchlist”:

“According to documents recently leaked to the Intercept, as of August 2013 that master watchlist contained 680,000 people, including 5,000 U.S. citizens and legal permanent residents. The government can add people’s names to it according to a shaky “reasonable suspicion” standard. There is, however, growing evidence that what’s “reasonable” to the government may only remotely resemble what that word means in everyday usage. Information from a single source, even an uncorroborated Facebook post, can allow a government agent to watchlist an individual with virtually no outside scrutiny. Perhaps that’s why 40% of those on the master watchlist have “no recognized terrorist group affiliation,” according to the government’s own records.”

If your name is on this list, you will get treated with extreme scrutiny when traveling, or when interacting with the police in any way.

And finally, the most terrifying list of them all:

“Inside the United States, no watchlist may be as consequential as the one that goes by the moniker of the Known or Appropriately Suspected Terrorist File. The names on this blacklist are shared with more than 17,000 state, local, and tribal police departments nationwide through the FBI’s National Crime Information Center (NCIC). Unlike any other information disseminated through the NCIC, the KST File reflects mere suspicion of involvement with criminal activity, so law enforcement personnel across the country are given access to a database of people who have secretly been labeled terrorism suspects with little or no actual evidence, based on virtually meaningless criteria.”

“And once someone is on this watchlist, good luck getting off it. According to the government’s watchlist rulebook, even a jury can’t help you. “An individual who is acquitted or against whom charges are dismissed for a crime related to terrorism,” it reads, “may nevertheless meet the reasonable standard and appropriately remain on, or be nominated to, the Terrorist Watchlist.””

Privacy ID Man

Picture this: you make a comment on Facebook about the 2nd Amendment. The police/surveillance apparatus picks this up and throws you onto one of their lists. One day, you get pulled over because of a broken tail light. When the police officer runs your plate, he sees that you are an “extremist” and potentially a terrorist, and are likely armed. Do you think the police officer might be a little on edge? And remember, you have no idea what the officer knows about you. How much more likely do you think it is that this interaction will turn out poorly?

Oh, that’s right. The police are trolling through social media in order to assign “threat ratings” to people. I kid you not. Here is a brief description of the software being used:

“…scanning the residents’ online comments, social media and recent purchases for warning signs. Commercial, criminal and social media information, including, as Intrado vice president Steve Reed said in an interview with urgentcomm.com, “any comments that could be construed as offensive,” all contribute to the threat score.”

Combine this with new technology developed by Raytheon which predicts your behavior based on your social media activity, and we start getting into the realm of the really creepy. The software “can be used to closely track a person’s life, down to their daily gym schedule,” and then predict what their next move will be (and then there is the US government questionnaire, which social workers and educators are supposed to use to determine which families are most likely to become terrorists). Is it farfetched to think that one day soon, people who have not committed any crimes at all will be monitored due to comments made online, picked up discretely when they go somewhere such that the police know they are alone, and then “disappeared” to a Homan Square-like black site? All in the name of “fighting terrorism” of course.

This is the world you invite when you advocate for mass surveillance.

 

The Architecture Of Mass Surveillance

“Unless social, legal, or technical forces intervene, it is conceivable that there will be no place on earth where an ordinary person will be able to avoid surveillance. In this possible future, public places will be watched by terrestrial cameras and even by satellites. Facial and voice recognition software, cell phone position monitoring, smart transport, and other science-fiction-like developments will together provide full and perhaps real time information on everyone’s location. Homes and bodies will be subject to sense-enhanced viewing. All communications, save perhaps some encrypted messages, will be scannable and sortable. Copyright protection “snitchware” and Internet-based user tracking will generate full dossiers of reading and shopping habits. The move to web-based commerce, combined with the fight against money laundering and tax evasion, will make it possible to assemble a complete economic profile of every consumer. All documents, whether electronic, photocopied, or (perhaps) even privately printed, will have invisible markings making it possible to trace the author. Workplaces will not only be observed by camera, but also anything involving computer use will be subject to detailed monitoring, analyzed for both efficiency and inappropriate use. As the cost of storage continues to drop, enormous databases will be created, or disparate distributed databases linked, allowing data to be cross-referenced in increasingly sophisticated ways. In this very possible future, indeed perhaps in our present, there may be nowhere to hide and little that can stay hidden.” – Froomkin (2000)

Thus far, we’ve seen how mass surveillance and violations of privacy can have catastrophic, dystopian consequences. In this section, I’d like to go into more detail on what kind of surveillance is going on right now, as we speak.

But before detailing the many ways that you are being surveilled (see here and here for lists of known NSA activities, though both lists are old and not comprehensive), I’d like to briefly address a very important subject.

NSA Spying

Does Mass Surveillance Stop Terrorism?

Many people in America are terrified. In their minds, terrorists lurk around every corner, just waiting to blow up them and their families. Even if they don’t like the idea of mass surveillance, they are willing to trade some of their liberty for what they believe will be enhanced security.

For starters, the actual risk to a US person that terrorism poses is trivially small. Just about everything you can imagine is more dangerous to you than terrorism:

  • You are 5,882 times more likely to die from medical error than terrorism.
  • You’re 4,706 times more likely to drink yourself to death than die from terrorism.
  • You are 1,904 times more likely to die from a car accident than from a terrorist attack.
  • You are 271 times more likely to die from a workplace accident than terrorism.
  • You are 26 times more likely to die from falling out of bed than be killed by terrorists.
  • You are more likely to be killed by a toddler than by a terrorist.
  • You are equally likely to die from being crushed to death by your TV or furniture as you are to die from terrorism.
  • You are 4 times more likely to be struck by lightning than killed by a terrorist.

And best of all, you are 55 times more likely to be killed by a police officer than to be killed by a terrorist. So put your fear in perspective; perhaps your real fear ought to be directed towards the police (or toddlers 😉 ) rather than terrorists.

Now, even if you want to ignore all this and focus undue attention on terrorists (which, of course, is their goal…), one must still show that mass surveillance plays a role in preventing terrorist attacks in order to have any chance of justifying it. Either way, the extreme risks of mass surveillance outlined above more than outweigh any potential benefit that this surveillance could have. But a key point here is that mass surveillance has been proven to be totally ineffective anyways.

For Your Safety

Now I know, you’ve probably heard something about how the NSA has stopped 54 terror plots using mass surveillance. This is indeed what they claimed at one point. But when pressed further, only one case, where someone was caught sending $8500 (chump change) to the Al Shabaab organization in Somalia, has been confirmed. What this means is that we have no knowledge of a single life being saved due to surveillance. Certainly, there could be instances that have not been made public, but we’ll just have to take the NSA’s word for it – the same NSA known for its repeated lies.

Additionally, research done by the European Union has shown that low-tech surveillance methods are more effective than the high tech methods in use today, such as internet monitoring. Best of all, members of the US Senate Intelligence Committee, Obama’s own commission, a US federal court, and an independent privacy board have all found that there is no convincing evidence that mass surveillance stops terror attacks.

But what about all the terrorist attacks that the FBI has thwarted on US soil? Surely quite a few of those are legitimate (though not necessarily the result of surveillance). However, many of these attacks are ones that were created, planned, and funded by the FBI itself! Usually the FBI finds a Muslim who publicly expresses somewhat radical political views, but is a poor, unemployed loner in his early 20s. Then the FBI creates a terror plot and recruits an informant to convince the target to partake in this government-supplied plot. Usually, there is resistance, but after plying them with large amounts of cash, they will agree. And then the FBI valiantly makes an arrest and trumpets to the media how great of a job they are doing keeping Americans safe. As Glenn Greenwald asks:

“But how serious of a threat can all of this be, at least domestically, if the FBI continually has to resort to manufacturing its own plots by trolling the Internet in search of young drifters and/or the mentally ill whom they target, recruit and then manipulate into joining? Does that not, by itself, demonstrate how over-hyped and insubstantial this “threat” actually is? Shouldn’t there be actual plots, ones that are created and fueled without the help of the FBI, that the agency should devote its massive resources to stopping?

