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Alexa Actionable Analytics for the Web. AmazonGlobal Ship Orders Internationally. Amazon Inspire Digital Educational Resources. Amazon Rapids Fun stories for kids on the go. Amazon Restaurants Food delivery from local restaurants. ComiXology Thousands of Digital Comics. East Dane Designer Men's Fashion. These enduring issues have to do with the ability of universities to protect the qualities that make them distinctive in the society and important to it. They can be brought together in a single proposition: When university administrators and faculty are deciding how much to charge for the sale of their research efforts to business, they must also decide how much they are willing to pay in return.
For there will surely be a price, as there is in any patronage relationship. It was government patronage, after all, that led universities to accept the imposition of secrecy and other restrictions that were wholly incompatible with commonly accepted academic values. There is nothing uniquely corrupting about money from industry. It simply brings with it a set of questions that universities must answer.
By their answers, they will define, yet again, what kind of institutions they are to be. Here are three questions that will arise with greater frequency as connections between business and university-based research grow:. I have chosen these three among many other possible questions because we already have a body of experience with them. It is not altogether reassuring. Some institutions have been scrupulous in attempting to protect institutional values. Others have been considerably less so. If it does not, then the competition for industrial money will intensify, and the abstractions of institutional values may find it hard going when pitted against the realities of the research marketplace.
Even in good times, the going can be hard. A Stanford University official not a member of the academic administration, I hasten to add commented approvingly on a very large agreement reached between an entire department at the University of California at Berkeley and the Novartis Corporation: Research has to be useful, even if many years down the line, to be worthwhile. I am equally certain, however, that the test of usefulness as a principal criterion for supporting research is more widely accepted now than in the past, as is the corollary belief that it is possible to know in advance what research is most likely to be useful.
The United States is in imminent danger of losing its prestige as a player in international affairs. It begins innocently with a plan to ship and to store nuclear. donnsboatshop.com: The Yucca Mountain Conspiracy (): Terry L Start reading The Yucca Mountain Conspiracy (A James Link Thriller) on your.
Since both of those beliefs turn the historic basis of the university on its head, and since both are raised in their starkest form by industry-supported research, it is fair to say that the extent to which those beliefs prevail will shape the future course of research universities, as well as their future value. Among the foundation stones underlying the success of the U.
In supporting research, betting on the best is far more likely to produce a quality result than is settling for the next best. Although judgments are not perfect, it is possible to identify with a fair degree of confidence a well-conceived research program, to assess the ability of the proposer to carry it out, and to discriminate in those respects among competing proposers.
Those judgments are most likely to be made well by people who are themselves skilled in the fields under review. Finally, although other sets of criteria or methods of review will lead to the support of some good research, the overall level of quality will be lower because considerations other than quality will be weighed more heavily in funding decisions. It is remarkable how powerful those propositions have been and, until recently, how widely they were accepted by decisionmakers and their political masters.
To see that, it is only necessary to contrast research funding practices with those in other areas of government patronage, where the decimal points in complicated formulas for distributing money in a politically balanced manner are fought over with fierce determination. That understandable, and in some respects even admirable, belief has always led to pressures to distribute research support more broadly on a geographic or more accurately, political-constituency basis. These pressures have tended to be accommodated at the margins of the system, leaving the core practice largely untouched.
Since it remains true that the quality of the proposal and the record and promise of the proposer are the best predictors of prospective scientific value, there is reason to be concerned that university administrators, faculty, and members of Congress are increasingly departing from practices based on that proposition. The basis for that concern lies in the extent to which universities have leaped into the appropriations pork barrel in an effort to obtain funds for research and research facilities that is based not on an evaluation of the comparative merits of the project for which they seek funds but on the ability of their congressional representatives to manipulate the appropriations process on their behalf.
In little more than a decade, the practice of earmarking appropriations has grown from a marginal activity conducted around the fringes of the university world to an important source of funds. Most of this largesse was directed to research and research-related projects. Even in Washington, those numbers approach real money. More important than the money, though, is what this development says about how pressures to get in or stay in the research game have changed the way in which faculty and administrators view the nature of that game.
