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Wednesday, April 11, 2012

Transparency: the Way of the Future?

Is full transparency in government a good thing?


I believe the ascendence of as a collaborative knowledge base has had a significant positive effect on the general access to knowledge. But it has also had a significant negative effect on existing encyclopedias. Recently, the venerable Encyclopedia Brittanica announced their final print edition. Really, it is no great surprise that an online knowledge base can be disruptive in this way. This is really quite similar to the disruption of printed news media (such as newspapers) by online new sources. But there are other ways that wikis can disrupt.


The concept of a wiki is a compendium of material with contributions from several authors. There is a specific wiki called that amasses secret material and publishes it, run by Julian Assange and his associates. The contributors are whistleblowers everywhere. Many of the contributions are centered on the secret doings of governments.

The interest in such wikis is fed by the conspiracy theorist and the popularization of the idea that governments are bad. That they are doing bad things. But weighing individual privacy against the common security is not a simple black-and-white issue.

That being said, I do believe that governments should not act unchecked. Doing evil "in the national interest" is wrong.

Wikileaks has the potential of disrupting a government's ability to operate. Perhaps they believe they can level the playing field between governments by rendering every government transparent. Perhaps they na├»vely believe they are only seeking the truth. Unfortunately, they have done little to render Russia transparent, or Iran, or North Korea. Or even China. They have primarily been concentrating on the United States. Indeed, in some countries, if journalists attempt to render those countries transparent they will simply be murdered. Witness, for example, the purported state-supported murders of Anna Politovskaya and Alexander Litvinenko. Some countries simply have a history of dissuading whistleblowers by making sad examples of them.

It is doubtful wikileaks has the balls to assail any of these countries.

What this has done is to make it less possible for the United States (and some other target countries) to operate in the diplomatic arena, and consequently it lends a strong an advantage to their competitors. This is inevitable. And the trend is to only publish material from countries that are relatively easily penetrated: free countries. This disadvantage is coming soon to your country.

Competition between countries is not just political, or concerned with human rights. It also is about economic prevalence. Countries such as Russia, with its oil and natural gas pipeline that nearly controls Europe economically, and China, with its control over cheaply-made electronics (due to their singular labor policies compared with other countries) and its near-monopoly on rare earth elements, owes its prosperity to the influx of currency from other countries. It is a strong motivation these days: perhaps the only motivation that actually counts to China.

Transparency is not good for negotiation. Without it, countries can operate in secret. Keeping their agenda secret while they strive to achieve their goals is actually key to success. A level playing field would make things better for negotiation. Ironically, the playing field is being made less level by wikileaks.

The kind of transparency that offers is total transparency. They constantly work to reveal everything they can: entire full sets of diplomatic dispatches, even full sets of military communiques. This will naturally reveal plenty of stuff that could be necessary for a country's economic survival.

Indeed, it would be to a competitor's advantage to extract such information and provide it to wikileaks. Whether this has actually happened is something I can't really verify, because wikileaks scrupulously seeks to anonymize the information, scrubbing away email MIME headers (so you can't be sure the emails were genuine in the first place!), zeroing empty blocks, and redacting content that could reveal their source.

If the publishing of the information is a crime, then they are accomplices and co-conspirators. But how do you prove that the information is true? You can't. They have scrubbed away all that can be used to prove it true. And if you independently verify one piece of information, can you trust the rest if you can't say where it actually came from? I doubt that wikileaks even knows whether the information they post is true or not. They may not even know for certain where it came from. Which makes the publishing of the information an incredibly questionable activity.

Wikileaks has also revealed information about companies as well, such as Bank of America. I am sure it would love to reveal information about people as well.

So, when Julian Assange commits a sexually predatory act in Sweden, for instance, he should be glad that such things can be transparent. And he should be glad to participate in a transparent legal process there, right? No. He is a hypocrite. It's OK to reveal other people's secrets. But when his secrets get revealed, then he objects! And fails to own his actions.


