Can Bitcoin be defeated by legislation?

The question breaks down into two parts:

  1. For what public benefit?     —and—
  2. No, it cannot be achieved in this way

Governments are in the business of regulating certain activities—hopefully in an effort to serve the public good. In the case of business methods and activities, their goal is to maintain an orderly marketplace; one that is fair, safe and conducive to economic growth.

But regulation that lacks a clear purpose or a reasonable detection and enforcement mechanism is folly. Such regulation risks making government seem arbitrary, punitive or ineffective.

QR Code_CRYPSA-001«—  This is money. It is not a promissory note, a metaphor, an analogy or an abstract representation of money in some account. It is the money itself. Unlike your national currency, it does not require an underlying asset or redemption guarantee.

Bitcoin is remarkably resistant to effective regulation because it is a fully distributed, peer-to-peer mechanism. There is no central set of books, no bank to subpoena, and no central committee to pressure (at least not anyone who can put the genie back into the bottle). In essence, there is no choke point or accountable administrative party.

Sure—it is possible to trace some transactions and legislate against ‘mixers’ and other anonymization methods—but there is no way to prevent a transaction before it occurs or to know the current distribution of assets. Bitcoin can exist as a printed QR code and it can be transmitted from a jail cell with a blinking flashlight. Sending bitcoin from Alice to Bob has no intermediary. Settlement requires only that one of the parties eventually has access to the Internet. But, there is no credit authority or central asset verification.              [continue below image]…

feral_cat_mating-02-ts

If you are thinking of legislating against the use of Bitcoin, you might as well pass laws to ban the mating of feral cats or forbid water from seeping into underground basements. These things are beyond the domain of human geopolitics. You can try to shape the environment (e.g. offer incentives to cats and water levels), but you cannot stop sex or seepage.

Fortunately, Bitcoin is not a threat to governments—not even to spending or taxation. A gross misunderstanding of economics and sociology has led some nations to be suspicious of Bitcoin, but this improper perception is abating. Governments are gradually recognizing that Bitcoin presents more of an opportunity than a threat.

I have written more extensively on this issue:

Ellery Davies is co-chair of The Cryptocurrency Standards Association, MC for The Bitcoin Event in NY and monetary systems board member for Lifeboat Foundation. This fall, he will teach Cryptocurrency and The Blockchain in Massachusetts.

Australia finds an effective smoking deterrent

Legislation against activities of compulsion are rarely successful. Even if a population is predisposed to abide by the law, they may be physiologically wired to follow the compulsion. Addiction and desires are driven by powerful evolutionary forces. People tend to find a way around statutory and cultural restrictions.

Consider the governments, churches, civic groups, schools and parents that have sought to restrict sex throughout human history—for example, among individuals who are unmarried, gay, underage, dissimilar heritage, or simply in a school, church or prison. Do laws and even physical barriers stop people from having sex?

Swollen bellies amongst high school students suggests that rules can be broken. And pregnancy represents the tip of an iceberg. It results from a fraction of sexual encounters and many are terminated before they are evident, because of the law, the parents, or the shame of discovery.

It’s easier to prevent cats from reproducing. Simply neuter them if you can catch them before they produce litters. But governments generally don’t sterilize their population. That makes it difficult to get reelected, at least in a democracy.

Smoking may not be as universally enjoyable as sex, but for smokers, it is also a powerful compulsion. How can a society ban a desirable activity that the majority agrees is harmful to health and to the welfare of the society at large? Here, then, is a Wild Duck guide to curtailing the use of cigarettes…

1.  Ban It
If a government bans a vice (like smoking), it simply drives it underground. Just ask any American who was alive during Prohibition. Alcohol was everywhere, but profits accrued to the Mob instead of to the producers and government.

2.  Tax It
Does a selective tax discourage consumption or a particular activity? It certainly seems like it should work. These are called vice taxes.

But what seems valid often fails supply-and-demand realities. If a government taxes something that is cheap to produce, people will find a way to evade the tax. Either the consumer will buy it out of the jurisdiction, import it, or the manufacturer will produce unreported products. The vast and free-flowing nature of the Internet makes all of these things difficult to police and even more likely than they were before.

3.  Scare the Hell Out of Consumers
The Australian courts have just approved of a measure against which tobacco companies fought with all the gusto they could muster. Beginning late this year, cigarette packages will be completely covered by a horrid photo that graphically depicts the consequences of smoking. It’s not just a written warning. It gets you right into a rotting jaw, cancer of the eye ball, or a suffocating child. The photo and a dire warning will cover the front and display edge of the package. The rest of the box will be drab olive green regardless of the brand. Other illustrations, cartoons or images are prohibited…not even a brand logo!