The change can be seen in the behavior of members of the Association of American Universities AAU , which includes the 61 major research universities. In , when two AAU members won earmarked appropriations, the association voted overwhelmingly to oppose the practice and urged universities and members of Congress not to engage in it. If a vote were taken today to reaffirm that policy, it is not clear that it would gain support from a majority of the members.
Since , an increasing number of AAU members have benefited from earmarks, and for that reason it is unlikely that the issue will be raised again in AAU councils. Even in some of the best and most successful universities there is a sense of being engaged in a fierce and desperate competition. The pressure to compete may come from a need for institutional or personal aggrandizement, from demands that the institution produce the economic benefits that research is supposed to bring to the local area, or those and other reasons combined.
The result, whatever the reasons, has been a growing conclusion that however nice the old ways may have been, new circumstances have produced the need for a new set of rules. At the present moment, we are still at an early stage in a movement toward the academic equivalent of the tragedy of the commons. It is still possible for each institution that seeks to evade the peer review process to believe that its cow can graze on the commons without harm to the general good.
As the practice becomes more widespread, the commons will lose its value to all. Although the current signs are not hopeful, the worst outcome is not inevitable. The behavior of faculty and their administrations in supporting or undermining a research allocation system based on informed judgments of quality will determine the outcome and will shape the nature of our universities in the decades ahead. There are other ways of looking at the future of our universities than the three I have emphasized here.
Much has been written, for example, about the effects of the Internet and of distance education on the future of the physical university. Much of this speculation seems to me to be overheated; more hype than hypothesis. No doubt universities will change in order to adapt to new technologies, as they have changed in the past, but it seems to me unlikely that a virtual Harvard will replace the real thing, however devoutly its competitors might wish it so.
The future of U. The decade of the s has seen considerable change in the career patterns for new doctorates in science and engineering. It was once common for new doctorates to move directly from their graduate studies into tenure track appointments in academic institutions. Now it is more likely that they will find employment in other sectors or have nonfaculty research positions. This change has created a great deal of uncertainty in career plans and may be the reason for recent decreases in the number of doctorates awarded in many science and engineering fields.
Another change is that the scientific and engineering workforce is growing more diverse in gender, race, and ethnicity. Throughout the s and s, men dominated the science and engineering workplace, but substantial increases in the number of female doctorates in the s has changed the proportions. Underrepresented minorities have also increased their participation but not to the same extent as have female scientists and engineers.
The narrowing tenure track The most dramatic growth across all the employment categories has been in nonfaculty research positions. The accompanying graph documents the growth in such positions between and The data reflects the percentage of academic employees who earned a doctorate from to who were employed in nontenured positions in The data reflects the percentages for those who earned doctorates between and In many fields the percentage of such appointment almost doubled between and A rapidly growing role for women Between and , the number of women in the academic workforce increased substantially in the fields in which they had the highest representation—biological sciences, medical sciences, and the social and behavioral sciences.
The rate of increase for women was even faster in the fields in which they are least represented—agricultural sciences, engineering, mathematics, and physical sciences. Still, women are underrepresented in almost all scientific and technical fields. Slow growth in minority participation Minority participation also expanded during the period but at a slower rate than for women.
African Americans, hispanics and native Americans comprise about 15 percent of the working population but only about 5 percent of the scientists and engineers working in universities. The data also shows substantial increases in the proportion of underrepresented minorities, but they are still not represented at a rate commensurate with their share of the population. Electronic commerce needs new policies to enforce tax laws, protect privacy, deter fraud, and prevent illegal sales.
The laws of commerce, which were established in a marketplace where sellers and buyers met face to face, cannot be expected to meet the needs of electronic commerce, the rapidly expanding use of computer and communications technology in the commercial exchange of products, services, and information. In addition, by the Internet will compete with radio to be the third largest medium for advertising, surpassing magazines and cable television. Online banking and brokerage are becoming the norm. In early , 22 percent of securities trades were made online, and this figure is rising rapidly.
Now is the time to review and update the laws of commerce for the digital marketplace. In any commercial transaction, there are multiple interests to protect. Buyers and sellers desire protection from transactions that go wrong due to fraud, a defective product, a buyer that refuses to pay, or other reasons.
Buyers and sellers may also want privacy, limiting how others obtain or use information about them or the transaction. Governments need effective and efficient tax collection. This includes sales or value-added taxes imposed on a transaction as well as profit or income taxes imposed on a vendor. Finally, society as a whole has an interest in restricting sales that are considered harmful, such as the sale of guns to criminals.