Hacktivism, hacking for the purposes of vigilante social justice, has been on the rise. The Anonymous group is famous for hacking in retaliation for the removal of credit card support in wikileaks. Really, anything they set their collective minds to, if they think it represents an injustice, is cause for a retaliatory hack. This makes them judge, jury, and executioner for their brand of justice.

Many of the Anonymous crowd also perpetrate hacks that simply reveal lists of credit card numbers and email accounts and passwords. Don't they know that the rogue and state-supported Chinese and Eastern European hack squads are going to exploit these? They disrupt businesses like Sony's Playstation accounts. These acts are essentially criminal acts. And if they aren't criminal acts, they almost certainly lead to them.

In some ways, hacktivism can also produce effects that may be useful, such as making us aware that we should change our passwords. But these are secondary, reactive effects, and not the ones that they were seeking to accomplish. Not by a long shot.

Really, such lawless acts are indefensible. In this day and age where so much is constantly being attacked by Chinese hack squads, why don't these hackers join the good guys and help to build better defenses against the barrage of cyberattacks? There is a real need, and they have the talent. Please, Anonymous, step forwards and help. And I'm not talking about defacing Chinese government web sites.

Perhaps the FBI will have to bust these hackers and conscript them, like they did Sabu.

Either way, we need to get organized to fight cyberattacks and cyberterrorism.

Even if laws could keep up with technology, there are still Chinese state-supported hack squads to deal with. Maybe wikileaks will try to keep them accountable. Sure.

The Moral

Those interested in transparency and who are eager to reveal things must own their actions and practice what they preach. An anonymous hack is an asymmetric form of warfare. Not exactly transparent, is it?


  1. Moral issues are contentious, e.g. some cite that government has an asymmetric advantage over the individual in the form of a monopoly awarded by the rule of the MOB (a/k/a democracy). I understand all major media (and thus voting) is now controlled by 5 wealthy families. As I understand, our country was originally a republic, not a democracy:

    Some Iron Laws of Political Economics, The Logic Of Collective Action:

    I am thinking the "good guys" are those who create disruptive technology that increases the degrees-of-freedom of society (c.f. our discussion in your Future Part 1 blog) and thus increases the efficiency of knowledge spread and production.

    I am thinking the topmost "bad guys" are the moneychangers-- those with a monopoly on the creation of money. However, I don't think we should fight them, because they are natural result (supply side) of the demand of the people to be entitled, directed, and controlled (i.e. socialism a/k/a democracy).

    "Give me control of a nation's money and I care not who makes the laws" (Shelby: because the lawmakers, media, etc are owned by those with the power to loosen or tighten credit at will) -- Mayer Amschel Rothschild

    History of money and banking is an important study:

    Looks like we have some major chaos ahead on that front:

    1. A government of individuals is no government at all. Thus it must gain advantage in some way or else it cannot properly support society. There are plenty of people who don't obey or even observe the social contract.

      Forces at play in our society have an effect on the individual's access to information, there is no doubt. Having an iPhone, I know that we can get weather, location, traffic, news, and social media connectivity instantly and at any time. News networks are no longer in control of the media. That stasis has been replaced by an instant spread via internet, twitter, bloggers, and personal information upload via YouTube. True, the media uses this information and puts their own spin on it, but they are followers, not leaders.

      True transparency means that, whatever grizzly, heinous, morally void crime has been committed, the media are motivated with few exceptions to publish all the gory details to satisfy the leering public. This has led to a spiral of increasingly terrifying crime. And this is reflected in the spate of torture-oriented movies, like the Saw franchise, that draw increasingly large crowds to our theaters. Our unquenchable obsession with serial killers has led to several movies like Seven, The Silence of the Lambs, Natural Born Killers, etc. that reveal quite a bit about the serial killer's habits, frame of mind, and techniques. Even the series Dexter rejoices at revealing every visceral detail with the detachment of a blood-spatter analyst.

      So my comment is this: transparency is merely catering to the public's true desire for more and more outlandish and detailed violence and gossip. And this is leading to an accelerating loss of the feeling of wonder. This because there is nothing left to wonder about.

