Snippets of Knowledge

In a world of privacy-invading smartphone apps and government-grade spyware, keeping personal data personal online can seem like a difficult task. But could you make money by choosing to give away logs of your most intimate data?

Federico Zannier is trying to find out. Emails, chat logs, location data, browser history, screenshots—you name it, the New York-based software developer is selling it all. With a Kickstarter campaign launched earlier this month, Zannier, a 28-year-old Italian-born master’s student at NYU, is offering to hand over a day’s digital footprint for a measly $2. He says he “violated his own privacy” starting back in February for about 50 days straight, recording screenshots and webcam snaps of himself every 30 seconds and tracking his every footstep using GPS technology. He logged the address of each Web page he visited—storing some 3 million lines of text—and accumulated a massive trove of 21,124 webcam photos and 19,920 screen shots.

Zannier’s aim, somewhat paradoxically, is to take ownership of his own data by selling it. He points out that we often hand over our private data unwittingly, given that few people take the time to read the terms and conditions of apps and online services. Companies rake in millions of dollars selling our information to marketing firms while we receive little in return. But Zannier’s Kickstarter is not just out to make a statement about online privacy—he plans to use the funds to create a browser extension and a smartphone app that he says will help others sell their own data. “If more people do the same, I’m thinking marketers could just pay us directly for our data,” he writes on his Kickstarter page. “It might sound crazy, but so is giving all our data away for free.”

I’m still waiting for a GPS that gets into a huff when you miss too many turns. Something like:

GPS: Turn right in 500 meters.
you: Misses turn.
GPS: Recalculating…. turn right in 300 meters. You’re ignoring me, aren’t you.
you: Misses turn.
GPS: Recalculating…. Please pay attention; make a U-turn
you: continues strait
GPS: Do you want to go to “work” or not? This is the 3rd time this week, that you’ll be in after 9am! I’m merely some plaything to be ignored whenever you feel like! Now take the next left, whinge-boy. Or do you want to get fired from this job, too! Aaaargh!

To extend the metaphor, Keynes’ point wasn’t that the long-term is unimportant—it’s crucial that a ship eventually arrive at the correct port. But in the middle of the storm an expert sailor needs to be able to say something useful about how to weather what’s actually happening. Economics will not be a useful or interesting discipline if all it can say about exchange rates is that eventually things will work themselves out. In the short run, it makes quite a bit of difference what happens to exchange rates: It can make the difference between prosperity and recession. Policymakers and the public should demand that economists have something to say about it. Consider, for example, Iceland which was hit by an economic storm at least as severe as what’s happened to southern Europe back in 2008 but which now has an unemployment rate below 6 percent. The secret to its success has been currency devaluation, which spread the negative shock to Icelandic wealth evenly across society. That hasn’t let Iceland recapture its halcyon days, but it has helped ensure that nearly everyone is employed doing something. In Spain, by contrast, euro membership prevents exchange-rate adjustment and the unemployment rate is 27 percent and rising.

In the long run, domestic prices in Spain will adjust and the storm will pass. But a lot can happen in the meantime.

But the subject of Eavis’s column — something called the qualified residential mortgage, or QRM — was never designed to be “an easy fix to prevent the excesses of the housing market”. Rather, it was designed as a loophole to allow banks to wriggle out from an entirely sensible skin-in-the-game requirement.

I covered this subject in some depth back in June 2011, so go read that post if you want the details; nothing has really changed. (For even more on the subject, read Kevin Wack’s excellent treatment from a couple of months later.) But the basic story is simple: under Dodd-Frank, banks need to hold on to at least 5% of the loans that they make. The QRM is a loophole in that requirement — loans with high down payments are exempt from the law, and banks can sell the entire thing, rather than just 95%.

If low-down-payment loans are as safe as the critics of high down payments say they are, there shouldn’t be a problem. The bank will make the loan, will hold on to 5%, and will profit twice: first by selling the other 95% for a quick-flip gain, and secondly by getting a non-defaulting income stream from the remaining 5% of the loan.

Somehow, however, the loophole has expanded to encompass pretty much the entire mortgage market, so that high down payments are now considered an outright “requirement” for new loans, rather than just being a way for banks to avoid holding on to a tiny bit of the loan that they themselves are making.

Really, this whole debate is concentrating on entirely the wrong thing. The question about high down payment mortgages is a relatively arcane backwater of financial underwriting, and we can leave it to the statisticians and bond investors to decide just how much, if at all, such down payments reduce defaults. Instead, we should be concentrating on the banks here, the institutions which seem to be entirely unwilling to underwrite any mortgage at all, unless and until they’re allowed to flip the entire thing, 100%, to bond investors, for a quick, risk-free profit.

This violates common sense. If the bank is underwriting the loan, the bank should retain at least a tiny amount of the risk in that loan. Indeed, if I were a bond investor, I would as a matter of course require extra yield on any loans which were sold by a bank without any skin in the game at all. After all, there’s not much point in being assiduous about your underwriting if you’re just going to sell the entire loan anyway.

So instead of debating down payments, let’s hold the banks’ feet to the fire, a little bit, instead. “Banks do not like” rules requiring them to hold on to 5% of a loan, says Eavis. Why not? Until we get a good answer to that question, we shouldn’t even be talking about down payment “requirements” which aren’t really requirements at all.

I have learned to be wary of people who say that their opinions are “serious” and other people’s aren’t. “Serious” people are the ones who “knew” that Iraq had an active nuclear program and who “know,” today, that Iran has similar ambitions and cannot be deterred. “Serious” people are the ones who know that we are at “war” with terrorists, and that other metaphorical understandings of our situation aren’t “serious.” Where the rubber meets the road, “serious” means, “expecting violence.” It isn’t the same thing at all as “knowledgable,” but rather the mirror image in ignorance of the platitudinous cotton candy of multiculturalism that Dreher, Sullivan and I alike disdain.

We don’t need more seriousness. Nor do we need more sugary platitudes. We need knowledge.

Samuel Huntington‘s line – “Islam has bloody borders” – struck me as correct at the time it was made. But correct or not, it was an observation of reality, and consequently subject to empirical verification. You can actually count up inter-communal conflicts and see how many involve Muslims. Then the question becomes: why?

If we were to test the proposition, “Islam is inherently more violent than other religions,” we’d need to compare Islamic civilization across time and space to other civilizations (and control properly for other factors). Are Dreher and Sullivan quite sure of what the result of such a comparison would be? Are they quite sure that, say, things like cousin marriage, or a burgeoning population of underemployed males, or the legacy of Cold War-era arms races, or the coincidence of massive oil wealth in the hands of a particularly puritanical sect on the Arabian peninsula, or the intrusion of Zionism, or the demographic decline of Christian Europe (and Russia), or the ructions of modernization meeting a subordination of women that pre-dates Islam, or … well, there’s a long list of theories for why Islam’s borders are bloody now. Are we quite sure that those theories are less-correct than the theory, “they are getting their ideas from a bad book?”

Dreher says that when a Christian “murders,” he acts in direct contravention of divine command. Fine: but what is murder? Is it “murder” to wage war to liberate the Holy Land? Or to obliterate the Cathars? Or to convert the Lithuanians? Or to reconquer Spain? I’m quite sure those who prosecuted those wars in the divine name would have been distinctly puzzled by the suggestion that their actions constituted murder – as opposed to justified killing. And, of course, “murder” is prohibited in every civilized society.