This FBI tactic would be akin to having the Drug Enforcement Agency (DEA) constantly warn of the severe threat posed by drug addiction while it simultaneously uses pushers on its payroll to deliberately get people hooked on drugs so that they can arrest the addicts they’ve created and thus justify their own warnings and budgets (and that kind of threat-creation, just by the way, is not all that far off from what the other federal law enforcement agencies, like the FBI, are actually doing). As we noted the last time we wrote about this, the Justice Department is aggressively pressuring U.S. allies to employ these same entrapment tactics in order to create their own terrorists, who can then be paraded around as proof of the grave threat.”

To sum up: you shouldn’t be so deathly afraid of terrorism. It is clearly a negligible threat to you. And in any case, mass surveillance will do nothing to reduce your risk of being a victim.

Where Are You Going? Surveillance That Tracks Your Movements

One of the biggest “growth industries” in terms of mass surveillance is in tracking your physical movements from place to place. This includes all forms of transportation, from flying to driving to walking down the street. The government would like to know where you are at all times and be able to retrace your steps.

As far as street surveillance goes, Britain is most definitely the world leader. They have one CCTV (closed-circuit television) camera for every 11 people, or 5.9 million total. This includes 750,000 in schools, hospitals, and other “sensitive locations.” Just recently, the Scotland Yard chief has suggested that all British citizens install CCTV cameras in their homes. While I don’t doubt that these can be useful for catching criminals after the fact, there are clear Orwellian implications as well. The police were able to reconstruct a three mile route around York while investigating a woman’s disappearance, ruling out that she walked to work. Trying to find a missing person is good, but what about trailing, say, a political activist?

America doesn’t have quite as sophisticated a network as Britain, but there are plenty of cameras here too. The extent of video surveillance used by government is generally not made public in the US, so it is more difficult to gauge the extent of their use. But thanks to a 2011 ACLU report, we know that the Chicago Police Department has access to at least 10,000 public and private cameras, and can see virtually every public segment of the downtown area. These cameras “have the power to automatically identify and track particular persons, and the capacity to magnify and make visible small details and objects at great distances.” This, despite the fact that this type of surveillance has not been proven effective and is ripe for abuse. Having ever-present video surveillance of public places will have a serious chilling effect:

“As syndicated columnist Jacob Sullum has pointed out, “knowing that you are being watched by armed government agents tends to put a damper on things. You don’t want to offend them or otherwise call attention to yourself.” Eventually, he warns, “people may learn to be careful about the books and periodicals they read in public, avoiding titles that might alarm unseen observers. They may also put more thought into how they dress, lest they look like terrorists, gang members, druggies or hookers.” Indeed, the studies of cameras in Britain found that people deemed to be “out of time and place” with the surroundings were subjected to prolonged surveillance.”

And do you really want the government to know when you are walking into the psychiatrist’s office or a reproductive health clinic? Or, for that matter, a political gathering?

As technology gets more and more advanced, this becomes more and more scary. There are new cameras being deployed that are flown above small cities, and can track the movements of every person and vehicle for several hours at a time. What if these were flown above, say, an Occupy protest, a Tea Party gathering, or the recent protests over police killings?

And then there are other surveillance cameras that can monitor the streets for “pre-crimes” or “suspicious” behavior, and then alert the authorities. These cameras have been installed at “tourist attractions, government buildings, and military bases in the US.” But they are also about to be installed in San Francisco subways. These things tend to proliferate quickly, so don’t be surprised to see them used widely across the US over the next few years.

Perhaps most disturbing is the recent revelation that police departments across the US are using radar devices that let them see through walls and into your home. And they’ve been secretly using these devices for years.

There is also extensive surveillance of cars and where you are driving. The street cameras mentioned above are relevant here, but there are also masses of license plate readers being deployed across the US. According to John Whitehead:

“License plate readers, yet another law enforcement spying device made possible through funding by the Department of Homeland Security, can record up to 1800 license plates per minute. However, it seems these surveillance cameras can also photograph those inside a moving car. Recent reports indicate that the Drug Enforcement Administration has been using the cameras in conjunction with facial recognition software to build a “vehicle surveillance database” of the nation’s cars, drivers and passengers.”

What’s more disturbing is that the primary goal of this massive database is to help the DEA seize cars and cash associated with the drug trade via civil asset forfeiture. In other words, this whole, massive surveillance apparatus is specifically being used in order to steal from people who have not even been arrested, let alone convicted, of any crimes!

But let’s just say, hypothetically, these license plate scanners were being used to stop crimes. How effective are they? Vermont has an extensive program, which captured 7.9 million plates in an 18 month period. The program helped solve five crimes. Five.

But things start getting really Orwellian when we consider things like the tax-per-mile scheme that is going to be tested out in Oregon. You see, after mandating that cars become more fuel efficient, the government ended up losing out on too much revenue from their gasoline taxes. So instead, they are making sure all cars are fitted with a tracker that monitors how many miles you drive and sends that info back to the state.

“It plugs into the Onboard Diagnostics (OBD) port that all cars manufactured since the mid-1990s have. Then ties into your car’s computer, where the data about your mileage and (cue Darth Sideous voice) many other things are stored. Including your speed, rate of acceleration, whether you’re wearing a seatbelt.”

We can add to that list things like emissions data, parking locations, and GPS data regarding your location. Better yet, these little doohickeys can both send AND receive information. So if you haven’t paid your speeding ticket, you might just have your car automatically shut down. Combined with the knowledge that the FBI can remotely activate the microphones in cars (such as OnStar systems) and then listen in on what’s happening inside the car without passengers being able to tell, we have the makings of some truly scary stuff (technically, that is illegal, but when has that ever stopped them?). Perhaps the government will track someone who was important in a political protest, listen in on what’s going on in their car, and then remotely stop them from even making it there. That’s right, those who monitor your car can gain remote access to your vehicle (and this includes hackers/criminals, as well). Here’s a creepy example of what might start happening in the next few years:

“Picture this: You’re riding with the flow of traffic, say 40 MPH and the speed limit, like most speed limits, is under posted at 30 MPH. Suddenly an on-coming car whips a left in front of you and you center-punch the drivers door, doing considerable damage to you and the driver. His insurance company refuses to pay your claims on the basis that you were exceeding the speed limit and that there is evidence that you are a dangerous maniacal rider that shouldn’t even have a license.

At the trial the opposition pulls out the black box data. Sure enough, you were going 10 MPH over the speed limit, but traffic records show that everyone travels that road at 10 MPH over the speed limit. Then they show that on 47 occasions over the past six months you hit speeds in excess of 90 MPH! You’re portrayed as a loose cannon looking for a place to have an accident. In fact, not five minutes before the accident you were traveling 87 MPH! It doesn’t matter that you were executing a clean, safe pass, you were exceeding the speed limit by 27 miles per hour, “reckless driving” according to state statutes.”

Anyone who is using E-ZPass is also liable to have their location and movements monitored and documented, even when they aren’t driving through toll booths.

Covert Surveillance

And as anyone who has flown at all in the last dozen or so years knows, you are being thoroughly tracked when you fly. I’m only going to gloss over the TSA here, because their abuses are obvious and they really deserve a separate article. But according to a former TSA employee, many of his coworkers would laugh at the nude images from the Rapiscan (you can’t make this stuff up) X-ray machines from another room – and would sometimes be having sex in there rather than trying to keep airline passengers safe. That doesn’t really matter anyways, because even the manufacturer admitted that they don’t work, and it is easy to sneak explosives or guns through them. Oh, and these machines have the capacity to store and send these naked images.

