Freeman

ARTICLE

The Wild West Meets Cyberspace

Government Intervention Will Stifle the Internet's Freedom

JULY 01, 1998 by ANDREW P. MORRISS

In 1848 Americans received the startling news that the vast territory they had just acquired from Mexico included tremendous riches. California, previously a distant, sleepy Mexican province whose economy was based on trading cattle hides and tallow for manufactured goods, was actually brimming with gold. There it was, just lying on the ground. Tens of thousands of individuals from all parts of the globe flocked to California, beginning almost 50 years of western mineral rushes. Similarly, after the Civil War, Americans discovered that the “Great American Desert” in the central west was perfect for raising cattle. Thousands of individuals and tens of millions of dollars of capital quickly flowed into the region to create the range cattle industry.

Gold and cattle became important influences in shaping modern America, creating hundreds of millions of dollars of wealth, new businesses (like Wells Fargo & Co.) that shaped the decades that followed, and revolutions in transportation and communications, exemplified by the transcontinental railroads and telegraph. During the next half century, western miners, cattlemen, and others built new institutions that challenged the existing structure of government.

Today a new gold rush is beginning. Entrepreneurs are using the Internet and other technological breakthroughs to create new wealth, build new business empires, and revolutionize communications. Just as happened in the nineteenth century, however, politicians are frightened by the entrepreneurial forces these opportunities unleash. One of the most widespread and powerful metaphors being invoked in the debate over whether we stand on the verge of a new era of unlimited prosperity or on the brink of societal collapse is that of the nineteenth-century American west. Hundreds of news stories and editorials compare the Internet to the “Wild West,” some to illustrate the opportunities available in cyberspace, most to warn of the dangers.

In the opportunity camp is the comedian Sinbad, who says the Internet is like the Wild West because it is “the only place left where you can be creative without any money and compete with the big money boys. And I think it bothers the boys-that the Internet puts the tools in the hands of the everyday person.” In the danger camp is Minnesota Attorney General Hubert H. Humphrey III, who warns that “it’s time to let go of the romanticized image of the Internet as the Wild West–an electronic frontier where the law is not enforced.” Which image of the west sticks is likely to have profound consequences for how we understand cyberspace and how we treat the opportunities it offers. Sinbad is right. Attorney General Humphrey is wrong.

Spontaneous Order in the West

When the gold rush, range-cattle industry, and other economic opportunities brought tens of thousands of new residents to the nineteenth-century west, the new arrivals had little choice but to create their own institutions to provide law and order. The west was far away from established centers of government, and the small outposts of officialdom present were usually unable to assert significant civil authority. In gold-rush California, for example, American military commanders were afraid to allow their troops to leave their forts because the lure of the mines led to rampant desertion.

Thrown back on their own resources, the miners, cattlemen, and others quickly established their own institutions, using contracts to create property rights, for example Remarkably, these institutions endured despite the regular doubling of population. In almost all cases more recent arrivals (who outnumbered the first waves of miners) respected established claims, choosing to establish their own claims on unoccupied land rather than using force to oust earlier arrivals with productive tracts. Even when government finally arrived, the west’s size enabled those who found taxes oppressive or regulations annoying to easily move on. When pioneering Texas cattleman Charles Goodnight encountered a tollgate across the main pass north, for example, he blazed a new trail around it. Similarly, when Canadian authorities attempted to tax gold miners in the Yukon, many packed their bags and left for Alaska. Indeed, despite the vast wealth produced from gold deposits across the west, it was not until quartz mining with its deep shafts and expensive machinery replaced panning for placer deposits as the dominant form of mining that governments became able to “mine” the industry for significant tax revenue. As a result, miners managed to avoid any federal regulation for eighteen years after the gold rush began. Even when the federal government finally asserted its authority over mineral resources in 1866, it was forced to recognize the validity of the customary norms and property claims established by the miners.

