Drop Gangs

Cryptocurrencies, GPS, drones, and cheap beacons are driving a new evolution in illegal markets:

…[A] major change is the use of “dead drops” instead of the postal system which has proven vulnerable to tracking and interception. Now, goods are hidden in publicly accessible places like parks and the location is given to the customer on purchase. The customer then goes to the location and picks up the goods. This means that delivery becomes asynchronous for the merchant, he can hide a lot of product in different locations for future, not yet known, purchases. For the client the time to delivery is significantly shorter than waiting for a letter or parcel shipped by traditional means – he has the product in his hands in a matter of hours instead of days. Furthermore this method does not require for the customer to give any personally identifiable information to the merchant, which in turn doesn’t have to safeguard it anymore. Less data means less risk for everyone.

The use of dead drops also significantly reduces the risk of the merchant to be discovered by tracking within the postal system. He does not have to visit any easily to surveil post office or letter box, instead the whole public space becomes his hiding territory.

…Classically, when used by intelligence agencies, dead drops relied on being concealed. This lead to dead drops being hard to find even by the intended recipients without costly preparation and training. One of the results of this was that dead drops were often used repeatedly, which increased the probability of both sender and recipient being identified by surveillance.

An ideal dead drop is however used exactly once. Only then can the risks of using it be reduced to pure bad luck.

This challenge is met by Dropgangs in various ways. The primary one is that the documentation of each dead drop is conducted in minute detail, covering GPS coordinates, photos of the surrounding and the location, as well as photos of the concealment device in which the product is hidden (such as an empty coke can). The documentation however increases the risk for the Dropgang since whoever creates it would be more easy to identify by surveillance. In addition, even great documentation still requires the customer to understand it and follow it precisely, which can lead to suspicious behavior around the dead drop location (staring at photos, visually comparing them to the surrounding, etc).

A first development to mitigate the problem of localizing is the use of Bluetooth beacons. In addition to the product, the dead drop contains a little electronic device that sends a signal that can be received by a smartphone, which in turn can display the direction and approximate distance to the device. In addition to the GPS coordinates, the customer requires only a smartphone with the correct App. Beacon devices like these are available on the open market for under ten dollars.

They do however pose the risk of a non-authorized party to discover the dead drop, simply by searching an area suitable for hiding dead drops with their own smartphone.

There are first reports of using beacon devices that are not constantly sending a signal, but have to be activated first. The activation usually happens by establishing a WiFi hotspot on the customer’s phone (by using the WiFi tethering feature). Only if the beacon sees a WiFi hotspot with a specific, merchant provided, unique name will it start to send a homing signal itself. Devices like these are very cheap (<15 USD) and have gained traction in the field, but they pose risks to the customer: His smartphone becomes identifiable by observers, even over considerable distance. This can lead to tracking the customer.

…A plausible next step would be the development of markets for dead drop operators that make their living by picking up product from one dead drop and placing it in another, working as a proxy for the customer to increase his safety and to reduce his efforts. This would also make this distribution model wider spread and available to more products, which will blur the lines between the black and the legal market. On this blurred line new services and technologies will establish themselves, inherently dual use services like lock boxes that can be paid by peer-to-peer cryptocurrencies.

Looking even further into the future, it seems plausible that the whole urban environment might find itself integrated into a dynamic landscape of very short-lived dead drops that are serviced by humans and cheap drones (unmanned aerial vehicles), which are already cheaply available and likely only require one market actor to develop and spread a mechanism to pick up and drop goods. Both merchant and customer could use drones, that are available for rent through dedicated Apps, to deliver product to a meeting point on a roof, where another drone would pick it up. Chaining multiple exchanges like this will make the tracing of the delivery extremely hard, essentially leading to mixing techniques so far used only in anonymizing digital communication.

Read the whole thing.

Hat tip: Eli Dourado.

Cable TV really does matter for political outcomes

This is only one estimate, from Gregory J. Martin and Ali Yurukoglu, but nonetheless it is backed by a plausible identification stragegy and this is very interesting research:

We find that in a hypothetical world without Fox News but with no other changes, the Republican vote share in the 2000 election would have been about half a percentage point lower. By 2008, the effect of there being no Fox News rises to more than six percentage points – a result of the channel’s increasing viewership and increasingly conservative slant over this period.

Unfortunately, that is followed by a real clunker of a paragraph:

All of these results suggest that citizens and regulators have reason to be concerned about media consolidation and the non-market objectives of media owners. A hypothetical monopolist controlling all three channels and interested in electoral influence would have enormous power over election outcomes.

How many things are wrong in those two sentences?  How can a profession supposedly devoted to rigor allow such sloppy thought to continue?  Here are a few of my objections:

1. The real story in this paper is about Fox News, and Fox — whether you like it or not — is very much an alternative to the mainstream media approach.  If you don’t like Fox, you might have preferred the “bad old days” of three dominant and pretty similar networks.

