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THE LIGHTHOUSE
"Enlightening Ideas for Public Policy..." VOL. 3, ISSUE 20 May 21, 2001 Welcome to The Lighthouse, the e-mail newsletter of The Independent Institute, the non-politicized, public policy research organization <http://www.independent.org<;. We provide you with updates of the Institute's current research publications, events and media programs. Do you know someone who would enjoy THE LIGHTHOUSE? Please forward this message to a friend. If they like it, they can add themselves to the list at http://www.independent.org/tii/lighthouse/Lighthouse.html. ------------------------------------------------------------- IN THIS WEEK'S ISSUE: 1. The Pearl Harbor Deception 2. Challenging the FTC's Hostility to Mergers 3. "Will Encryption Protect Privacy and Make Government Obsolete?" -- David Friedman Transcript Now Online ------------------------------------------------------------- THE PEARL HARBOR DECEPTION The creators of "Pearl Harbor" -- the new movie debuting Friday that Hollywood insiders are calling "'Titanic' with fighter planes" -- have missed a vital aspect of Pearl Harbor history. Although the movie's emphasis is on entertainment, not historical enlightenment, during the film's production Jerry Bruckheimer, the producer, made sure to consult Pearl Harbor survivors, historians, and government officials. But one perspective he never took seriously is one based on secret U.S. documents recently declassified under the Freedom of Information Act. "Overwhelming evidence contained in the May 2000 Freedom of Information Act release," writes Robert B. Stinnett in the new paperback edition of his book DAY OF DECEIT: The Truth About FDR and Pearl Harbor, "reveals that by mid-November 1941, as Japanese naval forces headed for Hawaii, America's radio cryptographers had solved the principal Japanese naval codes and that Japan's top admirals went on the Japanese naval airwaves and in a series of radio messages disclosed that Pearl Harbor was the target of their raid." "Based on these transmissions, President Roosevelt and General George Marshall predicted war with Japan would begin the first week of December. We would know even more about what FDR and his chief advisors thought, but the Japanese radio messages remain incomplete, still cloaked in American censorship.... By continuing to classify Japanese naval intercepts and their communication decoding data as 'national defense secrets,' the National Security Agency (NSA) has done a disservice to the excellent cryptographers and the radio intelligence obtained by monitor stations operated by the United States and her allies in 1941, as well as to history itself." "Nevertheless," concludes Stinnett, "the major secrets of Pearl Harbor are at last out in the open. After years of denial, the truth is clear: we knew." Unfortunately, this truth will not be coming soon to a theater near you. See Robert B. Stinnett's op-ed, "December 7, 1941: A Setup from the Beginning" http://www.independent.org/tii/lighthouse/LHLink3-20-1.html. For a transcript of Mr. Stinnett's talk at the Independent Policy Forum, "Pearl Harbor: Official Lies in an American War Tragedy?" see http://www.independent.org/tii/lighthouse/LHLink3-20-2.html. To hear it in RealAudio, go to http://www.independent.org/tii/lighthouse/LHLink3-20-3.html. ------------------------------------------------------------- CHALLENGING THE FTC's HOSTILITY TO MERGERS Although the Microsoft antitrust trial loomed largest in the public consciousness, it was not the only important antitrust trial in recent years. Another antitrust case -- the Federal Trade Commission's successful challenge to the merger of two office-supply "superstores" -- will have far-reaching effects, even if the Microsoft case is ultimately thrown out on appeal. The FTC prevented a proposed merger of Staples and Office Depot by arguing that a merger would raise the price of office supplies, citing evidence that office-supply prices were significantly higher in cities with only one company operating office-supply superstores. The defense accepted this evidence as true, but argued that higher prices were explained by higher costs in one-firm markets. What they didn't do, according to the judge, was to offer a unifying theory to explain why one-firm markets might have higher costs. Economist Craig M. Newmark offers such a theory, based on what economists call "indivisibility rents," in a new Independent Institute working paper. In essence, Newmark argues that the whole point of superstores is to have a store large enough to minimize the costs of transportation, advertising, and the like. In markets that can only support one store, the market is often too small to minimize these costs. Hence, the higher prices in these markets. This theory, presented above in the sketchiest fashion, is consistent with other evidence presented by the FTC. Markets having only two office supply superstore chains were notably smaller than those with three firms, suggesting that indivisibility was a factor. Unfortunately, the FTC apparently didn't consider indivisibility in its analysis. "The indivisibility theory implies that the higher prices in one-firm markets are not due to lack of competition; the merger should not raise prices." Consumers and their representatives, then, should let the FTC know that a knee-jerk hostility to mergers isn't in the public interest. Checking for indivisibility should be a staple of FTC analysis. See "The Positive Correlation of Price and Concentration in Staples: Market Power or Indivisibility?" by Craig M. Newmark, Independent Institute Working Paper #31, at http://www.independent.org/tii/lighthouse/LHLink3-20-4.html. For more on antitrust see the Independent Institute Archive at http://www.independent.org/tii/lighthouse/LHLink3-20-5.html. ------------------------------------------------------------- "WILL ENCRYPTION PROTECT PRIVACY AND MAKE GOVERNMENT OBSOLETE?" -- David Friedman Transcript Now Online Someone once said that the move toward civilization coincided with the move toward privacy. New