The expanded security at airports sure makes traveling a lot more stressful. But now there are cameras being deployed in airports that can detect “emotional strain” and analyze voice-prints to detect stress. Based on these indicators, your “behavioral intent” can be scrutinized as a part of the security process. These could be a great technology and save people a lot of time going through security, but what happens with false positives?

Oh, and you probably suspected as much, but the NSA knows where you are flying and when by reading through peoples’ airline reservations and passenger manifests. And this information is being used to associate you with other people on the same flight. So if you happen to be on a flight with a criminal, even if you have no relation to them whatsoever, this will be a small strike against you.

And while they are still a relatively new technology, let’s not forget about the government’s use of drones for domestic surveillance. In the coming years, drone surveillance is likely to expand exponentially, but the Air Force is already flying drones over the US, and they are spying on us. The FBI even admits this! Worse, there are no rules in place concerning domestic surveillance using drones, so the government has a completely free hand in this area. Of course, stronger privacy laws likely won’t stop this from happening, but they would be a start. Not only that, but (and perhaps you can see a pattern here) the military is developing drones with facial recognition software which can “remember” peoples’ faces and read “malintent.” The net is tightening.

Eavesdropping On Your Calls – Phone Surveillance

It is the NSA’s cell phone surveillance that is probably the most well-known by Americans since the Snowden revelations began. Much has been made of these mass surveillance programs, but most Americans are not familiar with the incredible extent of modern cell phone surveillance. Let’s take a look.

For a while, the NSA had insisted that their bulk collection programs only collect the metadata of your calls, and that therefore the American people need not worry about the intrusiveness of these programs. The metadata (the phone numbers involved in the call, duration of call, etc.) is totally different from the content of your calls, and so you shouldn’t be concerned, according to their side of the story.

This is pure BS, for numerous reasons. Metadata can be used to reveal far more about you than Obama and the NSA would have you believe. Two Stanford graduate students were able to gather the following information just from phone metadata:

“Using phone metadata, the researchers inferred sensitive information about people’s lives, including: neurological and heart conditions, gun ownership, marijuana cultivation, abortion, and participation in Alcoholics Anonymous.”

This is just from a small experiment done by two grad students; I’m sure the NSA’s capabilities are significantly more advanced.

“They warn that the metadata they had access to is dwarfed by what the amount the NSA has access to. “The dataset that we analyzed in this report spanned hundreds of users over several months. Phone records held by the NSA and telecoms span millions of Americans over multiple years.””

For more disturbing details, see this. In addition, the NSA is using this metadata (in addition to data from emails, social media, passenger manifests, GPS tracking, etc.) in order to map the social networks of Americans, so they can know who you may be associating with. And in 2014, former NSA and CIA director Michael Hayden remarked: “We kill people based on metadata.”

Regardless, it is somewhat of a moot point, because the NSA is in fact listening in on the content of your phone calls. In fact, low ranking analysts can listen to the content of phone calls, and read the content of emails, text messages, and instant messages without any kind of authorization! Note that this isn’t just in real time; the content of your calls (and everything else) is being stored, and can be sifted through by thousands of low ranking analysts at their discretion.

In other words, you have no privacy whatsoever.

But there is a lot more stuff we know about the government’s surveillance of phone data. This list is hardly comprehensive, but hopefully will provide you with some idea of the scope of the mass surveillance going on:

  • It was recently revealed that the DEA has been collecting data on all calls made between the US and certain foreign countries. This surveillance is related to drug crimes, not terrorism.
  • Law enforcement officers have had access to a massive database of call records dating back to 1987, which has been used for routine law enforcement (again, not terrorism). Four billion call records are added to the database every day (although one call can correspond to more than one record).
  • The NSA is collecting up to five billion phone records per day from around the world, provided by US telecom providers. This doesn’t specifically target Americans, but a lot of American call records are scooped up “incidentally.”
  • The NSA, in it’s Dishfire program, collects 200 million text messages every day globally. These records can be queried for location data, contacts, credit card info, missed call alerts, roaming alerts (indicating potential border crossings), payment notifications, travel itinerary alerts, meeting information, electronic business cards, and so on. This is an untargeted operation and includes information on people who are not suspected of any crimes.
  • The NSA and GCHQ stole the encryption keys from various SIM card makers, most notably Gemalto. Gemalto produces two billion SIM cards per year, sold all over the world. Any phone with one of these SIM cards is completely vulnerable, and all the data on it is available to these spy agencies.
  • The NSA is secretly introducing flaws into communication systems so that they can easily be tapped into. This makes networks less secure and makes it easier for hackers or foreign governments to steal data as well, not just the NSA. The scope of this project (codename: AURORAGOLD) is such that “virtually every cellphone network in the world is NSA accessible.”
  • The CIA has a coordinated campaign to hack Apple’s iPhones and iPads. Read more about this interesting story here.
  • Dozens of governments around the world have bought surveillance technology that allows them to monitor the location of cell phones simply by typing in a phone number. The NSA and GCHQ have been doing this for years, but it is also accessible to dictators in banana republics.
  • The FBI remotely activates the microphones in cell phones to listen in on conversations in real time. They are able to do this even if the phone is turned off.
  • The Feds are flying small planes equipped with fake cell tower technology over the US, which collects phone data by forcing your phone to connect with it. These machines are supposed to be used to aid in routine law enforcement, but the machines are incapable of discriminating and end up picking up the data of everyone within range. The range of these planes cover “most of the US population.”
  • Police departments across the country are using Stingray devices, which also operate as fake cell towers. The government has been absurdly secretive about their use. Apparently, these devices disrupt cell service of any phones in their vicinity – a potential danger if there are emergencies happening nearby.

The government has almost unqualified access to your phone data. Again, it is not at all difficult to see how this kind of power could be abused.

“Gentlemen Don’t Read Each Other’s Mail” – Snail Mail Surveillance

Even your very low-tech snail mail isn’t safe from the mass surveillance machine.

For starters, all mail sent in the US has its envelope scanned and is loaded into a database. This contributes to the massive amounts of metadata out there, helping to create the government’s dossier on you.

On top of that, the US Postal Service approved nearly 50,000 requests from law enforcement to monitor your mail in 2013. These requests were approved despite often having no reason provided or even the proper written authorization that is supposedly required. Unsurprisingly, this program was abused by those trusted to administer it. For instance, it was used at least once by a politician to spy on a political opponent, and was also used to spy on communications between attorneys and their clients.

And just recently, mysterious secret cameras were discovered set up outside the post office to monitor peoples’ faces and their license plates as they drive to and from the post office. Within an hour of the story breaking, the surveillance cameras were removed…

Becoming Omniscient – Internet Surveillance

Government Liking Status

The internet is effectively broken. Unless you take active measures and use strong encryption online, the government knows about whatever you do and is watching you. To give you a feel for just how serious this is, consider these words from security expert Bruce Schneier:

“Web search data is another source of intimate information that can be used for surveillance. (You can argue whether this is data or metadata. The NSA claims it’s metadata because your search terms are embedded in the URLs.) We don’t lie to our search engine. We’re more intimate with it than with our friends, lovers, or family members. We always tell it exactly what we’re thinking about, in as clear words as possible.

Google knows what kind of porn each of us searches for, which old lovers we still think about, our shames, our concerns, and our secrets. If Google decided to, it could figure out which of us is worried about our mental health, thinking about tax evasion, or planning to protest a particular government policy. I used to say that Google knows more about what I’m thinking of than my wife does. But that doesn’t go far enough. Google knows more about what I’m thinking of than I do, because Google remembers all of it perfectly and forever.