2. Do the authors have any argument that “the non-market objectives of media owners” are bad?  No.  In fact, there is a longstanding literature that “the market objectives of media owners” are bad, whether you agree or not.  Do they really just mean to say “I don’t like Fox News”?  Just say it.  Don’t worry, I don’t think most authors, especially of media studies, are objective to begin with.

3. Don’t the results suggest we should perhaps be worried about polarized news rather than consolidated news ownership?

4. Is it possible to consolidate news ownership in a world with so many cable channels and so many news alternatives to cable?  I strongly doubt this, but in any case it is not something the authors have shown.  Instead, they have shown that a renegade news channel can rise to a position of great political influence.

5. Might it have been better simply to have written?: “I am really worried that Rupert Murdoch, in the absence of regulation, could buy up all the news channels and implement political outcomes I do not like.”  That is an entirely coherent argument, and I wonder if it isn’t what the authors were getting at but couldn’t bring themselves to write it and thus were forced into the most illogical two sentences I have read this week.

6. By the way, Murdoch owns a lot of media properties and most of them have political stances, and most of all tones, fairly different from that of Fox News.  Worth a ponder.

For the pointer I thank the excellent Samir Varma.

Addendum: Andrew Gelman is skeptical of the basic result.

The new U.S.-China Cold War

That is the topic of my latest Bloomberg column.  It’s not my most fun piece, but in terms of content arguably the most important.  Here is one short bit:

The new dynamic affects people as well as products. China is asking state firms to avoid travel to the U.S. and its allies. And if you were an American or Canadian tech company executive, would you travel to China right now, given that Canada has detained a leading Huawei executive (and daughter of the company’s CEO) for extradition to the U.S.? Meanwhile, many American universities are kicking their local Confucius Institute off campus, most notably the University of Michigan, amid complaints that those institutes are spying on Chinese nationals who attend those schools. Whether or not that is true, this is another sign of the collapse of trust.

This is the deeper issue with the U.S.-China relationship: the continuing erosion, in an era of rapid deglobalization, of previous ties built at least partly on a common sense of purpose. Looking back at 2018, it now seems obvious that this was the most important story of the year.

Do read the whole thing.  It is much easier to break trust than to rebuild it.

How productive are owner-managers?

We find that the average premature death of a million-dollar-earning owner causes an 82% decline in firm profits.

And:

The data reveal a striking world of business owners who prevail at the top of the income distribution.  We find that most private business profits reflect the return to owner human capital.  Overall, the top earners are predominantly working rich, and the majority of top income accrues to the human capital of wage earners and entrepreneurs, not idle owners of financial and physical capital.

That is from Matthew Smith, Danny Yagan, Owen M. Zidar, and Eric Zwick, “Capitalists in the Twenty-First Century,” a new research paper.

Does housing wealth boost start-ups?

I don’t mainly mean tech start-ups but rather the broader concept:

…house price effects work through wealth, liquidity and collateral effects on the propensity to start new firms and expand young ones. Aggregating local effects to the national level, housing market ups and downs play a major role – as transmission channel and driving force – in medium-run fluctuations in young-firm employment shares in recent decades. The great housing bust after 2006 largely drove the cyclical collapse of young-firm activity during the Great Recession, reinforced by a contraction in bank loan supply. As we also show, when the young-firm activity share falls (rises), local employment shifts strongly away from (towards) younger and less-educated workers.

That is from a new paper by Steven J. Davis and John C. Haltiwanger.

*Governing Least: A New England Libertarianism*

That is the new book by University of Maryland philosopher Dan Moller, and it is one of the most sensible expositions and defenses of libertarianism you will find.  Here is from the Amazon summary:

In this major new defense of libertarianism, Dan Moller urges that critics and supporters alike have neglected the strongest arguments for the theory. It is often assumed that libertarianism depends on thinking that property rights are absolute, or on fetishizing individual liberty. Moller argues that, on the contrary, the foundations of libertarianism can be found in widely shared, everyday moral beliefs-particularly in strictures against shifting our burdens onto others. The core of libertarianism, on this interpretation, lies not in an exaggerated sense of our rights against other people, but in modesty about what we can demand from them.

The book then connects these philosophical arguments with related work in economics, history, and politics. The result is a wide-ranging discussion in the classical liberal tradition that defies narrow academic specialization. Among the questions Moller addresses are how to think about private property in a service economy, whether libertarians should support reparations for slavery, what the history of capitalism tells us about free markets, and what role political correctness plays in shaping policy debates.

I have just started this book, but am already happy to recommend it.  Can I ask for a Mid-Atlantic libertarianism however?

Those new (old?) service sector jobs

Nobody ever warns the patients at Pennsylvania Hospital about Pete Schiavo, “The Groin Crusher.”

The first time most people meet Schiavo, they’ve just come out of a coronary procedure and he’s explaining that after the catheters are pulled out of their femoral artery, he’s going to apply pressure to their groin for 20 to 40 minutes to aid in clotting.

Awkward!

Or it would be, if it was anyone else but Schiavo, a gregarious, emotional, wisecracking guy who is all South Philly, even if he lives over the bridge in Jersey now.

