Markets Versus the State

States throughout the world try to restrict markets. These attempts never succeed because the handful of individuals that comprise the state are up against the creativity of very person living under it. This is what so-called “black” markets exist.

Russia decided to place an embargo on foods from the European Union and United States in response to sanctions created against it by those regions. The embargo hasn’t stopped the importation of food from either region. But the embargo makes it risky for importers of these now illicit goods to openly advertise. In the past “black” market actors have relied on limited forms of advertising such as word of mouth. One advertisement agency has come up with a solution that allows “black” market providers to advertise their goods more widely and protects them from state agents:

Last summer, Russia imposed a full embargo on food imports from the European Union (as well as the U.S.) in retaliation for sanctions over Ukraine. This left authentic European food merchants in Moscow in a bit of a bind.

But one Italian grocery store there, Don Giulio Salumeria, kept selling its real Italian food—and came up with a bizarre out-of-home stunt to advertise to consumers without tipping off the police.

With help from agency The 23, the store developed a unique outdoor ad that could recognize police uniforms. Whenever the cops would appear, the ad would cycle out of its rotating display—in essence, physically hiding from the authorities.

Here’s a video showing the sign in action:

Obviously this solution isn’t perfect. Since it relies on recognizing police uniforms it won’t hide the advertisement from off-duty officers walking around in their regular clothes. However it is a demonstration of market innovation and could easily be expanded. In the next iteration they should have the sign store a facial picture of anybody recognized as an officer. Then have it compare faces of anybody passing by with known police officers and hide the advertisement if there’s a match. That way the sign would be able to hide its advertisement from off-duty and on-duty officers.

Innovative ideas such as this one are why the state will always fail when it attempts to restrict markets.

Markets Have Not Ruined Video Games

According to Lorne Lanning capitalism is destroying the gaming industry. In his eyes the for-profit game development model has lead to a world where creativity is stifled by large developers. The Foundation for Economic Education has a good rebuttal by pointing out that the video game industry wouldn’t even be a thing without markets. I want to take it a step further though.

Lanning believes the solution to capitalism in video gaming is independent developers:

In today’s marketplace, Lanning pointed to the indie victories we’ve witnessed with titles like Octodad or Monument Valley. Yes, it takes money to make money, but it doesn’t have to take tens of millions.

What he doesn’t stop to consider is that independent developers are enjoying a great deal of success thanks, in part, to the major game developers that he seems to despise. There has never been a better time to be an independent game developer. This is because the development tools have become cheaper (often free) and more capable and getting titles in front of customers is dead simple.

Consider Microsoft. As much as I dislike Windows I can’t fault Microsoft for how it treats developers. Over the years it has created excellent development tools, streamlined game development with its DirectX framework, and created a distribution platform that every Xbox and Windows gamer has access to. If I want to release a game for the Xbox Microsoft is very much interested in helping me see my dream come true because it stands to profit from my success. And Microsoft isn’t the only game in town. Valve has given independent developers an amazing distribution platform for PCs with Steam. It has also given game developers a great engine called Source. I haven’t even mentioned Sony, with its PlayStation store, Google with its Play Store, or Apple with development tools and App Stores for both OS X and iOS.

It was only a few years ago when independent developers had to front the expense of developing, advertising, and distributing titles. This often resulted in a hodgepodge of a million online stores, product keys you had to keep track of, and other assorted headaches. Now an independent developer can download excellent, free developer tools and publish the completed title to the Xbox Games Store, the PlayStation Store, Google Play, Steam, and the Apple App Stores. From there users can click a few buttons and have the game downloaded to their system with minimal hassle.

Markets gave rise to today’s large developers. These large developers then created development tools and platforms that helped give rise to independent developers. Someday the independent developers will become large themselves and likely create new tools and platforms to give rise to new independent developers.

Video games have gone from a geeky hobby you got beat up for enjoying to a multi-billion dollar industry. The only reason we have capable gaming hardware, quality development tools, and easy distribution platforms is because developers of old satisfied customer wants enough to acquire the capital necessary to build these things. Had the Nintendo Entertainment System or Sega Genesis flopped it’s possible that video games would still be a niche industry. Dedicated gaming hardware such as consoles and graphics cards would likely be much less capable than they are today. Development tools would probably still be primitive due to the lack of investment in improving them. Distribution would almost certainly still rely on a hodgepodge of disparate websites and produce keys. After all, why would a large developed like Microsoft put any money into the growing the gaming industry if it didn’t stand to profit? How would Valve have acquired the capital necessary to build Steam if Half-Life hadn’t raked in so much money?