I did a quick experiment with Google’s autocomplete feature. This is the feature that offers to complete typing your search queries in real time, based on what other people have typed. When I typed “should I tell my w,” Google suggested “should i tell my wife i had an affair” and “should i tell my work about dui” as the most popular completions. Google knows who clicked on those completions, and everything else they ever searched for. Google’s CEO Eric Schmidt admitted as much in 2010: “We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.””

The NSA has easy access to all of this data. Through their PRISM surveillance program, the NSA can perform “extensive, in-depth surveillance on live communications and stored information,” including on email, video and voice chat, photos, voice-over-IP chats (such as Skype), file transfers, and social networking details. Thousands of low-level analysts can access this data without any need for supervisor approval, a warrant, or anything like that. They want to eavesdrop on your Skype calls? No problem. From Wikipedia:

“…the NSA databank, with its years of collected communications, allows analysts to search that database and listen “to the calls or read the emails of everything that the NSA has stored, or look at the browsing histories or Google search terms that you’ve entered, and it also alerts them to any further activity that people connected to that email address or that IP address do in the future.””

The NSA is able to do this because they have direct access to the servers of major internet giants, such as Apple, Google, Microsoft, and Facebook. And while many of these tech giants are willing to cooperate closely with the intelligence community, it is clear that the government valued this program heavily and were willing to fight for it. In fact, they threatened to fine Yahoo $250,000 per day if they would not comply.

Another NSA program harvests “hundreds of millions of contact lists from personal e-mail and instant messaging accounts around the world, many of them belonging to Americans.”

Obama Civil Libertarians

And their internet surveillance isn’t politically agnostic, either; in fact, internet surveillance plays a critical role in the government’s war against WikiLeaks. In fact:

“By exploiting its ability to tap into the fiber-optic cables that make up the backbone of the Internet, the agency confided to allies in 2012, it was able to collect the IP addresses of visitors in real time, as well as the search terms that visitors used to reach the site from search engines like Google.”

But perhaps most disturbing of all is the NSA’s war against internet security, which is covered in a fascinating article on Der Spiegel. The NSA has a program deliberately designed to crack anything and everything on the internet, and to weaken the encryption standards of numerous internet protocols. Keep in mind that doing so creates vulnerabilities that anyone can exploit, including malicious hackers or foreign governments.

The NSA has completely cracked Skype and VPNs, which are not secure against their prying eyes. Even more scarily, https connections also aren’t secure, and these are the types of connections people use for financial services, e-commerce, webmail, etc. They’ve cracked the Secure Shell protocol (SSH), which is used by system administrators to log into employees’ computers remotely. Basically, they’ve cracked almost everything.

Regarding VPNs:

“According to an NSA document dating from late 2009, the agency was processing 1,000 requests an hour to decrypt VPN connections. This number was expected to increase to 100,000 per hour by the end of 2011. The aim was for the system to be able to completely process “at least 20 percent” of these requests, meaning the data traffic would have to be decrypted and reinjected. In other words, by the end of 2011, the NSA’s plans called for simultaneously surveilling 20,000 supposedly secure VPN communications per hour.”

Regarding https:

“The NSA and its allies routinely intercept such connections — by the millions. According to an NSA document, the agency intended to crack 10 million intercepted https connections a day by late 2012. The intelligence services are particularly interested in the moment when a user types his or her password. By the end of 2012, the system was supposed to be able to “detect the presence of at least 100 password based encryption applications” in each instance some 20,000 times a month.”

The silver lining of the report is that there are still some pieces of software that it appears the NSA has trouble cracking, including Tor, Truecrypt, and OTR instant messaging. Of course, this was from years ago, and it is quite possible they have discovered vulnerabilities since then.

Building An Economic Profile – Financial Surveillance

As in other areas, surveillance of financial records by the US government is total. As an American, you can no longer have any expectation of financial privacy. This means that any purchases you make, any money you transfer, or any investments you have, are known to the NSA.

As usual, most of what we know regarding this surveillance comes from documents released by Edward Snowden. Some of these documents were made public via Der Spiegel, and this is how ZeroHedge frames their revelations:

“They also know how much anyone in the world has spent on credit card-based purchases, what the source of that money is, and what the purchase was. In other words: absolute monetary and financial surveillance. And since SWIFT is involved, it likely also means a full blanket coverage of who buys what stock, and furthermore, leaves open to abuse the knowledge of which equities or FX pair the Fed, for example, is buying ahead of time in order to prevent yet another daily stock market plunge.”

This brings up an important point – gathering all this financial data could be quite profitable for those who are appropriately positioned to use it! Of course, that would never include people like you and me. And it’s also easy to see how having your personal financial info in a database somewhere could be inimical to freedom. Perhaps you don’t want people to know the things you’ve purchased or invested in.

But how widespread is this surveillance, really? Is it actually that bad? According to more documents from Der Spiegel, it is:

“Indeed, secret documents reveal that the main NSA financial database Tracfin, which collects the “Follow the Money” surveillance results on bank transfers, credit card transactions and money transfers, already had 180 million datasets by 2011. The corresponding figure in 2008 was merely 20 million. According to these documents, most Tracfin data is stored for five years.”

….

“The classified documents show that the intelligence agency has several means of accessing the internal data traffic of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a cooperative used by more than 8,000 banks worldwide for their international transactions. The NSA specifically targets other institutes on an individual basis. Furthermore, the agency apparently has in-depth knowledge of the internal processes of credit card companies like Visa and MasterCard. What’s more, even new, alternative currencies, as well as presumably anonymous means of payment like the Internet currency Bitcoin, rank among the targets of the American spies.”

There’s no escape (note that bitcoin has never been anonymous, nor is it an “internet” currency)! In the past, perhaps you could have counted on some discretion by using offshore banks in Switzerland or the Cayman Islands. But then the Foreign Accounts Tax Compliance Act (FATCA) happened, and financial privacy is now completely dead.

FATCA gives the IRS broad powers to force foreign financial institutions to give your info to them (and that info is available to be shared with other agencies in the government, such as the NSA/CIA/FBI). Many foreign banks will no longer take US customers or are shutting down American’s accounts because of the difficulty complying (and not complying comes with a 30% penalty).

Most people have never heard of FATCA. But it is a critically important piece of legislation, and I strongly suggest you read more about it here. While the stated intent is to prevent financial “crimes” such as tax evasion, the real purpose is about collecting your financial information:

“If FATCA’s sole purpose were to “recover” tax revenues from assets squirreled away offshore by American “fat cats,” it seems odd that it targets only individuals and specifically exempts reporting on accounts held by U.S. corporations. On the other hand, targeting individuals makes a lot of sense if FATCA’s purpose is directed towards something else: adding to U.S. government agencies’ global electronic “map” of personal information.”

Put simply, unless you conduct your financial affairs entirely in cash (or perhaps some anonymous cryptocurrencies like Darkcoin), whatever you do is being documented and stored in some massive government database.

Even if you don’t think that all this financial surveillance is out of line because you believe it’s “worth it” to sacrifice privacy for security, you should still be concerned, because the IRS is notoriously bad at protecting peoples’ data:

“Former Internal Revenue Service employees have access to your sensitive financial information. So do current employees who aren’t authorized to see such data. Even some visitors to IRS facilities may have access to sensitive material.”

“Note that the GAO report comes after revelations that the IRS has a habit of rehiring people it fired for snooping through data or otherwise misbehaving on the job. That may help to explain why its employees are regularly exposed as identity thieves and filers of fraudulent returns. The tax agency also improperly turns over sensitive data about taxpayers to law enforcement agencies.”

Yeah, pathetic. And horrifying.

Taking Your Measurements – Biometric Surveillance

Biometric surveillance technologies are being rapidly developed, and there is simply no way I can cover this as thoroughly as it deserves to be covered here.