      In international politics, transparency is asymmetrical at present and we are not talking about governments and individuals here.

      Nowadays, money definitely controls people's minds, though. You are right about that.

    2. Fixed-income savers were 339 times more prosperous in the 1800s when government was less than 10% of the economy. We didn't even have an income tax then, nor did the federal government have a monopoly on money in circulation. Roads were privately built toll-roads, etc..

      "Interest rates were more than 5% in 1800s and less than 4% in 1900s, while prices declined by 51% from 1800 to 1896 versus an increase in prices by 6,667% from 1913 to 2009."

      Estimates now are that the government in USA is 60 - 75% of the economy:

      My calculations say the social contract is bankrupt. I understand this assertion might seem out-of-sync with current state of middle class life in affluent regions of California. I can provide the hard data.

      It will probably take several more years of $1+ trillion deficits (and the Fed printing dollars to buy these bonds) in the USA before the titanic finally sinks. As far as I can see, other than some unknown disruptive technology, the only possible way out other than the current strategy of inflating away the debts by devaluing the dollar and USA standard-of-living, is massive immigration and attraction of foreign investment, which doesn't seem likely (the former probably requires a rise in the value of the dollar and the latter probably requires a drop).

      About censorship or the lack thereof, and the impact on social pathologies, I turned off the TV a decade or more ago. In my other comment, I had linked to an essay on social pathology in the USA:

      His libertarian stance is that entitlement causes every society to morally decay. This happened to the Romans too.

      So I don't think the answer is bigger government and more regulation, rather we need the government to stop printing money to delay the collapse of the entitlement bubble. The social contract is already on its death bed.

      Any way, we may have to agree to disagree on this one and then we can compare notes in a few years ;)

    3. I read today that the median networth in the USA is less than $6,000, i.e. 49% of people have less than that.

      What happens throughout history when the social contract is bankrupt (which is the result for every one of 100s of fiat systems and governments created throughout the history of the world), is the social contract eats its middle and upper-middle class.

      What may happen in the USA (when the collapse finally ensues) are capital controls forcing anyone with networth to invest in bonds as they decline to near 0 value. Or some other form of networth tax.

      Any way, the exact form of destruction is speculation. I look to history to for guiding examples. I feel fairly certain about this danger ahead, having researched it for several years. If you have any information to the contrary, I am interested to read. I will yield to you on the last word.

    4. Sorry, it's probably closer to $90,000.00 median net worth, according to my quick research. As opposed to the average net worth, of $284,000.00, which reflects the huge surplus of the Buffetts and other captains of speculation.

      The social contrast is still alive an kicking here in the US and it is in no way going to disappear overnight. Industrial disruption does cause waves but society does remain afloat.

      You are right about the deficit. Continued government spending at record levels while the deficit climbs is sheer economic stupidity. It's time to shore up.

      The real need for the average Joe is, simply put, a job. The US will have some hard decisions to make concerning education and job agendas. We can't keep getting outpaced by China year after year.

      Still, if you look at China, they build whole cities that go unused. This is not a really great thing and bespeaks tremendous waste.

      It's no wonder that China outpaces the US in fossil fuel consumption now and has now become the number 1 in CO2 emissions, ahead of the US. It's both coal and oil.

      My favorite thing is that hybrid and electric cars are skyrocketing in China, but the electricity comes 80% from coal and thus adopting electric cars has only made their pollution worse!

      China gets the labor-intensive contracts and thus outpaces the rest of the world in production. This is because (1) there are so many people and (2) their labor practices are like those in western society, only lagging by about 100 years.

      Accountability is low in China, where the government is not elected and those in power are the ones with the money and position. It's like Britain in the 1880s.

      Speaking of investment, Gold has been having quite a run in the last ten years. And businesses like Apple have succeeded because they created disruptive technologies that can really enable.

    5. I have to unyield to correct that statistic. Economic systems are non-linear and so we must model them with differential equations, not unrealistic static snapshots.