Schiavo, 52, was so overwhelmed to learn that reader Sandy Kuritzky, whose husband’s groin he crushed earlier this year, nominated him for this series that he wept tears of joy several times during his interview.

“I know he doesn’t remember me or my husband because he has his hands on so many groins,” Kuritzky said. “But Pete’s attitude with his patients and their caregivers is so upbeat and friendly and caring and funny that it makes a stressful time less stressful and difficult.”

Patients and their families don’t forget the way Schiavo touches them — physically and emotionally. He’s won awards, had money donated in his name, and gets stopped all the time by former patients who want to buy him drinks or dinner.

“I’m holding someone’s groin for 20 minutes, they tend to remember me and nobody else,” Schiavo said. “I tell them: ‘I can promise you two things when I’m done: You’ll never forget my name or my face.’ And they never do.”

Here is the full story, via Dean C.

The wisdom of Arnold Kling (a Kamala Harris parable)

Here is the opener of my Bloomberg column:

One of the worst tendencies in American politics is to restrict supply and subsidize demand. (The phrase is from the economist Arnold Kling.) The likely result of such policies is high and rising prices, restricted access and often poor quality. If you limit the number of homes and apartments, for example, but give buyers subsidies, that is a formula for exorbitant prices.

That is what makes early accounts of Senator Kamala Harris’s economic plans so disappointing. There is still room for course corrections as she campaigns for president, but too much of what is being bandied about seems designed to annoy Arnold Kling.

Do read the whole thing.

Tuesday assorted links

Those new service sector jobs

Ms. Golden, 43, has developed these no-fly lists in her four years as a dating app ghostwriter. For $2,000 a month, she swipes, chats and charms, impersonating her clients. Once she has earned a client a date, she tags them in and becomes a more traditional dating coach, reviewing each encounter in detailed post-mortems, helping to guide their next moves. Some clients disclose to their dates that they have used Ms. Golden’s services, and others do not.

And what does she use for input?:

Tone is essential to Ms. Golden’s — and her clients’ — success. She learns to imitate their conversational styles through the use of an eight-page intake form that includes specific questions: How do you take your coffee? Have you ever “swam with dolphins or stingrays or enormous turtles”?

By the time a potential client has answered those questions and had an hourlong introductory conversation, Ms. Golden thinks she can mimic them convincingly enough — down to whether they would type “gonna” or “going to” — to start chatting.

Don’t forget this:

She subscribes to a less-is-more mind-set, and much of the work she does is in how little she says.

Here is the full NYT piece by Jonah Engel Bromwich.

Facts that contradict the standard housing bubble story

Here I am doing a mix of quoting and paraphrasing the excellent Kevin Erdmann:

1. “Housing construction has been constricted in our most prosperous cities.”

2. “Home prices in many developed countries rose at least as sharply as inthe US.”

3. “…rent inflation has been persistently high for 20 years.”

4. “Growth in real rent expenditures generally had been declining throughout the supposed boom period.”

5. “During the boom, the relative income of the typical homebuyer did not decline.”

6. During the boom, homeowners were not “buying up.”

7. Homeownership rates, even at their peak levels in 2004, among age groups under 65 years old, were no higher than homeownership rates had been in the late 1970s and early 1980s.”

8. “…when taking into account all types of housing, the number of new housing units never even rose very far above the long-term average.”

Those are all from Kevin’s new and very important book Shut Out: How a Housing Shortage Caused the Great Recession and Crippled Our Economy.  The simple “housing bubble” story is not in fact as true as it might seem, as Kevin shows, and furthermore just look at how many parts of America now have home prices at or above their “bubbly peaks.”  I hope this work gets the attention it deserves.

Privacy vs. control

It is often suggested that Facebook, Google, and the other major tech companies violate the privacy of their users, and of course the companies are criticized on those grounds.  Yet I never see those critics go after other sources of privacy violations, such as say the friends and acquaintances who gossip behind our backs.  If privacy were so important, you might expect the overall campaign to be “pro-privacy” rather than just “anti-corporate” or “anti-tech.”

One possibility is that service users don’t see much of a chance that the “Zip files” assembled on them by the algorithms stand much chance of harming their fortunes or even being released in decipherable form.

Still, people are made vaguely uncomfortable by some of what is going on.  Could it be a “control” issue rather than a privacy issue?  That is, people do not like “feeling out of control” when it comes to their lives, including their personal data.  They used to “feel in control” and now they do not, in part because of the very media critics who view themselves as solving the privacy problem.

If it is a control problem, the chance that placebos will improve matters is higher, because I do not see our privacy losses as being reversible, or people even caring all that much.  What is the cheapest placebo that can help us address the control problem?  Passing some meaningless piece of legislation?  Self-reforms from the media?  The right kinds of proclamations from the tech companies?  All of the above?

I believe public discourse would be improved if we realized “privacy problems aren’t always about privacy,” to paraphrase Robin Hanson.