The Biggest Problem with the Surveillance State is that It Will Never Actually Work

One of the biggest oversights in the ongoing conversation about the surveillance state depends and the generally low level of public knowledge about statistics. Thankfully, Carl Bialik in The Wall Street Journal has taken the effort to help clear this up. As he explains,

Reports about the National Security Agency's program to collect vast amounts of data on personal electronic communications have created an uproar about the implications for privacy. But some statisticians and security experts have raised another objection: As a terror-fighting tool, it is highly inefficient and has some serious downsides.

Their reasoning: Any automated approach to spotting something rare necessarily produces false positives. That means for every correctly identified target, many more alarms that go off will prove to be incorrect. So if there are vastly more innocent people than would-be terrorists whose communications are monitored, even an extremely accurate test would ensnare many non-terrorists.

Kaiser Fung, in his book terrific book Numbers Rule Your World, points out that statisticians tend to be much more interested in variability than actual predictions. Analyzing data based on samples is fundamentally an imprecise science, and statisticians have diligently worked to formalize a system of expression uncertainty. Take an introduction to statistics class, and almost half of your time will be taken up by calculating variance, standard deviations, variance and confidence intervals. All of these are simply ways of saying how much (and how little) you actually know.

This obsession with variance matters because statistical inference is not actually built around binary outcomes. In fact, any projection or estimate contains four possible outcomes: a true positive (correctly guessing something is there), true negative (correctly guessing that something isn't there), false positive (saying something is there when it isn't) and false negative (saying something is there when it isn't). The latter two are labeled type 1 and type 2 errors. While better algorithms and more data can, to an extent, reduce the total number of errors, it is essentially impossible to be perfectly accurate. Instead, a statistician must always accept a trade off between false positives and false negatives. Getting rid of one means accepting the greater prevalence of the other.

Why does this matter? Terrorism is an inherently rare activity and terrorists are very rare among any population. This makes it extremely difficult to establish any robust model for identifying terrorist activity within communication data. Moreover, the incentive system for an NSA agent is badly stacked against false negatives. Let one suspected terrorist go, and you have another 9/11 on your hands (or so they're all trained to think).

In response, the data mining algorithms used by PRISM have to be extremely large. Because reducing false negatives is so important, a basic Bayesian model developed by Corey Chivers estimates that there will be about 10,000 false positives for every successfully identified piece of terrorism-related communication. The government has tried to trot out a handful of terrorist plots that they've interfered with as evidence of the effectiveness of these broad surveillance tactics. For the statistician, this is a tacit admission from the government that hundreds of thousands of Americans have had their constitutionally-protected civil liberties shockingly violated by agents engaged in a hopeless wild goose chase.

The fundamental case against torture, past ethics and human rights, is that it simply does not work. It has never proven to be an effective intelligence gathering tool. Even worse, we have lapsed towards torture despite the fact that much more humane tactics have proven to be incredibly productive.

The case against the surveillance state is exactly the same. Comprehensive data collection accompanied with data mining algorithms is a terrible way to actually investigate and pursue terrorists. Agents will spend most of their time dealing with false positives. At the same time, massive direct costs will be incurred by maintaining such an elaborate system and even larger indirect costs will amount from the systematic violation of civil liberties.

This isn't a particularly novel concept, as the Cato Institute was already tearing apart the fundamentally flawed ideas behind mass surveillance seven years ago. As Jeff Jonas and Jim Harper wrote in 2006,

Though data mining has many valuable uses, it is not well suited to the terrorist discovery problem. It would be unfortunate if data mining for terrorism discovery had currency within national security, law enforcement, and technology circles because pursuing this use of data mining would waste taxpayer dollars, needlessly infringe on privacy and civil liberties, and misdirect the valuable time and energy of the men and women in the national security community.

What the 9/11 story most clearly calls for is a sharper focus on the part of our national security agencies—their focus had undoubtedly sharpened by the end of the day on September 11, 2001—along with the ability to efficiently locate, access, and aggregate information about specific suspects.

Living with terrorism means accepting living in a world that is fundamentally unpredictable and having the courage to face the day knowing that something bad might happen, no matter how hard you try and stop it. There will never be a surveillance system fine tuned enough to actually accomplish what the government wants from PRISM. Instead, a much different approach is necessary: one that modestly accepts our ability to control the world and holds the value of personal sovereignty to the highest degree.

Both at home and abroad, the actions of the US government violate these basic precepts. There is little regard for the well-being of American and foreign citizens, and a hopelessly irrational obsession with trying to control the uncontrollable. A drastically more modest approach has the potential to both reaffirm the importance of human rights and offer the greater opportunity for meaningful security. It's badly needed.