I think Lanning’s real objection to today’s gaming industry is that the best selling titles aren’t the titles he enjoys. As somebody who doesn’t enjoy today’s most popular series, such as the titular Call of Duty, I can relate. But the success of those blockbuster series hasn’t hampered the games I enjoy. Series I enjoy, such as MegaMan and Armored Core, have seen releases in recent times. Inafune, one of the creators of the MegaMan series, has even branched out on his own to release a spiritual successor. Igarashi, one of the masterminds behind Castlevania: Symphony of the Night, has also branched out to release a spiritual successor. Capitalism hasn’t destroyed the gaming industry, it has propelled it forward. All of the capital acquired by releasing blockbuster titles has given way to tools that help independent game developers. Hell it’s unlikely Oddworld, Lanning’s most well-known title, would have never seen the light of day if it wasn’t for blockbuster titles from the 8-bit and 16-bit console days creating a major gaming industry.

Watching Cronies Fail

A major benefit of providing solutions to government meddling is watching as the government’s cronies fail. Cab drivers in Mexico, as cab drivers in much of the world, are unhappy with ride-sharing services such as Uber and Lyft. Their unhappiness is understandable since they’ve been shielded from competitors by their government for decades. When you haven’t had to compete in a market it can be scary facing competition because it makes you realize that you have to actually provide a superior service if you want to thrive.

On Monday cab drivers in Mexico went on strike to protest Uber. The protest was a plea for the Mexican government to ban Uber. The end result was to give Uber a great dead of publicity and convince a lot of people to try Uber since they couldn’t get around using traditional cabs:

Monday’s protest from Mexican Taxi drivers, against ride-sharing mobile apps such as Uber, has proved a boon for the San Francisco-based company. After offering a protest-edition special with two free 10-dollar rides, downloads of the app rose by 800 percent, Uber Communications Director for Mexico Luis de Uriarte said on Tuesday.

Unlike Uber, the signs of regulated taxis were off in Mexico on May 25, as some 5,000 drivers took to the streets of Mexico City. Chanting “Get out Uber!” union leaders demanded the government impose a ban on the smartphone-based service.

With the hashtags #UberNoPara (Uber doesn’t stop) and #MexicoNoPara (Mexico doesn’t stop), Uber launched a campaign offering two MEX$150 (US$9.8) fares for free between 7:00 a.m. and 9:59 p.m. on Monday. The initiative not only have become a commercial success, it brought PR blowback on the taxi drivers.

Uber and Lyft are providing a solution to a market that has been crippled by government regulations for decades. Many localities put an artificial cap on the number of legal taxi cabs that can operate. Other localities, while not putting an artificial cap in place, require potential taxicab drivers to pay a licensing fee, which adds a barrier to entry. The result has been lackluster taxicab services in much of the world. With ride-sharing services such as Uber and Lyft anybody can act as a taxicab. Suddenly cronies that have been protected from competition are facing the competition of anybody with a vehicle and they’re floundering.

Providing solutions to government create problems weakens its grip by showing how unnecessary it is. While government protected taxicab drivers were refusing to provide services ride-sharing swooped in to save the day. Because of this people are unlikely to accept any prohibition against ride-sharing services.

Market Solutions Versus State Solutions: Global Positioning System

Continuing on my theme of comparing market solutions to state solutions, today I’m going to discuss the Global Positioning System (GPS). For those of you unfamiliar with GPS it’s a network of satellites that provides positional information for navigation purposes. Development started in 1973 by the Department of Defense (DoD) and it became fully operational in 1995. Today anybody who uses a computer navigation system, say their phone or a dedicated GPS receiver, relies on this network.

There are several points to note about GPS. It was originally developed to improve the DoD’s ability to blow up people in foreign countries. Civilians were begrudgingly given access to the network but only through a degraded signal. In 2000 civilians were finally allowed to access a non-degraded GPS signal and that’s when the real innovation began.

The DoD’s exclusive access to the full capabilities of GPS resulted in no notable quality of life improvements for everyday people. Instead the DoD saw GPS as a way of improving its ability to kill people. Even today the state still uses GPS to enhance its own power. The Federal Bureau of Investigations (FBI), for example, uses GPS to perform warrantless surveillance.