Not only that, but biometrics tend to interface with all of the other methods of surveillance mentioned thus far. For instance, the drones that can recognize faces, and so on. Nevertheless, I did want to provide some examples of what would – if used appropriately rather than for mass surveillance – be considered really cool technology. All kinds of neat things fit in this category, from facial and voice recognition software to fingerprint scanners. Some of this starts to almost delve into the realm of science fiction. For a great overview of biometric technology and some of the issues with its use, see this paper from the EFF.

Where else can I start but with the revelation that the GCHQ and NSA intercepted 1.8 million webcam images (that many in just six months!) from Yahoo webcam chats, mostly from people who were not under any suspicion of wrongdoing, and stored them in a database with the intention of using facial recognition technology to identify terrorists using the service to communicate. Up to 11% of that webcam imagery was “undesirable nudity.”

Facial recognition technology has been used to great effect in Iraq  and Afghanistan, where the US has created massive databases of facial scan data.

“Information about more than 1.5 million Afghans has been put in databases operated by American, NATO and local forces. While that is one of every 20 Afghan residents, it is the equivalent of roughly one of every six males of fighting age, ages 15 to 64.

In Iraq, an even larger number of people, and a larger percentage of the population, have been registered. Data have been gathered on roughly 2.2 million Iraqis, or one in every 14 citizens — and the equivalent of one in four males of fighting age.”

Using these databases, the military is able to see if the people that they capture in the field are known terrorists, escaped prisoners, or the like. This kind of information can prove invaluable on the battlefield.

The real problem comes from when this use of the technology is brought back home. And unfortunately, this is happening at an alarming rate.

For instance, the Boston police had a dry run of their facial recognition software and spied on everyone who attended a local music festival. In and of itself, this wasn’t a huge deal; the problem is that the Boston PD tried hard to cover it up.

“Like many surveillance programs, this uses the assumed lack of an expectation of privacy as its starting point. But this assumption only works one way. The public can only expect a minimum of privacy protections in public, but law enforcement automatically assumes a maximum of secrecy in order to “protect” its investigative techniques.”

Most of the facial recognition data from this was posted online – a massive security issue.

But that is nothing compared to what is happening on a national level. As reported by the New York Times, the NSA is harvesting images from the internet and feeding them into its facial recognition database.

“The agency intercepts “millions of images per day” — including about 55,000 “facial recognition quality images” — which translate into “tremendous untapped potential,” according to 2011 documents obtained from the former agency contractor Edward J. Snowden.”

“It is not clear how many people around the world, and how many Americans, might have been caught up in the effort. Neither federal privacy laws nor the nation’s surveillance laws provide specific protections for facial images.”

In other words, your Facebook photos are giving the NSA biometric data which they can then use to identify you elsewhere.

And an article on Newsweek shed some more light on the scope of the biometric surveillance that is going on, along with some reasons to be concerned.

“…the federal government has been quite busy with biometrics. This summer, the FBI is focusing on face recognition with the fourth step of its Next Generation Identification (NGI) program, a $1.2 billion initiative launched in 2008 to build the world’s largest biometric database. By 2013, the database held 73 million fingerprints, 5.7 million palm prints, 8.1 million mug shots and 8,500 iris scans. Interfaces to access the system are being provided free of charge to local law enforcement authorities.

Jennifer Lynch, staff attorney for the privacy-focused Electronic Frontier Foundation (EFF), notes there were at least 14 million photographs in the NGI face recognition database as of 2012. What’s more, the NGI database makes no distinction between criminal biometrics and those collected for civil service jobs. “All of a sudden, your image that you uploaded for a civil purpose to get a job is searched every time there’s a criminal query,” Lynch says. “You could find yourself having to defend your innocence.”

Through a federal lawsuit, EFF obtained redacted NGI documents that it will soon publish. documents show that by 2015, the FBI estimates that NGI will include 46 million criminal face images and 4.3 million civil face images. The vendor building the face recognition system, MorphoTrust, was asked to design it to receive up to 55,000 direct photo enrollments per day and 2,300 per hour, as well as process 34,000 photo retrievals per day and 1,400 per hour. The statistics hint at the sheer scale of the face recognition infrastructure under construction—in one year, over 20 million Americans could be put into the system.

…any time citizens have their photo taken in a governmental capacity, whether it’s a background check or a driver’s license, their faces are liable to be analyzed by NGI.

“What would a world look like with comprehensive biometric surveillance? “If cameras connected to databases can do face recognition, it will become impossible to be anonymous in society,” Lynch says. That means every person in the U.S. would be passively tracked at all times. In the future, the government could know when you use your computer, which buildings you enter on a daily basis, where you shop and where you drive. It’s the ultimate fulfillment of Big Brother paranoia.

But anonymity isn’t going quietly. Over the past several years, mass protests have disrupted governments in countries across the globe, including Egypt, Syria and Ukraine. “It’s important to go out in society and be anonymous,” Lynch says. But face recognition could make that impossible. A protester in a crowd could be identified and fired from a job the next day, never knowing why. A mistaken face-print algorithm could mark the wrong people as criminals and force them to escape the specter of their own image.” [emphasis mine]

This brings up an important point. The increasing ease by which police departments can identify people in specific locations makes it far easier for the government to mask civil liberties violations and abuses. Rather than arresting every protester at a public protest, the police could use facial recognition technology to selectively arrest or detain the leaders or organizers of the protest. Clearly, this could destroy it before it even has a chance to get off the ground.

Biometrics are starting to be secretly used in the US, largely by Customs for immigration/border crossing purposes. Right now, these are more in an experimental phase, but surely it won’t be long before this is the standard. Here are three biometric programs that have been revealed by leaked documents that were acquired by Motherboard:

  • Facial recognition at Dulles Airport. The intention of this program is to catch “impostors,” or people who are using passports that aren’t their own. Customs officers are allowed to “randomly” select people to take aside for a mug shot, and if selected, they are not allowed to opt out. This picture is then compared with their passport photo and is scored on how well they match up.
  • Fingerprint scans in Atlanta. When foreign nationals exit the US, they will have their fingerprint scanned and matched with their entry records to see if they have spent more time in the US than allowed.
  • Iris scans and facial recognition at the US-Mexico border. This is an experiment to test the viability of these technologies in terms of adding extra layers of security to the border crossings.

Biometric

This is how it begins. First, they are unveiled for the fairly noncontroversial idea of improving border security. But soon enough, these technologies will be used everywhere – when you buy things, when you enter buildings, when you are driving, and so on.

I want to close this section with a very short sampling of the insane new technologies being developed in this area. These are just a handful of the creepy things I’ve found, but I’m sure there are a gazillion more.

  • Voice recognition technology allows investigators to recognize and analyze your voice, even when background noise makes the recording itself inaudible. Imagine this, combined with the ability to remotely turn on your phone, car, or computer’s microphone.
  • New spy tech lets investigators retrieve your “voice imprint” from physical objects. Using this technology, researchers “could detect speech from an object photographed from 15 feet away through soundproof glass, as well as analyze video recordings and extract the data from objects in a room even when the people targeted were off camera.”
  • Fingerprint scanners can capture and analyze your fingerprint from up to 20 feet away. This could streamline the process of walking into the gym, but it could also be deployed to get a much larger fingerprint database of innocent people.
  • Soon, scientists may be able to read your memories. So far, this has only been done on rats, but humans could be next. Don’t worry, the technology for this is still likely many years away – but we are on track to develop it eventually.
  • Similarly, scientists may soon be able to read your mind. Again, this is a long way off, but scientists can already get some crude information on your thoughts via brain scans.

These technologies have legitimate uses, and could solve some very real problems. But used inappropriately, they could lead to an incredibly dystopian future.