Four Economic Lessons Courtesy of Dorian Electra

Dorian Electra is Youtube pop star who devotes most of her efforts to promoting Austrian Economics. Awhile back, she posted a video called "FA$T CA$H: Easy Credit & the Economic Crash," which unexpectedly turns out to be a useful teaching tool for some fundamental economic theories. You can check it out below.

Dorian seems like a nice enough girl, and I apologize in advance for holding her up as a representative of a whole body of thought. While this isn't very fair (or nice on my part), I think it is very useful to see how her video illustrates public knowledge of economics and the current debate over monetary and fiscal policy. People like Dorian try to create an economic framework based entirely on their (limited) understanding of "economic crashes." This might be because these ideas are inherently sexier than other economics topic (three cheers for AD-AS!!! no one?). But it also has a lot to do with how "nationally screwing up" is a much more relatable story. We can imagine the debtor that gets in over his head. It's harder to understand more specific macroeconomic problems.

But proper economic management is a much broader subject than crashes, and economic recovery has very little to do with what happened before. Even if (and I'm not conceding that point yet) a "fast cash bubble" was the sole cause of the crisis, it should not immediately stop us from doing similar things to encourage a recovery, especially since fiscal and monetary stimulus are proven solutions to a demand-side shock.

Saying "crash, crash, crash" when you want to "cut, cut, cut" is like a doctor who won't treat your cancer because you were a smoker. Fixing the disease and solving its cause are fundamentally independent problems. That's lesson one.

This is lesson two: there is no economic problem so important that it takes precedence over getting back to full employment. To get to that point you need deficit spending and currency devaluation. The latter can come through higher inflation (which I've talked about before, and is more suitable to big economies) or actual exchange-rate manipulation (the Iceland scenario, which you can do if you're small, open and control your own currency). At this point, especially after the Reinhart-Rogoff meltdown, there is almost no debate about this point. There also is no evidence over the last five years of a country returning to macroeconomic stability using any other set of policies.

No matter which monetary path you choose, the end goal is to get people back to work as quick as possible and encourage hard work. The things you could buy before the collapse are harder to get now (especially imports), but you're all working to a solution together. You'll eventually have to pay more taxes too, which sucks. But as long as everyone keeps working, you'll eventually get out of it.

People often  want to make economics into the broad morality play. Even though this is generally a big mistake, there is a bit to think about here. The austerian solution focuses all of the suffering of its policies among the poor and disenfranchised. No rich German is bothered much by the European crisis. On the other hand, a solution that returns to full employment through fiscal and monetary stimulus forces everyone to share the burden of recovery. This is important for the institutions that maintain the long-term well being of a society.

Lesson three is that not all economic problems are the same. A whole bunch of things that led into the crisis, and they continue to plague Europe. This includes the challenges with adopting the Euro, the various housing bubbles, the risk of complex financial instruments (like derivatives), inefficiencies in European labor markets and regulatory challenges facing those countries. Obviously, austerity can't be the solution to all of them. In fact, the euro, for example, has been one of the chief causes of austerity on the periphery. Germany won't accept higher inflation, Greece can't devalue on its own, so they get forced into a debtor's prison version of policy where European bureaucrats decide their budget for them.  

Part of the problem with making broad arguments, as Dorian does, is that it reflects a limited understanding of relevant issues. This is true for most people, no fault there. Nonetheless, even the more informed argument against stimulus-based recovery has fundamental problems. Many conservatives look at something like the economic problems of the 80's and then blindly assume that the actions of the Volcker Fed somehow stop us from using loose monetary policy now. This is obviously absurd. Economic problems can have many sources, just as your car can suffer from many different problems. A solution for one problem might not be the same for the other.

So yes, after Europe gets back to full employment (whenever that will be) there will be other things to address (remember lesson two: full employment comes first). Complex financial instruments need more transparency, as does the actions of mortgage originators and intermediaries (the primary actors in the housing bubble that you cite).

Austrian solutions might be suitable to certain aspects of labor markets and other supply-side problems facing Europe, but they're not alone. More importantly, though, is solving a fundamental Austrian myth when we get to the point of trying to address them. I'll let Matt Yglesias explain:

Rich people who don't like paying taxes don't like the idea of macroeconomic stabilization policy. That's because it'd convenient for them if the market economy could be not just a practical tool for allocating goods, but an moral framework imbued with deep ethical significance.
 