The legal, financial, and regulatory environment that has developed to protect buyers, sellers, and society as a whole is inconsistent with emerging technology. When purchases are made over a telecommunications network rather than in person, there is inherent uncertainty about the identity of each party to the transaction and about the purchased item. Furthermore, it is difficult for either party to demonstrate that transaction records are accurate and complete.
This results in uncertainty and potential conflict in four critical areas: Telephone and mail order businesses face similar problems, but e-commerce is different. This is not true with e-commerce. Mail order revenues are a negligible fraction of the economy, so the fact that sales taxes are rarely collected for mail order is tolerable. E-commerce revenues will be significant. Current law is particularly inapplicable to e-commerce of information products such as videos, software, music, and text, which can be delivered directly over the Internet.
These sales produce no physical evidence, such as shipping receipts or inventory records. As a result, auditors cannot enforce tax law, and postal workers cannot check identification when making a delivery. And if either party claims fraud, it may be impossible to retrieve the transmitted item, prove that the item was ever transmitted, or locate the other party. Two schools of thought have emerged about how to deal with e-commerce conflicts. One is that the infant industry needs protection from regulation. Lack of government interference has helped e-commerce grow, and heavy-handed regulation could cripple its burgeoning infrastructure and deny citizens its benefits.
This philosophy underlies the position that all e-commerce should be tax-exempt, that all Internet content should be unregulated, and that consumers are sufficiently served by whatever privacy and fraud protections develop naturally from technological innovation and market forces. Proponents call this industry self-regulation. Others argue that policies governing traditional commerce evolved for good reasons and that those reasons apply to e-commerce.
They warn of the dangers of having different rules for different forms of commerce. If digitized music purchased online is tax-free and compact disks purchased in stores are taxed, then e-commerce is favored, and consumers who cannot afford Internet access from home suffer. The problem is that rules developed for traditional commerce may not be applicable or enforceable for e-commerce. To meet old objectives, proponents push additional laws, sometimes with significant side effects.
For example, the state of Washington considered legislation to impose criminal penalties on adults who make it possible for minors to access pornography on the Internet. Because there is no perfect pornography filter, this could effectively ban Internet use in schools and prohibit a mother from giving her year-old son unsupervised Internet access from home.
Australia prohibited Australian Web sites from displaying material inappropriate for minors, thereby denying material to adults as well. Similarly, laws have been proposed to ensure that sales taxes are always collected, except when transactions are provably tax-exempt. Some proposals include unachievable standards of proof, forcing vendors to tax all sales. Worse, laws could make tax collection so expensive that e-commerce could not survive. Policymakers are often forced to choose between conflicting societal goals—for example, between collecting taxes and promoting valuable new services—because policies and institutions are not equipped to meet both objectives.
This need not be the case here. The United States can devise a system that protects against misuse of e-commerce without stifling its growth. Pornography, cryptography, and other restrictions. The most prominent e-commerce controversy is the easy availability of pornography on the Internet. The draconian solutions are to censor material intended for adults or deny minors Internet access.
In the Communications Decency Act, Congress penalized those who provide indecent material to minors. Supreme Court found the law unconstitutional because it would interfere with communications permitted between adults. Congress passed a less restrictive version in that affects only commercial Web sites. It allows pornography vendors to assume that customers are adults if they have credit cards. This protects the financial interests of pornographers, but it allows minors with access to credit cards to obtain pornography without impediment and prevents adults with poor credit from doing so.
This also undermines the privacy of adults who do not want pornography purchases on their credit card records. Other restrictions have been proposed in Congress to protect children, including bans on Internet gambling and liquor sales. Such restrictions might protect children, but they would deprive adults of these services and reduce revenues for the respective industries.
In addition, sales may be restricted in some jurisdictions and not others, which is problematic on the global Internet. For example, a New York court found that an online casino in the Caribbean violated New York laws, because New Yorkers can lie about their location and gamble. This court would shut down online casinos worldwide if they cannot determine whether customers are in New York. The desire to maintain security in online transactions has led to a debate over the use of encryption.