 

Technology And The Future Of Surveillance

The modern iteration of the surveillance state is already quite impressive, as you have just seen. But technology is advancing rapidly, and certain trends may lead us into a world even beyond the wildest ideas of Orwell’s 1984. If these trends continue along a certain path, life in America could be a lot like living in an open-air prison. Consider people who are on house arrest who are made to wear GPS trackers – except that everyone will be subject to it, and it will be literally impossible to cut it off.

The Internet Of Things

“Items of interest will be located, identified, monitored, and remotely controlled through technologies such as radio-frequency identification, sensor networks, tiny embedded servers, and energy harvesters — all connected to the next-generation Internet using abundant, low-cost, and high-power computing.” – Former CIA Director, David Petraeus

The Internet of Things (IoT) is the network of physical objects embedded with electronics, usually connected to the internet, in order to get some kind of additional benefits or functionality based on the ability for these objects to communicate with each other, with you, and with their manufacturer. IoT offers us unprecedented benefits in terms of convenience and lifestyle improvements, but is also a massive threat to our privacy.

As more and more physical devices become connected to the internet, more and more pieces of data become easily gathered and transmitted. Some estimate that there will be 30 billion devices connected to the internet by 2020. Most people are willing to allow this to happen without a peep, and without any concern for their privacy, because they are willing to trade it for some added convenience. In fact, one in four professionals aged 18-50 have stated that they would like to connect their brains directly to the internet if possible.

Before diving into the more terrifying aspects of this, let me make clear that the IoT does in fact promise massive benefits to society. If implemented with proper security and without government surveillance involvement, it would be one of the most incredible advancements for humanity that I can imagine.

Consider just some of the mundane applications of this. As you start coming home from work, your refrigerator reminds you that you need to pick up milk, so it tells your car the best route to get to the store where milk is sold cheapest. As you pull into your driveway, the thermostat turns up the heat – remembering the temperature that you like. And when you step inside, there’s already a hot cup of coffee ready for you; because of some files open on your laptop, it figured you might be burning the midnight oil.

Yes, the Internet of Things offers unprecedented amounts of convenience, but it comes at a serious cost. And we are collectively marching forward with this without giving enough thought to the consequences. You can opt out of using the internet/cyberspace on your computer, but you cannot “opt out” of your home gadgets in the same way. “Always on” connectivity means that these appliances can continue collecting and transmitting data even when they appear to be off, so it could be almost impossible to protect yourself. Soon, people will need to choose whether they want these appliances or not, but people who rent likely will not have that option. And at some point, “smart” devices may be all that are available on the market.

In theory, so long as there is some demand for devices that are not connected to the IoT, there should be some that are sold and available. But don’t be surprised if these kinds of devices become mandated as standard for “safety” reasons. You must have a self-driving car, because of the risk of human error. You must have a smart refrigerator in order to prevent you from getting food poisoning, or to prevent food from being wasted. You must have a smart thermostat, because it will be better for the environment.

We don’t even need to bring government into the picture before this becomes a bad idea. There are massive security risks to the Internet of Things, and these absolutely need to be addressed. IoT technology is highly susceptible to hackers, government or otherwise; a recent HP study found that 70% of internet connected devices are vulnerable to attack. Most of the data transmitted from current “smart” appliances is unencrypted – in other words, anyone can easily get access to it. For more detailed analysis of the cyber threats posed by the IoT, see this.

According to security expert Claude Baudoin, IoT devices are susceptible to three main kinds of attack:

  • Listening in on the data or the commands could reveal confidential information about the operation of the infrastructure.
  • Injecting fake measurements could disrupt the control processes and cause them to react inappropriately or dangerously, or could be used to mask physical attacks.
  • Sending incorrect commands could be used to trigger unplanned events, to deliberately send some physical resource (water, oil, electricity, etc.) to an unplanned destination.

In other words, not only can data be stolen, but the actual physical integrity and operation of these devices can be compromised as well. This can be particularly scary when you think about your car; if hackers or government operatives can take control of your vehicle, it would be very easy to, say, murder you and make it look like suicide. And the terrorist attacks of the future could be catastrophic, like that portrayed in Live Free or Die Hard.

charlottes webcam

There are already some unsettling examples of the IoT in practice, and others where it is easy to envision them being used in a creepy or dangerous way:

  • Children’s toys. There is a Barbie doll that records what your children are saying, sends that audio over the internet to a third party, and uses their words to come up with a response. Children tend not to have much of a filter, so who knows what kind of potentially incriminating things they could say? And children have always been used as spies in totalitarian regimes…
  • Smart TVs. The Samsung smart TV recently got some attention because it is recording your conversations, is able to conduct a voice analysis, and then transmits this audio to a third party. It’s also logging your website visits, and is equipped with a camera for facial recognition. Perhaps even worse is the LG smart TV, which also transmits voice recordings. Not only that, but it tracks when you change the channel, and it transmits file metadata from your USB sticks. In other words, your TV knows about your files stored elsewhere. Finally, even when you turn the “collection of watching info” setting off (it is on by default), it continues to collect your data.
  • Baby monitors. These things have terrible security, and there have been multiple instances where hackers have taken control of them and started yelling at peoples’ babies from across the world.
  • Health “wearables”. These devices offer some incredible benefits, like allowing doctors to remotely monitor your health (“OnStar for the body”). But what happens when, under a socialized medical system, this information is used to enforce doctors’ orders?

But this is just the beginning. Much has been written about the Internet of Things and how it spells the end of privacy. I can’t possibly reproduce it all here. I highly recommend reading this fictional account of an IoT future from Wired reporter Mat Honan, from which the following is excerpted:

I wake up at four to some old-timey dubstep spewing from my pillows. The lights are flashing. My alarm clock is blasting Skrillex or Deadmau5 or something, I don’t know. I never listened to dubstep, and in fact the entire genre is on my banned list. You see, my house has a virus again.

Technically it’s malware. But there’s no patch yet, and pretty much everyone’s got it. Homes up and down the block are lit up, even at this early hour. Thankfully this one is fairly benign. It sets off the alarm with music I blacklisted decades ago on Pandora. It takes a picture of me as I get out of the shower every morning and uploads it to Facebook. No big deal.”

I also suggest reading this article by Matthew Harwood and Catherine Crump regarding the dangers of IoT surveillance. Some excerpts:

“…Apple introduced iBeacon last year.  It’s a service based on transmitters that employ Bluetooth technology to track where Apple users are in stores and restaurants. (The company conveniently turned on Bluetooth by default via a software update it delivered to Apple iPhone owners.) Apps that use iBeacon harvest a user’s data, including his or her location, and sometimes can even turn on a device’s microphone to listen in on what’s going on.

Another company, Turnstyle Solutions Inc., has placed sensors around Toronto that surreptitiously record signals emitted by WiFi-enabled devices and can track users’ movements. Turnstyle can tell, for instance, when a person who visited a restaurant goes to a bar or a hotel. When people log-on to WiFi networks Turnstyle has installed at area restaurants or coffee shops and check Facebook, the company can go far beyond location, collecting “names, ages, genders, and social media profiles,” according to the Wall Street Journal.

The danger of the rise of Big Data and the Internet of Things is straightforward enough. Whenever data is perpetually generated, collected, and stored, the result is going to be a virtual ATM of user information that government agencies can withdraw from with ease. Last year, for instance, local, state, and federal authorities issued 164,000 subpoenas to Verizon and more than 248,000 subpoenas to AT&T for user information, while issuing nearly 7,500 subpoenas to Google during the first half of 2013.”

