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Volume 7, Issue 9: February 28, 2005

  1. Government Regulation Would Weaken Computer Security
  2. Quiet Diplomacy a Safer Tactic for Promoting Liberty
  3. Explaining Inequality in Post-Soviet Economies

1) Government Regulation Would Weaken Computer Security

Unless it wants to shackle innovation, the government should ignore calls to regulate cybersecurity -- the protection of computer hardware, software, and networks from malicious viruses or hackers -- according to Benjamin Powell, director of the Independent Institute's Center on Entrepreneurial Innovation.

The industry's “track record should make us skeptical that government regulation can improve security without damaging innovation,” writes Powell in his new op-ed, “Don't Regulate Cyber Security.”

Consumers and corporations weigh the extra cost of cybersecurity against the extra benefit. Even where third parties would be affected, markets have been providing more security each year. The financial services industry, for example, has taken the lead in promoting cybersecurity, Powell explains.

Over 85 percent of financial institutions surveyed for the latest Deloitte GLOBAL SECURITY SURVEY used intrusion-detection and -prevention software, "and most firms were experimenting with using many more advanced technologies," writes Powell. From 2003 to 2004, "63 percent of firms surveyed saw their security budgets increase while only 10 percent decreased, and nearly half of all firms increased security staffing."

Concludes Powell: "Reforms should be limited to examining negligence liability standards in situations where security breeches spill over to firms without contractual relations. Direct government regulation will raise costs against consumer wishes, delaying and limiting new products from coming to market. Market forces are better regulators of cyber security than government bureaucrats."

See "Don't Regulate Cyber Security," Benjamin Powell (2/28/05)

Also see, "Will Strong Encryption Protect Privacy and Make Government Obsolete?" featuring David Friedman (4/24/01)


2) Quiet Diplomacy a Safer Tactic for Promoting Liberty

President Bush used his recent visit with Vladimir Putin to chide the Russian president for backsliding on democracy. This was a risky gamble that could backfire on the cause of liberty, according to Ivan Eland, senior fellow and director of the Independent Institute's Center on Peace & Liberty.

As Jimmy Carter learned, publicly nagging countries about democracy and human rights can prompt them to crack down on dissidents to show the world that browbeating by the United States is futile, Eland argues in his latest op-ed.

"Similarly, Bush administration pressure on Russia about its eroding freedoms has raised the hair on the back of Yuri Ushakov, the Russian ambassador to the United States," writes Eland. "This reaction could very well morph into an 'in your face' Russian government tightening of the reins on its civil society."

Rather than risk making things worse, the U.S. government should opt for quiet diplomacy, "letting autocratic regimes know that the United States is watching their behavior toward dissidents, human rights, and democratic practices," Eland writes.

"Even more important, the U.S. government can ensure that freedom flourishes within its own borders so that the United States can lead by example. The post-9/11 prison torture scandals and passage of the draconian USA PATRIOT Act, which clamped down on civil liberties, have smudged that image. Ending torture as a U.S. policy and repealing the PATRIOT Act would go a long way toward restoring the American image as a beacon of liberty."

See "George W. Bush Fails to Learn from Jimmy Carter's Naive Human Rights Policy," by Ivan Eland (2/28/05)

To purchase THE EMPIRE HAS NO CLOTHES: U.S. Foreign Policy Exposed, by Ivan Eland, see

To purchase PUTTING "DEFENSE" BACK IN U.S. DEFENSE POLICY, by Ivan Eland, see

"The Way Out of Iraq: Decentralizing the Iraqi Government," by Ivan Eland

Center on Peace & Liberty


3) Explaining Inequality in Post-Soviet Economies

Since the collapse of state socialism in the early 1990s, researchers have reported growing levels of income inequality in central and eastern Europe. What are we to make of the claim?

On the one hand, the freedom of opportunity that characterizes market economies -- combined with other factors, such as individuals' varying talents, ambitions, and luck -- ensures that people will achieve unequal levels of material gain in the marketplace. (This outcome does not worry proponents of free-market economies, who typically praise the market's tendency to "raise all boats," not a tendency to raise them to equal heights.) On the one hand, large differences in income and wealth can indicate the presence of interference with a free market, such as massive subsidies for favored groups or severe regulations that penalize disfavored groups.

Is the perceived increase in income inequality in the former Soviet client states the result of greater economic freedom or government favoritism? Three economists writing in THE INDEPENDENT REVIEW argue a third alternative: inequalities in present-day central and eastern Europe are often little-known legacies of state socialism.

In "The Hidden Inequality in Socialism," David R. Henderson, Robert M. McNab, and Tamás Rózsás argue that other researchers have discounted pervasive inequalities in health care, education, and housing, which governments had doled out on the basis of political considerations. In fact, researchers had almost uniformly underestimated the real value of privileges granted by government bureaucrats, as well as underestimated the role of corruption and the subsidies to urban dwellers and the expense of rural residents.

"In summary, the inequalities of real disposable income were so great in these societies and survey methods so unreliable that even if accurate measures of inequality for the socialist era cannot be reconstructed, a real increase of income inequality during the transition seems unlikely to have occurred," Henderson, McNab, and Rózsás write.

"Instead of nurturing nostalgia, governments and legislators of the transition countries should abolish unnecessary restrictions on their economies, eliminate subsidies, decrease taxes, and cut back on the overgrown, inefficient system of government transfers, including social security," they conclude.

See "The Hidden Inequality in Socialism," by David R. Henderson, Robert M. McNab, and Tamás Rózsás (THE INDEPENDENT REVIEW, Winter 2005)

For an antidote to poverty through wealth redistribution, see "Make Everybody Rich," by Frederick Turner (THE INDEPENDENT REVIEW, Summer 2002)

For a summary and links to selected articles and to all book reviews of the latest issue of THE INDEPENDENT REVIEW, see

For subscription information, see


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