Spontaneous orders thus developed in the absence of the state across the west. Westerners established property rights and dispute resolution mechanisms that relied on the consent of the participants rather than the coercive force of the state. They lived in peace and good order without centralized executive authorities, police, jails, or armies. Simple tort rules sufficed for criminal law. Corruption of those appointed to resolve disputes was rare, a striking contrast to the rampant corruption among government judicial officials in the west,

Spontaneous Order on the Internet

As it was in the west, the state is largely absent from the Internet today. The Internet is “far away” from government because there are no centralized control mechanisms, making it impossible for any government to physically assert control over information, As a Microsoft vice president told the Wall Street Journal, “This is not like regulating trucking.” Thus, for example, when a local governing body in Britain recently attempted to squelch an investigatory report highlighting abuses in its child welfare service, web sites outside Britain quickly made the report available in its entirety. Not only was the information thus archived beyond the reach of the British authorities, it remained easily accessible to anyone in Britain with access to the Internet. (Governments can, of course, choose to completely block access to the Internet, but doing so would be akin to forgoing the riches California offered in 1849.)

Despite the lack of centralized control, the Internet exhibits a remarkable degree of order. Without government coercion, millions of users have managed to adopt standardized protocols enabling the network to function, Social norms have arisen in a wide range of contexts, norms that are enforced by communities of users rather than a centralized police force. New tools enhance such decentralized procedures. Deja News, for example, allows users to review others’ contributions across newsgroups, enabling individuals’ reputations to be easily verified. Certification systems from groups like the Electronic Frontier Foundation and Better Business Bureau enable service providers to signal their reliability and trustworthiness.

Even more important, traditional forms of economic regulation are rapidly becoming impossible in many industries. Relatively simple, readily available technology, for example, enabled international “call back” services to force national telecommunications regulators to lower the cost of international phone calls. Indeed, the falling communications costs made possible by the Internet mean that businesses from retail banking to gambling can be effectively removed from regulators’ jurisdiction. Widely available means of strong encryption provide individuals with a degree of privacy previously attainable only by government security services. Freedom is thus outstripping the ability of the state to contain it, creating new spaces in which spontaneous orders can flourish.

Justifying Coercion

Spontaneous orders and freedom frighten governments. Those who fear the Internet’s potential to undermine government use the metaphor of the “Wild West” to argue for central control. Hollywood westerns have cemented the idea that Westerners lived in a constant hail of bullets loosed by hard-drinking desperadoes. Only when the Texas Rangers, U.S. Marshals, or some other square-jawed lawmen rode into town and stopped the terror could decent people rest easily. Invoking such images and painting a flattering image of themselves as movie lawmen, modern statists like Attorney General Humphrey hope to rescue us from the dangers of the ungoverned Internet. To do so, statists rely on two myths about the west and the Internet:

Myth 1: The west reached its potential only when government established law and order; the Internet needs the helping hand of government, too.

The west underwent phenomenal growth during periods when there wasn’t any functioning government. San Francisco grew from a mud flat to the largest city west of the Mississippi with almost no municipal or state government; gold-rush communities from California to Alaska went from unpopulated wilderness to bustling communities of 10,000 or more in a matter of weeks; and cattlemen transformed much of the Great Plains into a source of great wealth in a few years without significant government help and often in the face of active government opposition. Throughout the nineteenth century, the federal government was never able to keep up with the changing technology and explosive population growth in the west.

Government’s absence did not leave westerners impoverished economically or culturally. For most of the second half of the nineteenth century, westerners managed to live productive lives without much government, lives that were full of opportunities for more than chasing cows or panning gold. The explosive economic growth that drew tens of thousands from around the world to make the difficult journey to the American west also attracted entrepreneurs who saw a substantial market for cultural institutions. Westerners filled the region with private libraries, opera houses, schools, and theaters to enrich their lives. World-renowned opera singers and actors toured packed houses throughout the west.

Governments did invest in the region, of course, most notably in massive direct subsidies to railroads and others and indirect subsidies through military infrastructure. The existence of government subsidies is hardly persuasive evidence of the need for subsidies, however. Railroads required government help because the federal government owned most of the land west of the Mississippi. Unlike private landowners, however, the government could offer more than a right of way. Government bonds financed the subsidies that provided an inviting target for flim-flam artists, who used the promise of a rail line to bilk countless millions across the west.

Today politicians like Al Gore want to repeat this experience by using government funding to build the “information superhighway.” While the initial infrastructure of the Internet was largely funded through government subsidies, the government’s version of the Internet was a sleepy place, much like pre-gold-rush California. The early Internet was sparsely populated, almost entirely by academics, and built around difficult-to-use programs. Only when easier-to-use graphical interfaces became widely available and private investment vastly expanded capacity did the Internet become the exciting, vibrant place it is today. The norms and order present on the Internet are the spontaneous result of billions of interactions among hundreds of millions of users, not centralized planning.