And that, in turn, is an idea that sits oddly with the concept that actually you have a bunch of bureaucrats in the Federal Reserve System making the economy plug along. So rich guys indulge fantasies of shifting back to a gold standard or something else that would restore divine right to the monetary system. But beyond that, the central banker they like best is the central banker who's most obscure. Conventional monetary policy was something economists and bond traders paid attention to, but nobody else. Alan Greenspan raising or cutting rates by 25 basis points wasn't a big spectacle. Since the easing (or tightening) was based on interest-rate targeting rather than quantitative monetary creation, you didn't get articles about "printing money". It was all just there in the background. 

Ben Bernanke is as if the Wizard of Oz stepped forward from behind the curtain and turned out to be a really powerful wizard. The whole market economy turns out to be an elaborately orchestrated affair, with deep involvement by government central planners who weigh a variety of situations before determining outcomes. In that kind of world, there may still be reasons to eschew certain kinds of tax hikes. But they're practical, pragmatic reasons. They're not moral reasons, in which taxes violate the natural hierarchy of the market because there clearly is no such hierarchy.

It's probably very uncomfortable for people to recognize that the success or failure of a national economy comes down the work of a few bureaucrats. It's probably very uncomfortable to realize the money is fundamentally worthless too. Unfortunately, there's no way to make this more palatable. Economic policy has to be an active and progressive force, since an economy is an inherently managed venture. The Austrians, and more broadly austerity pundits in general, fail to address so many problems because they cannot recognize this fact. And that's lesson four. 

On the Need for Additional Evidence

There is an interesting new report from the University of Waterloo that claims Chlorofluorocarbons (CFCs) are the chief cause of global warming since the 1970s. It was published in the International Journal of Modern Physics B  last week. As phys.org explains,

CFCs are already known to deplete ozone, but in-depth statistical analysis now shows that CFCs are also the key driver in global climate change, rather than carbon dioxide (CO2) emissions.

"Conventional thinking says that the emission of human-made non-CFC gases such as carbon dioxide has mainly contributed to global warming. But we have observed data going back to the Industrial Revolution that convincingly shows that conventional understanding is wrong," said Qing-Bin Lu, a professor of physics and astronomy, biology and chemistry in Waterloo's Faculty of Science. "In fact, the data shows that CFCs conspiring with cosmic rays caused both the polar ozone hole and global warming."

"Most conventional theories expect that global temperatures will continue to increase as CO2 levels continue to rise, as they have done since 1850. What's striking is that since 2002, global temperatures have actually declined – matching a decline in CFCs in the atmosphere," Professor Lu said. "My calculations of CFC greenhouse effect show that there was global warming by about 0.6 °C from 1950 to 2002, but the earth has actually cooled since 2002. The cooling trend is set to continue for the next 50-70 years as the amount of CFCs in the atmosphere continues to decline."

I might not be the most qualified person to criticize Dr. Lu's work, but I do think we should not jump to conclusions right away. The carbon/ temperature record goes back a long time, tens of thousands of years if we are referring to ice cores.With that much data, it's fair to say that the very strong correlation between carbon and temperature can be assumed to continue to the future. But even with that much data, establishing a causal basis can be very difficult. Since we can't run control experiments, we'll almost always have enough uncertainty in the data to keep climate denier websites busy for decades.

The black line represents a three-year moving average. Data from the NOAA, which is available here.

Considering this challenge, I find it very presumptuous to go that far against consensus based on only 10 years' worth of deviation from the original trend. The argument for CFCs is based entirely on the fact that temperatures have not risen as quickly as CO2 levels in the last decade, even though it remains much hotter than any period before it. Considering measurement challenges and the huge number of almost random processes that influence weather (just ask Lorenz about that), it seems presumptuous, to say the least, to claim that CFCs are the only compounds that matter. There's just too much that we don't understand to make that claim with that little of evidence.

To be fair, I'm not claiming that CFCs don't matter in this debate. I only want to recommend caution about extreme claims. A much older report from the US Environmental Protection Agency did say CFCs were responsible for about 15 percent of global warming. They could also play a strong role in the less-than-expected recent rise in temperatures. So could volcanoes, so could a lot of other things.

So what's really going here? Academics have strong incentives to make almost absurd claims, since it helps them get published, and it generates references. While this can be annoying on a case by case basis, the overall scientific discourse benefits from the trolls as it forces people to expand their cases and move the debate forward.  It will take a lot to overturn consensus at this point, since about 97 percent of scientists in a recent survey agree on the mechanism and the effect. As readers of scientific literature, wish should keep this in mind. Prior beliefs should be adjusted only when there is substantial evidence to change course. So far with CFCs and global warming, we're not there yet.