Law-abiding individuals use encryption to promote security, but criminals can use it to evade law enforcement. The United States does not regulate domestic sale of encryption software but tightly restricts its export. This is difficult to enforce, because popular products such as Web browsers often incorporate encryption capability. The upshot is that legal sales could be hampered, whereas savvy foreign buyers can readily circumvent the rules. Security issues also arise in other contexts.
For example, legislation has been proposed to ban gun sales via the Internet, because online gun vendors cannot check customer identification to prevent sales to criminals. This blanket prohibition would deny law-abiding citizens this convenience. The alternative to broad restrictions is a system in which vendors can access and reasonably believe customer credentials, which might indicate whether a customer has a criminal record or is a minor or a U.
Policymakers should penalize those who ignore credentials in cases where they could be available, and only in those cases. A final point about sales restrictions: If other nations do not impose and enforce similar laws, U. Fraud and other failed transactions. Two problems must be addressed in order to provide protection against fraud. First, a transaction must create an incorruptible record. In traditional commerce, this can be accomplished with a paper receipt that is hard to forge.
In e-commerce, one might reveal all information about the transaction to a third party. This is not always effective, because the resulting record may not be trustworthy or available when needed. Moreover, this reduces the privacy of buyers and sellers. Second, it must be possible to check the credentials of other parties. CyberSource could not collect because the buyer could not be identified or located, and the item could not be retrieved. For example, does that online pharmacy really have licensed pharmacists on staff?
Fraud would be more difficult if a unique identifier were embedded in each computer.
Intel provided this feature in its latest processor, and Microsoft did the same in software. But the public immediately and loudly expressed its opposition, because such identifiers could undermine privacy. For example, Web sites could use identifiers to track the viewing habits of individuals in tremendous detail, or an identifier could reveal the authorship of documents created or distributed anonymously.
Another way to identity parties is through electronic signatures. Unfortunately, there is no guarantee that certificate authorities operate honestly. Anyone can offer this service, and there is no government oversight. Consequently, it is not clear that their assurances should be legally credible. They may do so because providing all the information makes it harder for a dishonest certificate authority to remain undetected, which is important given the lack of oversight. A total of 46 states tax e-commerce, but taxes are collected on only 1 percent of e-commerce sales.
This tax is simply unenforceable. As a result, e-commerce vendors have an unfair advantage, and state revenues are decreased.
Many states depend heavily on sales tax revenues, so they want enforcement even if it damages e-commerce. Taxation of e-commerce has all the practical difficulties posed by restricted sales and fraud protection, and more. Sometimes, vendors must know about their customers to determine whether a given tax applies. For example, taxes may not be collected from customers in some locations or from licensed wholesalers. Such customers must supply trustworthy credentials, but this raises corresponding privacy concerns.
Neither sales tax on a transaction nor revenue tax on a vendor can be enforced without auditable records that are trustworthy. Traditional commerce generates paper trails of cash register logs, signed bills of sale, and shipping records that are difficult to alter or forge. E-commerce often produces only electronic records that are easily changed, especially when the transaction takes place entirely over a network.
The enormous increase in speed and decrease in costs in these transactions will make commerce without exchange of physical objects increasingly common. Such transactions create two problems for tax auditors. First, transactions leave no physical evidence behind. Second, unlike a physical product, information can be sold many times. Thus, revenue figures cannot be corroborated by examining inventory.
Auditors must depend entirely on transaction records. If transaction records can be changed without risk of detection, any policy that requires such records for enforcement is doomed. Many policies neither support taxation nor protect privacy. Vendors in the state of Washington, for example, are expected to ask customers for their names and addresses, and collect taxes when customers give a Washington address or no address. Thus, anonymous out-of-state sales are taxed when they should not be.
More important, name and address need not be verified or even verifiable, so customers within the state can establish false out-of-state accounts and easily evade taxes. The Internet Tax Freedom Act prohibited new taxes on e-commerce for three years, although it does not affect existing taxes applicable to e-commerce, many of which predate computers. The act established a commission to advise Congress by April on policies to enact before this three-year moratorium ends.
The first year was spent arguing about who should be on the commission, and the commission never met. It is unclear whether this group will develop any policies or, if it does, whether its recommendations will be followed. Online vendors can capture extensive information about their customers; for example, they know what products customers look at, not just what they buy. Privacy protection creates a particularly thorny dilemma because it works against fraud protection, restricted sales, and taxation.