advances in information technology allow the possibility of greater privacy, but they also make it easier for government bureaucrats, criminals, and other unwanted intruders to snoop into your private life. Will privacy-enhancing technology outpace privacy-threatening technology? Will freedom and civilization thereby advance? Or will the new technology strengthen the rule of Big Brother? Economist and legal scholar David D. Friedman addressed these and related issues in his recent Independent Policy Forum talk, "Will Encryption Protect Privacy and Make Government Obsolete?" -- a transcription of which is now available on the Independent Institute website. Leery of predicting the future, Prof. Friedman said that he would not forecast beyond 30 years -- after that, all bets are off. For the coming three decades, however, he predicts that "public key encryption," a young technology increasingly used in e-commerce, is likely to promote privacy -- unless the government acts immediately to control its use. Rather than control what people do with personal information about you, public key encryption lets you decide with whom you want to share that information. With it, we can better ensure that financial information, health records, and other information will only go to those we deem are on a need-to-know basis. Further, public key encryption -- along with e-mail re-mailers -- can promote anonymity, making it increasingly possible for you to buy and sell over the Internet without the taxman knowing about it. And "anonymous" companies in cyberspace can easily build a solid reputation needed to gain a loyal customer base. Thus we may soon have an underground cyber-economy that rivals the size of underground economy in the real world. Public key encryption also acts as a virtual Second Amendment, according to Friedman. Just as the Second Amendment to the U.S. Constitution institutionalized the self-defense of the citizenry against a federal tyranny, so public key encryption will institutionalize the self-defense of the citizenry against government propaganda. Americans (and citizens of other countries) will be better armed with the truth. Information about government encroachment will be easier to spread and thereby help keep it in check. For a transcript of David Friedman's talk, "Will Encryption Protect Privacy and Make Government Obsolete?" see http://www.independent.org/tii/lighthouse/LHLink3-20-6.html. For more on privacy, see: "Freedom of Speech, Information Privacy, and the Troubling Implications of a Right to Stop People from Speaking About You" by Eugene Volokh, Independent Institute Working Paper #14 http://www.independent.org/tii/lighthouse/LHLink3-20-7.html "Watching You: Systematic Federal Surveillance of Ordinary Americans" by Charlotte Twight (THE INDEPENDENT REVIEW, Fall 1999) http://www.independent.org/tii/lighthouse/LHLink3-20-8.html "Information Technology as a Universal Solvent for Removing State Stains" by David R. Henderson (THE INDEPENDENT REVIEW, Spring 2000) http://www.independent.org/tii/lighthouse/LHLink3-20-9.html R.W. Bradford's review of PRIVACY IN THE INFORMATION AGE by Fred H. Cate (THE INDEPENDENT REVIEW, Spring 1999) http://www.independent.org/tii/lighthouse/LHLink3-20-10.html "Cryptography versus Big Brother" and "Internet Encryption and the Second Amendment," by Alex Tabarrok, research director of The Independent Institute http://www.independent.org/tii/lighthouse/LHLink3-20-11.html http://www.independent.org/tii/lighthouse/LHLink3-20-12.html. ------------------------------------------------------------- THE LIGHTHOUSE is made possible by the generous contributions of supporters of The Independent Institute. If you enjoy THE LIGHTHOUSE, please consider making a donation to The Independent Institute. For details on the Independent Associate Membership program, see http://www.independent.org/tii/lighthouse/LHLink3-20-13.html , or contact Ms. Priscilla Busch by phone at 510-632-1366 x105, fax to 510-568-6040, email to <PBusch@independent.org<, or snail mail to The Independent Institute, 100 Swan Way, Oakland, CA 94621-1428. All contributions are tax-deductible. Thank you! ------------------------------------------------------------- For previous issues of THE LIGHTHOUSE, see http://www.independent.org/tii/lighthouse/LHLink3-20-14.html. ------------------------------------------------------------- For information on books and other publications from The Independent Institute, see http://www.independent.org/tii/lighthouse/LHLink3-20-15.html. ------------------------------------------------------------- For information on The Independent Institute's upcoming Independent Policy Forums, see http://www.independent.org/tii/lighthouse/LHLink3-20-16.html. ------------------------------------------------------------- To subscribe (or unsubscribe) to The Lighthouse, please go to http://www.independent.org/subscribe.html, choose "subscribe" (or "unsubscribe"), enter your e-mail address and select "Go." ------------------------------------------------------------- If you like our service, you may also like PolicyBot, an excellent resource from the Heartland Institute -- the people who bring you Intellectual Ammunition, Environment and Climate News, Health Care News, and School Reform News. PolicyBot is a Web archive of over 7000 public policy documents, which come from over 300 organizations and publications, cover topics from agriculture to welfare, including budgets, taxes, regulation, health care, and environment, and take a generally low-tax, limited-government personal-responsibility perspective. The "Hot Docs" e-mail service from Heartland alerts you to the latest op-eds, studies, and papers that are available through PolicyBot. Sending a message to laplante@heartland.org will add you to the Hot Docs list. Please note whether you want to receive the daily or weekly version. ------------------------------------------------------------- Copyright ? 2001 The Independent Institute 100 Swan Way Oakland, CA 94621-1428 (510) 632-1366 phone (510) 568-6040 fax
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