Meanwhile the market has been utilizing GPS to improve the lives of everyday people. In 1991 a GPS receiver weighing less than 3 pounds was finally created. Today GPS receivers are so small that they fit in our phones. Using these miniaturized GPS receivers we are able to navigate with our phones. Google and (to a much lesser extent) Apple’s mapping services give consumers free access to constantly updated maps that enable real-time turn-by-turn navigation when coupled with a GPS signal. Market access to GPS gave rise to Geocaching, a game where players use GPS to locate hidden caches. Task management apps allow users to create reminders that will fire off when they enter their home or place of work. Bicycling apps allow cyclists to keep track of where they road, how fast they were going, and how high the hills the ascended were. Phones and other devices can utilize GPS to report their location so they can be easily recovered if stolen. Thanks to the market you can even use GPS to defend yourself against the state. Apps such as Waze will alert you to reported police presence before you’re close enough to be clocked on a radar gun.

Where the state saw a network of navigational satellites only as a means of improving its ability to kill and spy the market saw it as a means of improving our lives in a vast number of ways. Thanks to the market GPS is so integrated into our daily lives that we take it for granted.

Market Solutions Versus State Solutions: Google Edition

Xcel Energy demonstrated the difference between how markets and the state utilize drones. Now Google unwittingly provided another demonstration. When Google created the Play Store it saw it as a service that would improve the lives of their customers by providing a method to easily download Android applications. When the National Security Agency (NSA) saw the Play Store it saw it as a method to infect Android phones so they could be surveilled:

The information about Irritant Horn comes from documents provided by Edward Snowden to The Intercept and CBC. The program, which appears to have been in its early stages in 2011-2012, had NSA analysts use a type of man-in-the-middle attack to implant spyware on Android devices connecting to the Android Market or Samsung’s apps store. Basically, besides the requested app, the targets were served malicious software that allowed spooks to eavesdrop on everything that happened on the device. The NSA even explored using the capability to modify the target device, for propaganda or disinformation purposes.

Google wants to provide Android users with Firefox so they can browse the web. The NSA wants to provide Android users with a modified version of Firefox that reports on their browsing habits and potentially feeds them disinformation.

Whether the NSA was successful in highjacking Google’s service is up in the air. I think the answer to that heavily depends on the security used by the Play Store. If the Play Store uses effective tools to encrypt communications between an Android device and the Play Store as well as digitally sign provided software the likelihood of the NSA being successful is low. This is because a properly secured connection cannot be highjacked and digitally signing the software will alert you if it has been altered. Even if Google cooperated with the NSA the user would be able to tell if the software was modified so long as the developer signed it (that still leaves the possibility of the NSA enlisting the developer but then the problem isn’t the Play Store).

Two lessons should be taken away from this story. First, the market sees services as means to fulfill consumer wants whereas the state sees services as means to exploit them. Second, proper security is important and markets actors should focus on it to protect consumers from the state (and other malicious entities).

Political Solutions Versus Technical Solutions

When discussing pervasive surveillance I focus exclusively on technical solutions. People involved in political activism often ask me why I don’t also involve myself in political solutions. My reason is that I don’t like investing effort into worth that is unlikely to pay off when I can invest it in work that will pay off.

Consider the political solution. Say, in spite of everything we know about the state, Congress decides to ban the National Security Agency (NSA) from spying on American citizens and actually enforces that ban. What then? You’re still vulnerable to spying from the Government Communications Headquarters (GCHQ) as well as the intelligence agency of every other major world government. In addition to that your Internet service provider (ISP) can still spy on you and inject malicious code into websites you visit. Political solutions are also temporary. Once the Congress that voted to prohibit the NSA from spying is replaced with a new Congress that ban could be reversed.

Technical solutions avoid those limitations. When you use security forms of communication that the NSA, GCHQ, and other intelligence agencies can’t crack then they are unable to spy on regardless of where the political winds blow. Furthermore ISPs are unable to surveil your traffic or inject malicious code into websites you visit. Technical solutions fix the holes needed to spy on you and therefore defends you against all surveillance and not only for temporary stretches of time (assuming the secure communication tools continue to be maintained so any discovered vulnerabilities are fixed).

I, like everybody else, only have a limited amount of time. Why would I invest some of that precious time into something that is, at best, temporary and only guards against a select few bad actors when I can focus on something that is more permanent and works against all bad actors? It just doesn’t make sense.