These other objectives could be easier to achieve if transaction details were public. On the other hand, some capabilities required for these other objectives, such as the ability to retrieve trustworthy credentials, are also essential when applying traditional privacy policies to e-commerce. For example, people are legally entitled to view their personal credit records and correct any errors. Applying this policy to e-commerce would fail unless a vendor can verify the identity of the person requesting access to this information.
Similar problems arise when different privacy policies apply to different users. Today, a minor can lie about age without detection. The most controversial issues of e-commerce have common underlying causes. Because buyers and sellers lack trustworthy information about each other during the transaction and auditors lack trustworthy records after the transaction, it has been necessary to compromise important policy objectives such as privacy and fair taxation. Rather than fight over which sacrifice to make, we should create an environment in which these objectives are compatible.
We must supply the missing elements. Records must be generated for each transaction. Any attempt to forge, destroy, or retroactively alter records must face a significant risk of detection. Records stored electronically can be changed without detection. A third party is necessary if transaction records are to be trustworthy. This might be a credit card company. Today it is impossible, making problems inevitable. Moreover, transaction records must go to third parties without undermining privacy.
Today, many e-commerce customers and merchants entirely surrender their privacy to a credit card company and often to each other. It is no surprise that Internet users routinely cite privacy concerns as their primary reason for not engaging in more e-commerce. Parties to a transaction should not be forced to reveal anything beyond the credentials necessary for that particular transaction, which need not include identity. Even that information should be unavailable to everyone outside the transaction, except for authorized auditors. It should even be impossible to determine whether a particular person has engaged in any transactions at all.
I want to propose a system that solves many of these problems. Conceptually, it works as follows: All parties create a record containing the specifics of a transaction. All parties sign it. A party that is subject to audits then has its copy notarized. To enable a true audit, outside entities must be involved in recording the transaction. This system therefore includes verifiers, notaries, and auditors. Verifiers check the identity of all parties and vouch for credentials.
Notaries oversee every transaction record, establishing a time and date and insuring that any subsequent modifications are detectable. Auditors review and confirm the accuracy of records. Separating verifier and notary functions is crucial. A verifier knows the true identity of some customers. Technically, the system is based on public-key encryption. Each entity E gets a public key, which is available to everyone, plus a secret key, which only E knows. Public-key encryption operations are executed transparently by software.
Any person or company who wants an audit trail must first register with one or more verifiers. To register, this person tells the verifier her public key but not her secret key. She has the option of providing additional information, which she may designate as either public or private. Public information can be used as credentials during transactions. Private information may be accessed later by authorized auditors.
The verifier is responsible for checking the veracity of all customer information, public and private. For example, one individual might provide her name and social security number as private information and her U. Auditors can check her identity if necessary. Vendors know only her verifier account number and citizenship, allowing her to anonymously purchase U. This individual might also register with a second verifier. This time, she declares as public information that she is a software retailer, so she can avoid certain sales taxes.
She keeps her nationality confidential.
Because she has two verifier accounts, no one can determine that she is both a software retailer and a U. This would enable her, for example, to purchase stock with both accounts without revealing that there is only one buyer. For each verifier account, a relationship is established with one or more notaries. The auditor must be informed of all verifier accounts and relationships with notaries. Then, e-commerce transactions can begin. In a transaction, all parties create a description of the relevant details using a standardized format.
For a software purchase, the description might include the software title, warranty, price, date, time, and the locations of buyer and seller. A transaction record would consist of this description, plus the electronic signature and verifier account of each party. The record would be equivalent to a signed bill of sale and would prove that all parties agreed.
Each party in a transaction that requires an audit trail would submit its copy of the transaction record to an associated notary. This makes it possible to later audit one party without viewing the records of the others. A party submitting a record must also provide verifiable proof of identity, probably using a verifier account number and an electronic signature. This allows the notary to later assemble all records submitted by a given vendor, so auditors can catch a vendor that fails to report some transactions.
The notary adds a time stamp and processes the record. Once a record is processed, subsequent changes are detectable by an auditor, even if all parties to the transaction and the notary cooperate in the falsification. The notary also creates a receipt. Anyone with a notarized record and the associated receipt can verify who had the record notarized and when, and can determine that no information has subsequently been altered. Entities that are not subject to audits, including most consumers, would be largely unaffected by this system.