Will people find a way around it? With bans and taxes, there is a strong incentive to circumvent rules. But I don’t think that consumers will go out of their way to purchase cigarettes from unknown sources to avoid a disturbing package. People still want their smokes. With the Australian scheme, people can still smoke–the brand they crave, from a trusted source, and without onerous taxation.

But the Australian parliament realizes that smokers cannot circumvent death and disease. That burden is not foisted upon you by government. It’s a just a fact, plain and simple. Their new rules help ensure that the smokers aren’t fooling themselves. Cancer and death will no longer be out-of-site, out-of-mind.

If the goal is to reduce smoking, this last idea is likely to achieve the goal. Most of us want to live. In the United States and Europe, warnings are a bit abstract and hypothetical. Australia’s packaging rules take the danger of smoking and shift them from a theory to stark, in-your-face reality.

Australian legislators are clearly Wild Ducks at heart. They understand compulsion. For some smokers, the desire to avoid a graphically depicted, painful experience may exceed the desire to get a quick nicotine high.

Will a ban on hand’s free phones make driving safer?

The National Traffic Safety Board is very concerned about distracted driving. Their research and testimony was instrumental in shaping statutes in 35 states that ban texting while driving and the 9 states that ban the use of handheld phones (many more states have partial restrictions). If you have ever tried using a tiny keyboard (for example, typing a destination into a GPS device) while gliding down a highway or even a side street, then you know it is very risky to say the least.

Studies on the effects of laws are often ambiguous, because so many extraneous variables are at play before and after the law goes into effect. But in the case of texting while driving, studies are conclusive. Applying this data, I am reasonably confident that at least 3 people reading this blog in the week it was posted are alive because of one of these laws.

When the NTSB first suggested that handheld use of cell phones should be banned, I was surprised at the specificity of their wrath. Don’t we already punish “Driving while distracted”? Keeping laws general seems so much simpler and fair. Why should a cell phone user be restricted but not the lady in the next lane applying mascara or the guy drinking coffee and shaving at the same time?

Perhaps one reason for a targeted restriction is because the technology is newer and more insipid. It takes a few years before most drivers recognize how dangerous it is to hold a portable device while driving. In my opinion, a phone is used in a very different manner than a cup of coffee. Doing those other things (applying makeup and shaving) is just plain stupid. These things require that your eyes and full attention be on the mirror and not the road.

Perhaps a ban on cell phones is palatable because it relieves traffic officers and courts from the vagaries of interpretation. Either way, I accept the restriction. I make a serious effort to ensure that an automatic hands free connection is established each time that I enter my car. I wasn’t truly happy with wireless speakerphones until I found a simple and effective Bluetooth speaker that recognized when I was inside the vehicle. The detection of an occupant is a major step forward, because it ensures that calls from home are not hijacked by the device in my parked car.

But now, the NTSB has gone too far. They are recommending a complete ban on the presence of mobile phones in cars. What’s next? Why not Prohibit drivers from talking with passengers? (Apparently, they believe that talking with a caller is more dangerous). Even if studies demonstrate a link between talking and safety, the research technique cannot possibly factor in the dramatically increased safety and reduced driving of those who keep in touch with business and loved ones, especially if the call pertains to their reason for driving in the first place.

Consider an example: Suppose that the research conclusively demonstrates that a call doubles the chance of a serious accident from 1 in 150,000 miles to 2 in 150,000 miles. What if the call removed the car from the road because the whole trip is unnecessary? Is that covered by the study? For example, suppose that you are rushing to the airport to pick up an elderly relative who is ill and forgot critical medicine. They don’t speak English and – well – you get the idea… You are under stress, speeding and very concerned about someone else’s safety. Anyone will acknowledge that the risk of an accident is heightened. You are aware of this, but you are good driver. You are not tired and you weigh the risk against your personal mission.

Now suppose that this relative called you from another airport. They missed their flight and they will not be arriving as expected. But wait! They ran into the family doctor at the airport. He has the required medicine and will even give Grandpa a lift home. I realize that the example is a bit contrived and melodramatic, but the gist is broadly applicable. Accepting the call in the car not only removes a source of stress, it makes the entire trip unnecessary. While not every call saves tires, gas, stress and lives—many calls make business and personal life more efficient. In turn, this reduces stress and the need to drive. The relationships between these things are intangible and difficult to measure, but the net effect is very tangible. It would be difficult to incorporate control mechanisms that relate to these factors and almost impossible to set controls and measure results. (How is overall traffic safety influenced by reducing the need to drive? The influence goes beyond the individual driver!) They are perhaps more important components of overall safety than all the things that can be measured.

Banning the use of all telephone communication in cars is not just foolish, it is political idiocy. Fortunately, I’m not the only one who thinks so. If you don’t agree with me after the very slightest of reflection then post a comment. But be prepared for my retort. In my opinion, anyone who disagrees with me just hasn’t thought enough about the issue! (Eventually, you will get it right!)

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