      For the purposes of being a qualified investor in private placements under SEC law and other official definitions of "net worth", they disallow home and business equity, because net worth must be liquid to be meaningful.

      So the LIQUID median net worth is considerably lower, looks like might be negative:

      I believe the gold-house price ratio will plummet further due to unprecedented "financialization":

      Also we are near the end of multi-decade bond bubble (falling from double-digits in the 1980s to 0%), and as interest rates rise, the price of homes will be devastated. This will cascade into business equity.

      Here is the key statistic on China which shows it will collapse:

      Apple is having quite a run, but I think they are being disrupted by Android. I will post some data in your Post-PC blog.

      I think the current depression is going to be worse than the 1930s, and causes dramatic changes to the social contract. The USA GDP has been contracting severely every year and has not rebounded:

      John Williams consults to Fortune 500 companies because the government CPI and thus real GDP statistics weren't congruent with actual results for companies. He shows the official headline numbers are using mathematical deception.

    6. Well, it's not so bad that you couldn't sell your house. Lots of people do sell, and also get various forms of refinancing. Which is quite attractive right now since the interest rates are down around 4%. And they would also get reappraised, so that their actual property taxes can go down. So there are plenty of reasons to treat homes as liquid assets.

      Business equity is leveragable and so it can count as loan security.

      Still, who wants to increase their debt? It's the debts that matter against the net worth, and this counts as negative.

      Staying out of debt is the key to keeping afloat. The government under Clinton and the next two administrations should never have told the insurers and lenders to look the other way on bad debts.

      Certain other acts of God had a significant effect on net worth, such as the Katrina hurricane.

      While there are people in Aptos who have been foreclosed, this is not a widespread thing, apparently.

      But I don't really agree with you on your measure of net worth. When people get into a pinch, it's all liquid.

      There are indications of the housing market recovering. I'm seeing that locally, and not just Santa Cruz and Aptos.

      Things do move up and down but it would certainly be precipitous to point at a "coming crash". BTW there are people who want to sell you that concept.

      But I'm not saying that things are fine. Not by a long shot. I believe government fiscal responsibility is at a minimum, and that this must change soon.

    7. Houses are always liquid (in the future) at some price, but since we are trying to anticipate the future outcomes, it is the assumption of the current market price in the future (a snapshot in time), which is an erroneous mathematical model. An analogy is if we erroneously assume a mass on a spring will be moving down in the future, because it is at current time snapshot. The correct model of the velocity is a differential equation of all the forces involved:

      The key point is that the market prices of houses is HIGHLY LEVERAGED to the interest rate, thus any snapshot of net worth including a snapshot of the current market price of a house, is an incomplete and erroneous mathematical model. The market price of houses is based on the intersection of the supply and demand curves, and the demand price curve (the maximum prices the buyers can pay) is based on the monthly payment, which mathematically can not exceed (a reasonable % of) the buyer's income.

      Since we can see from the net worth statistics, that at least 49% of the people are (or nearly) bankrupt if the market price of their house drops significantly, we can see that there is contagion risk. If interest rates rise significantly enough, the market prices of houses will plummet.

      Next let me explain how I know mathematically that eventually interest rates must rise significantly.

      The above contagion risk is why the Fed is forced to hold the short-term bond interest rates down near 0% and long-term bonds down around 3% currently (which translates to roughly 4% mortgage rate as you said).

      What does free (nearer to 0%) money do to an economy? It encourages investment in less productive sectors. Low interest rates redistribute capital from the most productive sectors to the lowest ones. This is true because capital (unlike money or finance) is finite. Capital is actual productive resources. We use money and finance to allocate it. Labor (your brain and mine) is one main example of capital. Raw materials is another lesser significant one (in this new knowledge based economy).

      Thus while we keep interest rates low, we are destroying (wasting or misallocating) capital.