Most could register over the Internet with the click of a mouse button. A customer who makes restricted purchases such as guns or encryption software might be required to register once in person. Software executes other functions transparently. Several companies currently provide some necessary verifier and notary functions, but not all. For example, there are notaries that establish the date of a transaction, but none can produce a list of all transactions notarized for a given vendor, which is essential. Trustworthy commercial verifiers and notaries are needed.
A government agency or government contractor could provide the services, but private companies would be more efficient at adapting to rapid changes in technology and business conditions. Commercial competition would also protect privacy, because it allows customers to spread records of their transactions among multiple independent entities. How would anyone know that services provided by a private company are trustworthy? The federal government should support voluntary accreditation of verifiers and notaries.
Only accredited firms would be used when generating records to comply with federal laws or to interact with federal agencies. Others are likely to have confidence in a firm accredited by the government, which could further bolster e-commerce, but a state or private company would be free to use unaccredited firms.
To obtain accreditation, a verifier or notary would demonstrate that its technology has certain critical features. A notary, for example, would show that any attempt by the notary or its customers to alter or delete a notarized record would be detectable. The system must also be secure and dependable, so that the chances of lost data are remote.
The specific underlying technology used to achieve this is irrelevant. Accredited firms must also be financially secure and well insured against error or bankruptcy. The insurer guarantees that even if a notary or verifier business fails, the information it holds will be maintained for a certain number of years. The insurer therefore has incentive to provide effective oversight. A new corps of government auditors is needed to make this system work.
Auditors must randomly check records from notaries and verifiers to ensure that nothing has been altered. Auditors would also keep track of the verifiers and notary accounts held by each electronic vendor and by any other parties subject to audit. Many current laws and regulations require written records, written signatures, or written time stamps.
Federal and state legislation should allow electronic versions to be accepted as equivalent when the technology is adequate. Contracts should not be unenforceable simply because they are entirely electronic. It should be possible to legally establish the date and time of a document with an electronic notary. A notice sent electronically should be legally equivalent to a notice sent in writing, when technology is adequate. For example, a bank could send a foreclosure notice electronically, provided that accredited verifiers and notaries produce credible evidence that the foreclosure was received in time.
Similarly, electronic records of commercial transactions should carry legal weight when technology is adequate. For example, commercial vendors must show records to stockholders and tax auditors. The Securities and Exchange Commission, the Internal Revenue Service, and state tax authorities should establish standards for trustworthy electronic records using accredited verifiers and notaries.
Government could improve its own efficiency by using these systems. Congress took the first small step in by directing the federal government to develop a strategy for accepting electronic signatures. Government should use commercial services whenever practical, rather than developing its own. The new approaches used to identify parties in e-commerce raise novel policy issues regarding identity. Who is responsible if a verifier incorrectly asserts that an online doctor is licensed? Certificate authorities already want to limit their liability, but such limits discourage the use of appropriate technology and sound management.
It should also be illegal for customers to provide inaccurate information to a verifier. If this inaccurate information is used to commit another crime such as obtaining a gun for a criminal, that is an additional offense. Other identity issues are related to electronic signatures. Forgery and fraud are illegal, but these acts that enable forgery and fraud in e-commerce may currently be legal because they are new.
Accredited and unaccredited verifiers and notaries should be required to notify customers about privacy policies, so that consumers can make informed decisions. Vendors could be allowed to sell restricted products such as pornography, encryption software, guns, and liquor if and only if they check credentials and keep verifiable records where appropriate. For dangerous physical goods such as guns, double checking is justified. Online credentials would include name, mailing address, and criminal status; the name would be verified again when the guns were delivered.
One of the most difficult outstanding issues is to determine when a vendor must collect sales tax and to which government entity it should be paid. At present, taxes are collected only when buyer and seller are in the same state. Policies should change so that collection does not depend on the location of the seller, because too many e-commerce businesses can easily be moved to avoid taxes. This forces vendors to collect taxes for customers in all jurisdictions. There are 30, tax authorities in the United States with potentially different policies; monitoring them all is a costly burden.
