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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 web site
at http://www.bbb.org 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 flocked
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 flats 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.
*Andrew Morriss is Professor of Law and Associate Professor of
Economics at Case Western Reserve University, Cleveland, Ohio. His
article on spontaneous order in Western history, Miners, Vigilantes
and Cattlemen: Overcoming the Free Rider Problem in the Private
Provision of Law, was just published in the Land and Water Law Review.
This article first appeared in The Freeman Vol. 48, No. 7, July,
1998, and is reprinted with permission.
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