This last point is critical. If the Internet of Things really takes hold, there will be unlimited amounts of data at the government’s fingertips. They will be able to know everything about you, and they will potentially be able to control nearly everything that you interact with. I’d like to close this section with some words from security expert Bruce Schneier:

“In the longer term, the Internet of Things means ubiquitous surveillance. If an object “knows” you have purchased it, and communicates via either Wi-Fi or the mobile network, then whoever or whatever it is communicating with will know where you are. Your car will know who is in it, who is driving, and what traffic laws that driver is following or ignoring. No need to show ID; your identity will already be known. Store clerks could know your name, address, and income level as soon as you walk through the door. Billboards will tailor ads to you, and record how you respond to them. Fast food restaurants will know what you usually order, and exactly how to entice you to order more. Lots of companies will know whom you spend your days — and nights — with. Facebook will know about any new relationship status before you bother to change it on your profile. And all of this information will all be saved, correlated, and studied.”

Mass Surveillance And DNA Databases

My final warning regarding the dystopian future we may be heading towards is about DNA databases.

DNA Testing

DNA contains almost limitless amounts of information about you, and it is something you will never be able to change. Not only can your DNA be used to identify who you are, but it also can tell you what you look like (there’s even a company that creates “mug shots” for police based on DNA samples), who you are related to, your health history, your likelihood of contracting certain illnesses, and your likelihood of behaving in certain ways. This information could be incredibly valuable to a government looking to control its subjects.

The Obama administration has already proposed forming a massive genetic database containing the DNA of American citizens. So far, the proposal is only asking for 1 million volunteers, but as with all areas of government, there could easily be “mission creep” and have the scope widened drastically. And the government is legally allowed to collect your DNA without your permission or knowledge. In Raynor vs. Maryland, it was determined that leaving your genetic material behind is like leaving a fingerprint, and the government can do what they want with it. In this case, a rape suspect refused a mouth swab, but the police simply collected DNA off the chair he was sitting on. This sets a dangerous precedent, because as the scientist Leslie Pray says:

“We all shed DNA, leaving traces of our identity practically everywhere we go. Forensic scientists use DNA left behind on cigarette butts, phones, handles, keyboards, cups, and numerous other objects, not to mention the genetic content found in drops of bodily fluid, like blood and semen. In fact, the garbage you leave for curbside pickup is a potential gold mine of this sort of material. All of this shed or so-called abandoned DNA is free for the taking by local police investigators hoping to crack unsolvable cases.”

This DNA is ripe for getting picked up and included in any governmental DNA database. And it can get picked up in many other ways, too. For instance, during drunk driving checkpoints, or for that matter, any arrests or police interactions, even if not convicted. And it is certainly plausible that one day, DNA samples may be required in order to get a driver’s license, when entering government buildings, when applying for jobs, and so on. Even today, there are government rules mandating that hospitals collect the DNA of all newborn babies, without requiring parental consent or even that the parent knows about it. Soon enough, everyone’s DNA will be on file. There may even be mosquito-esque drones flying around extracting DNA samples.

As John Whitehead notes:

“With the entire governmental system shifting into a pre-crime mode aimed at detecting and pursuing those who “might” commit a crime before they have an inkling, let alone an opportunity, to do so, it’s not so far-fetched to imagine a scenario in which government agents (FBI, local police, etc.) target potential criminals based on their genetic disposition to be a “troublemaker” or their relationship to past dissenters.”

And researchers have shown that DNA evidence can be fabricated – perhaps these free thinkers will even be framed for crimes preemptively. Or the database could be used to implement a eugenicist program. The possibilities for abuse are almost unfathomable.

 

Conclusion

Obama I Spy

While you may believe you “have nothing to hide,” you have every reason to value your privacy and to fear and fight back against the surveillance state. Mass surveillance is not about stopping terrorism; it is a tool to control the population and to secure the interests of an elite group of aristocrats.

Mass surveillance can lead to all kinds of dangers for both individuals and the wider community. There can be witch hunts based on certain information, people will be considered guilty until proven innocent based on predictive analytics, and due process will be a thing of the past. Laws will be inequitably enforced, everyone will be suspicious of everyone else, and society will lose its moral cohesion. And the potential for totalitarian government is simply too strong to ignore, even in countries that most consider a part of “the free world.”

The degree of surveillance going on already is staggering, but the public outcry has been almost non-existent. Sure, a few people have listened to Edward Snowden, but half of America thinks he is a traitor and should be killed! And regardless of what the rest of us do, the government has been ignoring our outrage.

How can we stop this? Unfortunately, I don’t have the answer. Ultimately, I believe the solution lies in technology; what we need is for strong encryption to become easy to use and the default way we communicate. And we need a cultural transformation, where people who care about their privacy aren’t immediately viewed as “suspicious.”

But until then, there are things you can do to protect yourself. You should always stay up to date on the privacy and security world and it’s technology, because these things change rapidly. A great start is with Laura Poitras’s white paper, detailing the methods she used to securely communicate with Snowden.

Optimistic For Liberty: Bitcoin, Cryptocurrencies, And The P2P Revolution

Bitcoin

Whether you realize it or not, power structures all around you are beginning to crumble. Decentralization is going to be the major trend of the 21st century; in fifty years, it will have made today’s institutions nearly unrecognizable.

I believe we have already passed the point of no return; while the powers that be can throw hissy fits and slow the decentralization trend down, it is too late to completely eliminate it (unless a nuclear war destroys us all…). And luckily, while there has been some resistance to this trend, it has come far short of the complete war against decentralization that would be necessary to cause a substantial delay in its unfolding.

Technology and business innovations, foremost among them being the internet, bitcoin (and other cryptocurrencies), and peer-to-peer (P2P) everything, are helping to usher in a new world where power has been radically distributed. This is in stark contrast to most of the history of human existence, where political and capital structures have been controlled by an elite oligarchy – a “1%”, if you will (though it is really more like .01% to .001%).

This post is intended to just be an introduction to some of these developments, and it will not be the last time that I discuss them. But for now, my goal is just to show you how modern technology is allowing us to relate and connect to each other without relying on existing power structures.

 

The Internet and Communication

I’m hardly the first person to point out the way that the internet has revolutionized communicating and sharing information. But things like blogging and social media are only just the beginning.

In the past, it was very easy for governments and large corporations to control the information that the public had access to. This is largely still true – consider how in America, only six giant corporations control over 90% of what you watch, read, and listen to. Because of this concentration of power (among other reasons), it is very easy for governments to distribute propaganda and misinformation in order to manipulate public opinion.

Luckily, the rise of the internet, and with it, the alternative media, this control of information is beginning to slip. Yes, government propaganda is still very effective on the majority of the population (there are people who still believe there were WMDs in Iraq…), but now people have access to different and conflicting sources of information at the click of a button.

The significance of this cannot be overstated. More people than ever are recognizing that they’ve been lied to, bamboozled, and used. Discontent with the status quo is spreading like wildfire. Now, when the police slaughter an innocent 12 year old boy and then manhandle, handcuff, and shove in their patrol car his 14 year old sister, the whole world can see it and be enraged. But like I said, this is only the beginning.

The next Big Thing in this area is the imminent adoption of micropayments. Before the advent of technologies like bitcoin, the cost of transferring money to someone was fairly high – it generally costs at least a dollar in fees to move money around from one person to another. But bitcoin and other cryptocurrencies have negligible transaction fees, which means that “tipping” someone, or sending them a few cents at a time, is possible.

What does this mean for media and the spread of information?

A whole lot. Currently, most alternative news sources are dependent on some combination of donations and advertising deals. As such, there are still barriers to entry in this space, because sites require a lot of traffic before they can get any kind of significant advertising. But with micropayments, this can all change.

Soon, we will be seeing websites with bitcoin paywalls. Publishers will be able to charge miniscule amounts for people to consume their content – perhaps just a couple cents per article. This will make content creation far more economical for anyone. By starting even a small blog such as this one, a writer could make some side cash immediately, and perhaps even a decent living fairly quickly (assuming people like their content, of course). This will greatly reduce the influence that advertisers have, so they will be less able to exert pressure on the types of content that are available.