Tax rates and policies should be harmonized throughout larger regions with one organization collecting taxes. For example, there might be a single tax policy throughout each state. Because cities often have higher taxes than rural areas, cities may oppose harmonization.
A verifier could provide trustworthy static information, such as billing address or tax home, but not actual location at the time of purchase. Taxing based on static information is more practical, although a few people may manipulate this information to evade taxes. At minimum, each party should state its location in a notarized transaction record, so that retroactive changes are detectable. This can only be accomplished by addressing fundamental deficiencies in the e-commerce system rather than by debating individual controversies in isolation.
This philosophy underlies the position that all e-commerce should be tax-exempt, that all Internet content should be unregulated, and that consumers are sufficiently served by whatever privacy and fraud protections develop naturally from technological innovation and market forces. It proposed an administrative enforcement process to police unfair competition in the airline industry. It is no surprise that Internet users routinely cite privacy concerns as their primary reason for not engaging in more e-commerce. The auditor must be informed of all verifier accounts and relationships with notaries. Meanwhile, in May , the Department of Justice DOJ filed a civil antitrust action against American Airlines, claiming that it engaged in predatory tactics. A party that is subject to audits then has its copy notarized. Northern Dancer The weather leading up to the Preakness was nearly perfect.
This includes the creation of commercial intermediaries. Verifiers can provide trustworthy credentials, and notaries can ensure that transaction records are complete and unaltered. Dividing responsibilities for these functions among competing notaries and verifiers will capture enough information for tax auditors and law enforcement agents to pursue illegal activities without sacrificing the privacy of the law-abiding. To make this happen, government should develop accreditation procedures for verifiers and notaries. It should update laws and regulations to allow electronic records to replace written records when and only when the technology is adequate.
Government should also use these new services. It should develop new policies on taxation and restricted sales that are consistent with e-commerce. And for those who try to exploit the new technology illegally, criminal codes should provide appropriate punishments. Federal Trade Commission, Privacy Online: A Report to Congress, June www. Peha, Encryption Policy Issues, October www.
Deregulation of the airline industry, now more than two decades old, has been a resounding success for consumers. Yet even as the economy booms and people fly in record numbers, travelers are increasingly heard complaining about widely varying fares, complex booking restrictions, and crammed planes and airports. Among longtime business travelers, these complaints are often followed by fond but fuzzy recollections of the days before deregulation, when airline workers were supposedly more attentive, seating spacious, and flights usually on time and direct.
Even leisure travelers, who have been paying record low fares, can be heard grousing about harried service, crowded flights, and missed connections. High fares in some markets and a growing gap in the prices charged for restricted and unrestricted tickets have not only raised the ire of some travelers but also prompted concern about the overall state of airline industry competition. Although reregulating the airlines remains anathema to most industry analysts and policymakers, there is no shortage of proposals to fine-tune the competitive process in ways that would influence the fare, schedule, and service offerings of airlines.
Unfortunately, the history of aviation policy suggests that attempts by government to orchestrate airline pricing and capacity decisions, however well intended and narrowly applied, run a real risk of an unhealthy drift backward down a regulatory path that has stifled airline efficiency, innovation, and competition.
Today, numerous detrimental policies and practices remain in place, even though they have long since outlived their original and often more narrow purposes. These enduring policies and practices—particularly those designed to control airport and airway congestion—deserve priority attention by policymakers seeking to preserve and expand consumer gains from deregulation.
The airline industry was originally regulated out of concern that carriers, left to their own devices, would compete so intensely that they would set fares too low to generate the profits needed to reinvest in new equipment and other capital. It was feared that this self-destructive behavior would, in turn, lead to the degradation of safety and service, ultimately leading to either an erosion of service in some markets or dominance by one or two surviving carriers.
Regulators on the now-defunct Civil Aeronautics Board CAB took seriously their mission to avert such duplicative and destructive competition. No new trunk airlines were certified after CAB was formed in , and vigorous competition among the regulated carriers was expressly prohibited. Airlines were assigned specific routes and service areas and given formulas governing the fares they could charge and the profits they could earn.
They were even subject to rules prescribing the kinds of aircraft they could fly and their seating configurations. Established when the propeller-driven DC-3 was king and when air travel was almost exclusively the domain of the affluent and business travelers, CAB was slow to react to the effects of new technology and the changing demands for air travel. The widespread introduction of jet airliners during the s greatly increased travel speed, aircraft seating capacity, and overall operating efficiencies.