      We can see this is capital destruction is ongoing if we calculate the aggregate statistics using methods before the Clinton hedonics, as does for Fortune 500 clietns. There we see that real GDP has dropped by 25% since 2001, and real GDP growth has remained negative. We see that unemployment is continually worsening.

      We can't tighten fiscally without gutting the income and thus also plunging the prices of houses. We can't raise interest rates also.

      So what we are doing is borrowing to delay the inevitable crash, and misallocating more capital and making the end crash worse.

      Remember also that the value of a bond is highly leveraged to the market interest rate. Thus an owner of a bond profits when the interest rate continues to drop. Bonds plummet in value if the interest rates rise significantly.

      The interest rates have been perpetually declining since the early 1980s, when Paul Volcker used double-digit interest rates to contain inflation and tame the gold and silver prices. This declining interest rate regime has been sustaining the misallocations of capital that occurred along the way. It is a mathematical bubble.

      All bubbles have to be popped eventually. We are sustaining the historic misallocations, by piling on more debt and misallocations. Interest rates will eventually rise, and the massive accumulated misallocations will default.

      So far, the USA real GDP shrunk -25% (1/4) since 2001

      Factoring in the 1% US population growth rate. that is a -38% contraction since 2001, meaning it will take +61% real growth (over 0 years) to get back to prior level. Say it takes 20 years to get back, so that means +83% real growth needed (factoring in population growth over the 20 years).

  2. Following up on my prior comment, perhaps the USA has a geopolitical incentive to sow conflict in the Middle East and EurAsia (Iraq, Afghanistan, Pakistan, Iran, the Arab Spring, etc) in an attempt to keep the "vassals" from uniting in trade:
    (see Zbigniew Brzezinski quote near end of the article)

    Regarding the Logic of Collective Action, unteresting insight that the revolving door of political corruption in the USA is more stealthy ("cautious") than the Third World, due to a western culture attribute of delayed gratification:

    And for something even more pessimistic:

    What keeps my spirits running high is the opportunity to create disruptive technology. We are going to need some.

    1. People always want to follow the money, but is this always a valid approach? It is incorrect to say that Arab Spring is about following the money. There are some factors that can no longer be controlled, and social media is among them. This new force is having tremendous effect in so many nations that seek to stringently limit their people's voice. However, some nations (who will go unnamed) have successfully limited their people's voice through technology, propaganda, and fear. For instance, Syria is a battlefield being fought by guns and bullets, but also by social media.

      And coincidentally, these lockdown nations are not subject to WikiLeaks-style transparency. So, yes, there is asymmetry and it is not a good thing.

      There are several factors leaning on modern economics, and disruption is one of them. This is the force that makes it impossible to predict what will happen. This is the force that changes everything.

    2. I thought it was a Wikileaks revelation (US diplomatic cables) on the corruption in the north African governments that lead to the first guy burning himself to death (self-immolation) in Tunisia, and then it spread to Egypt and Libya.

      I have seen graphs on how external internet traffic was squelched in Iran and I think also China and Libya. Apparently the information still gets through after these controls are in place, via VPNs and other tricks ( ), then spread by SMS and MMS messaging. If a nation shuts down cell phone service entirely, then apparently it is too late to stop the public uprising and the economy will grind to a halt anyway, due to loss of communication abilities. So as far as I know, it is economically and politically infeasible to stop the force of transparency.

      I have read that there are 1000s of uprisings per month in China. Many or most of the rich have already moved their money and families out of the country, because they fear that once the economy stalls, chaos will erupt.

    3. This is quite right. The leak was definitely distractive to a government, but apparently not ours. The comment on cellphone service was never so poignant than with Syria, where Syriatel is owned an operated by an Assad family member. By the time they shut it down, the insurrection was far too widespread.

      If every nation is headed for revolution due to transparency, there might not be much left of the world. There are plenty of countries that keep a tight lid on transparency still, and it doesn't look like it will change any time soon.

      I suspect that China won't be changing too quickly. Their only chance in the long term is a slow, measured move towards accountability. Chaos in China would indeed create a global depression.