The blockchain, which is the underlying technology behind bitcoin, will also contribute to information liberation. It is a decentralized public ledger – in laymen’s terms, a way of keeping track of information that does not require trusting any particular party. This means that the historical record will soon be free from the Orwellian notion of being rewritten. As Julian Assange, founder of Wikileaks, describes it:

“You can prove a particular statement, particular consensus and particular contract that happened at a particular time globally and it requires the subversion of every single jurisdiction where people are running bitcoin to overturn that.”

In other words, it will become practically impossible to censor information, as there will be no central point of control over it.

Technology is making freedom of speech a physical reality, rather than just an ideal that people hope governments will abide by.

 

Bitcoin and Finance

Another major power center today is with the control of the money supply. Central banks around the world control the supply of money, which allows governments to monetize their debt (spend beyond their means but just “print” more money to cover the costs) and distribute largesse and favors to politically connected individuals and businesses.

The victims? You and me, and everyone else who are stuck holding on to the less valuable dollars, euros, yen, rubles, etc.

But bitcoin and other cryptocurrencies are free from central control. They operate based on mathematical principles and code, rather than special interests. Not only that, they are global technologies that allow fast transactions to happen from anywhere in the world for negligible fees, all while avoiding capital controls.

This means that you and I could do business together, even if our governments may not want us to. Government “sanctions” (aka economic warfare) will become irrelevant, and capital controls intended to prevent people from taking their wealth outside the country will be easily circumvented. We saw this happen in Cyprus during their banking collapse.

The blockchain will make possible all sorts of secure financial instruments as well. “Smart contracts”, or self-executing contracts, are becoming a reality. What does this mean? For one thing, it drastically reduces or even eliminates the need for trust in business dealings. This will take lawyers and banks out of the picture for many types of financial or business transactions.

You can think of smart contracts as a computer program’s “if-then” statements, except that they interact with real world assets. Let the power of that sink in for a moment, and you’ll see that huge changes are coming.

And with the proliferation of cryptocurrencies and “crypto 2.0” projects out there, much more is on the horizon. For instance, Darkcoin is becoming closer and closer to digital cash, allowing anonymous, instantaneous, and secure payments. And other projects, such as NXT, are building entire infrastructures that can have all kinds of applications. Consider the NXT FreeMarket, which is like a decentralized eBay. Think Silk Road, but impossible to shut down.

Cryptocurrencies such as bitcoin are destroying barriers and giving people an unprecedented amount of freedom from the decisions of their governments.

 

P2P Everything

By far, the most famous P2P businesses to take hold recently have been Uber and Airbnb, which have shaken up the taxi and hotel industries, respectively. Uber is basically just a mobile interface that allows drivers to connect with people who need rides without going through a cab company as an intermediary. Airbnb does the same thing, but connects property owners with people who are looking to stay somewhere.

These services have already gone mainstream and hardly seem exciting, but there’s so much more than this. As Jeffrey Tucker said:

“If your sink is leaking, you can click TaskRabbit. If you need a place to stay, you can count on Airbnb. In Manhattan, you can depend on WunWun to deliver just about anything to your door, from toothpaste to a new desktop computer. If you have a skill and need a job, or need to hire someone, you can go to oDesk or eLance and post a job you can do or a job you need done. If you grow food or make great local dishes, you can post at a place like credibles.co and find a prepaid customer base.”

People can connect with each other and take advantage of their skills in ways we could never before. P2P technology is taking the division of labor as far as it will go, and this is incredibly disruptive to more centralized business models.

Consider the taxi industry. In most cities, the taxi industry is highly regulated, and the supply of drivers is strictly limited. This helps them secure undeserved profits by allowing them to charge higher prices. You and I, of course, are the victims. But with Uber and Lyft available, anyone with a car can have an income, and anyone who needs a ride can get it more affordably.

Imagine this happening in every industry. What might this look like in health care? Only the free market will decide, but here’s a thought: perhaps people with some medical knowledge will offer their services and start doing home visits again. If you get sick, you can go online and order a nurse or physician (based on the feedback that other users have submitted) to drop by your house and help you. This can get around strict medical licensing requirements and expensive medical care, and allow people to have a more personal experience for a fraction of the cost.

Let’s take this another step further. What about the provision of security? Most people believe that a 3rd party, the state, is necessary to provide this good. There are some very obvious problems with the socialized policing model we are forced to live under today, including rampant police brutality and the lack of protection offered. Enter the PeaceKeeper app.

Peacekeeper connects members of a community together so they can help protect each other. If your home is being robbed, you can press a button on your phone, alerting your neighbors to the break in. By the time the robber goes outside with your TV, there could be three people you trust with shotguns ready to go. Compare this with local police, who are often slow to respond, never get your property back, and more likely than not will murder your dog.

The P2P revolution is already happening, and over time, will completely change the way we interact with each other.

 

3D Printing

The Liberator

3D printing has the potential to get around excise taxes, regulations, and intellectual property laws by allowing anyone to simply “print” any product that they can get their hands on a design for.

Even I struggle to comprehend the implications of this. But without a doubt, 3D printing will help consumers become producers of the things that they want, without being dependent on inefficient or monopolized companies. If a new product is invented, the patent holder will no longer be able to extort extra monopoly profits from this – once their design is known, anyone will be able to create it from their own home.

Most significant for our discussion is the effect this could have on the manufacture of guns. Cody Wilson, founder of Defense Distributed, has already created a 3D printed gun called the “Liberator”, and its design had been downloaded over 100,000 times before being taken offline. It’s far from perfect, but just imagine the benefit for human liberty that something like this could have! If 3D printing had existed during the 1930s and 40s, the disarmed Jewish population of Germany could have fought back far more effectively. And this will be the case for future despots – they will have far more difficulty controlling and “pacifying” their population.

 

Are These Changes Really Inevitable?

This rapid advance in technology is a crypto-hippie or techno-libertarian dream come true. But is it a guarantee that things will play out this way?

Of course, anything can happen, and nothing is inevitable about this. But the technology is here, and we aren’t going to un-learn how to take advantage of it, especially when it has so much potential to improve our lives. And unless there is a worldwide effort to eradicate these technologies, governments will just be playing an elaborate game of whack-a-mole with them. Even if, say, bitcoin were made illegal in the US, it would continue to be used and have its infrastructure developed throughout the world (and let’s be honest, it would continue to be used in the US).

I often hear skepticism about things like bitcoin. “But doesn’t it get hacked all the time?” seems to be a common refrain. The answer is no, it doesn’t. While it is technically feasible that there is some major flaw in the bitcoin protocol, it is entirely open source and has the attention of many developers focused on making it even better. It’s highly unlikely that there is a “fatal flaw”, and it is even more unlikely that there is an NSA backdoor.

The bitcoin ecosystem is showing signs of being “anti-fragile”, which means that it may be getting even stronger when faced with difficulties and instabilities. Consider the bubble in bitcoin price at the end of 2013 and beginning of 2014. While the price was certainly volatile, this has merely attracted more and more interest in the currency, strengthening its network effects.

And while many bitcoin companies (note: not bitcoin itself) have had issues, including the cataclysmic Mt. Gox meltdown in February 2014 and the recent BitStamp hack, the security of the bitcoin ecosystem is continuing to improve.

In fact, BitStamp is back up and running, now with multi-sig security, which is an incredible step up. It has turned a weakness into a strength, and now other cryptocurrency exchanges will need to adopt multi-sig in order to keep up. And this is nothing, because we will soon have decentralized exchanges, which will reduce counterparty risk while trading digital currencies.

So, while the techno-libertarian dream may not be a 100% certain future, we are rapidly progressing in that direction. The next few years will be fascinating, and if governments haven’t somehow blown up the world, it seems about as sure as one can get when trying to predict the future.

Disclaimer: The author currently holds investments in bitcoin, darkcoin, litecoin, and NXT.

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