By flying the faster and more reliable jets, the airlines were able to schedule more flights and use their equipment and labor more intensively. As travel comfort and convenience increased, passenger demand escalated. Constrained by regulation, the airlines could respond only awkwardly to changing market demands.
Airports in many large cities desperately needed new gates and terminals to handle the larger jets and increased passenger volumes. The air traffic control system, designed and managed by the Federal Aviation Administration FAA for a much smaller and less demanding propeller-based industry, suddenly had to handle many more flights by faster jets operating on much tighter schedules.
A fundamental shortcoming, which remains to this day, is that neither the local airports nor the air traffic control system were properly priced: The air traffic control system has long been financed by revenues generated from federal ticket taxes and levies on jet fuel. Unfortunately, there is little correlation between the size and incidence of these taxes and the cost and benefits of air traffic control services.
Likewise, airport landing fees rarely do more than cover the wear and tear on runways. Among other omissions, they are not equated with the costs imposed by users on others when taking up valuable runway space during peak periods. Both airport and airway capacity are allocated to users on a first-come, first-served basis, a simple queuing approach that provides little incentive for low-value users, such as small private aircraft, to shift some of their activity to less congested airports and off-peak travel times.
Not only has this approach been accompanied by air traffic congestion and delays, but it has prompted a series of often arbitrary administrative and physical controls on airline and airport operations that have had anticompetitive side effects. In the regulated airline industry of the s and early s, many shortcomings in the public provision of aviation infrastructure could be addressed by the relevant parties acting cooperatively. As a practical matter, this quota system as opposed to the queuing used elsewhere could be smoothly implemented only because a small number of airlines were permitted by CAB to operate from these airports and could thus decide among themselves who would use the scarce take-off and landing slots.
Other airport access controls were agreed on by the airlines, the federal government, and the local authorities. Most notably, nonstop flights exceeding prescribed distances were precluded from flying into or out of National and LaGuardia airports. In a highly regulated environment—in which airline prices and service areas could be adjusted by regulators to compensate for the effects of these restrictions—the airlines had little incentive to object vigorously to these proscriptions, many of which were later codified in federal law and rulemakings.
Airlines and airports in the regulated era also cooperated in the funding of airport expansion. Concerned that airport authorities would exploit their local monopoly positions by sharply raising fees on airport users and spending the revenue on lavish facilities, the federal government placed stringent restrictions on the use of federal aid to airports.
Hence, when it became necessary to modernize and expand gates and other passenger facilities, particularly after the introduction of jets, many large airport authorities turned to their major airline tenants for financing help. In return, the airlines signed long-term leases with airports that often gave them control over a large share of gates and the authority to approve future expansions.
The possible anticompetitive effects of these leases generated little, if any, serious attention. Largely unforeseen 20 years ago was the extent to which major carriers, once deregulated, would shift to hub-and-spoke operations. This network capability was especially valuable for attracting business travelers interested in frequent departures to a wide array of destinations. The airlines soon discovered that time-sensitive business travelers would pay more for such convenience.
The introduction of frequent flier programs made hub-and-spoke networks even more effective in attracting business fliers. By regularly using the same airline, travelers were rewarded with free upgrades to first class, preferential boarding, access to privileged airport lounges, and free trips. Hub-and-spoke systems coupled with the frequent flier programs put the startup airlines at a competitive disadvantage.
Without access to the slot-controlled airports, the new airlines faced a handicap in competing for the highly lucrative business market. A wholly voluntary process for distributing slots became impossible in a highly competitive environment. Unfortunately for the new airlines, the FAA grandfathered most of these slot assignments to the large incumbents, allowing them to sell or lease the slots as they saw fit.
New entrants were further hindered in their efforts to build desirable route systems by the persistence of perimeter rules at several key airports. Though strongly supported by residents living near these airports as a way to curtail airport traffic and noise, these limits on long-distance flights are a highly arbitrary means of regulating airport access.
The switchover to hub-and spoke systems by the incumbents made it much easier for them to operate within the perimeter limits, because a high proportion of their passengers travel on short- and medium-haul flights connecting from hubs located within the perimeter.