Myth 2: Like the Wild West, the Internet is full of dangerous people who prey on the helpless and weak.

In Hollywood’s version of the west, no epic was complete without the villain with the pencil-thin mustache preying on the innocent widow and her helpless children. So too, we are warned, is the Internet full of predators: con artists await the opportunity to steal the life savings of the unwary; criminals of all sorts are able to communicate without the fear of being observed because of widespread cheap and effective cryptography; and most ominously, pedophiles lurk online waiting to seduce children.

Again, the reality of the western experience differs from the myth. Many of the greenhorns and easterners fleeced in the west made themselves easy marks. They bought mines without testing the ore or invested in cattle companies that never counted their cattle. Investors who had never been west of the Mississippi or even to America lined up in the 1870s, for example, to invest in western cattle operations that “guaranteed” risk-free profits of 20 percent and more. British investors alone invested between $20 million and $45 million in American ranches from 1879 to 1888. These investors rarely counted the cattle they bought, relying on “book counts” based on sellers’ estimates of the rate of increase of the cattle turned loose to roam the plains. It should come as no surprise that such sloppiness was eventually rewarded by massive losses.

People are losing money on the Internet today for similar reasons. Simply being careful. with your credit-card number and suspicious of terms that seem too good to be true prevents most fraud. Indeed, rather than a source of fraud, the Internet is actually turning out to be a valuable tool for distributing up-to-the-minute information on fraudulent schemes. (Try the Better Business Bureau’s website for some creative fraud-busting.)

Protecting children turns out to have a similarly simple solution: parents. Commercial Internet service providers have already produced services aimed at children-E-mail service that allows messages to be received only from approved addresses, for example. Simply putting the home computer used for Internet access in a room where the screen is readily visible to others is an effective deterrent to children’s unauthorized access to sites with inappropriate content. Moreover, as demand grows for ways of enhancing parents’ ability to control their children’s access to the Internet, entrepreneurs will provide more effective products and services than government will.

The West as a Metaphor for Opportunity and Freedom

The opening of the American west created unprecedented opportunities for ordinary people. The California gold rush alone offered tens of thousands of people, drawn from every corner of the globe, the chance to pick gold up off the ground. Not surprisingly, they Rocked to California and spread out across the west in search of more gold. In the process, they turned what had been a quiet provincial backwater into a fast-growing, diversified economy. While the Internet is not quite offering gold on the ground, it is offering something close. Technology companies are just the better known Internet success stories. On a smaller scale, opportunities abound. I buy most of my books and CDs from Internet stores. I gain access to things unavailable in my hometown and at better prices; the entrepreneurs who offer these services get some of my money. The free market has made us all better off.

Because we can access information anywhere around the globe, the Internet frees us from geographic constraints on our activities. That means regulators lose a significant amount of control over our lives. We can obtain offshore banking services, gamble on horseracing around the world, buy books from a bookstore in England that charges neither British nor American taxes, and route around censorship. With a little more effort, we can structure databases to exploit regulatory differences or establish a web site on a computer located in any number of countries, where we can sell services, information, or products free from the grasp of regulators. Indeed, what really has government regulators sweating is the Internet’s potential for tax avoidance. New York state, in a bid to attract Net businesses, announced last year that it won’t tax Internet service providers.

The nineteenth-century west was a place of almost limitless opportunity where, through market transactions and voluntary action, tens of thousands of strangers developed institutions that allowed them to take advantage of that opportunity in communities of peace and good order. Today we are only beginning the Information Rush. Like a forty-niner trying to imagine modern-day San Francisco while looking at the mud Rats and tents of his day, we cannot foresee what forms the spontaneous order now evolving in cyberspace will take. What we can do is reject the use of the metaphor of “Wild West” as a justification for state intervention. Whether the demand is for law-enforcement authorities to restrict cryptography or antitrust regulators to crush competition, intervention will stifle freedom. If we are lucky, the Internet will turn out to be just like the American Wild West.

ASSOCIATED ISSUE

July 1998

ABOUT

ANDREW P. MORRISS

Andrew P. Morriss is the D. Paul Jones, Jr. & Charlene A. Jones Chairholder in Law and Professor of Business at the University of Alabama. He is coeditor (with Roger E. Meiners and Pierre Desrochers) of Silent Spring at 50: The False Crises of Rachel Carson, forthcoming from the Cato Institute.

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