    4. I pass along Michael Pettis's analysis on China:

      I don't want to get too political (also out of respect for your employer), so I will not summarize some of his conclusions here.

      Mish Shedlock has a had a few insightful articles on China, some with insider info. Also there is Jim Chanos's bet against China and his stats, such as afair 50 sq.ft of office space in China for every one of its 1.3 billion people. In short, the typical overbuilding and capital misallocation of a top-down command economy, which I informally attempt to relate to the mathematics of entropy, potential energy, and degrees-of-freedom:

      (see the chart on steel foundries)

  3. I haven't verified whether this long wave cycle principle repeats throughout history, but I assume he has, since he said he spent 10 years perfecting it:

    I had read an article that ties this cycle into generational cycle attitudes. I am trying to find it, as I think it explains a difference in our world view.

    1. I found the generational research which correlates to the longwave economic cycles:

      Zoomed chart of the longwave economic cycle:

      Prophet Nomad Hero Artist
      High Childhood Elderhood Midlife Young Adult
      Awakening Young Adult Childhood Elderhood Midlife
      Unraveling Midlife Young Adult Childhood Elderhood
      Crisis Elderhood Midlife Young Adult Childhood

      High = Spring
      Awakening = Summer
      Unraveling = Fall
      Crisis = Winter

      Prophet = Boomers (born 1946 - 1964), 40 percent of the workforce
      Nomad = Gen X (born 1965 - 1979), 16 percent of the workforce
      Hero = Gen Y (born 1980 - 1994), 25 percent of the workforce
      Artist = Gen Z (born 1995+)

      Boomers = vision, values, and religion (loyalty, idealistic, entitled)
      Nomad = liberty, survival and honor (survival, pragmatic, alienated)
      Hero = community, affluence, and technology (order, righteous, protected)
      Artist = expertise and due process (continuity, flexible, overprotected)

      Some links on different attitudes between the current generations:

      So now we can understand why boomer's (you) politics are loyalty, enforcing idealistic values, and maintaining entitlements.

      And Gen X's (me) politics are liberty, pragmatic survival, individualism (honor), and distrust of values and institutions. I am libertarian anarchist. So trying to convince me that the entitled state should enforce values, is like me telling you that we should privatize the government.


      It explains why we are going to disagree about any political/social topics, such as Hackers, Transparency, media's role in society, etc..

    2. Some useful tables (although I think this deviates in some cases from the generational theory in the prior comment):

      The Boomers (elders) and Heros (youth) are archtypes and will be at odds. Boomers will judge them to have threatened values (remember the Heros are protected), yet ironically the above link claims the Boomers did more drugs, volunteered less, have lower college education, and higher teen pregnancy than the Heros do.

    3. So many labels! I have found that people are the same and are fighting the same fight year after year after year. The scenery changes a little bit, but it's almost the same every time. Movies get remade and stories get retold. Music is covered.

      But new music always gets written. Creativity is agnostic, ignorant of labels.

      So, if you have the creativity, and some ideas, then practice proper marketing and take it to the next level. The world can be yours to disrupt.

      Particularly in the information age.

    4. On the individual level agreed, that is why politically I don't agree with collective action.

      Billions of unique individual situations (a market with trillions of interactions in its network) can't be optimized with centralized "one size fits all" laws and regulations.

      I explained in detail in the other blog:

    5. Still, there is a place for "don't steal stuff and profit from other people's work without their permission and/or license" within some limits.

      The problem with legislators is they typically muddy up the situation by creating a voluminous tome instead of a clear simple law that people can understand. And then the throw in stuff that is earmarked for other purposes, so the right people will vote for it. Legislation is, at best, an imperfect process.

    6. Agreed, to the extent that people don't do the right thing w/o government force, and/or for those markets where there isn't an algorithmic solution to ending theft (e.g. the example I gave where it doesn't make individual's effort opportunity cost sense to steal download music below some threshold price).

      Bottom line, if the private free market doesn't protect, then the government will be forced to.

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