January 18, 2011

Last week, we mentioned no less than three bodies with regulatory power were revisiting the challenge of eprivacy in our Information Age. Chances are, some of their hard working civil servants read business newspapers and may find themselves a bit unloved. I feel their pain.

Take for instance John Kay on the UBS 2010 clothing statement (*). Wittily recycling a satire written "exactly 15 years ago", the Financial Times columnist demolishes the pretensions of rulemakers and dubs their picayune output "a licence for abuse".

In clever hands, economics does belie its reputation as a dismal science. And the "43-page dress code" of a bank better known for cloaking the wealthy in anonymity practically begged John Kay's ready made article. Still humor can hurt if the balance is not redressed.

While I myself have nominated some rules to make fun of, I hold societies cannot live without them. John Kay prefers principles and warns us away from "try[ing] to translate general principles [...] into specific rules". If we are to find an agreement, better start not by looking at rules, not even at the rulemakers, but at those for whom rules are meant, i.e. the human race as a whole.

"According to Professor Morris, writes Martin Wolf (**), social development is driven by "greedy, lazy, frightened people" who "seek their own preferred balance among being comfortable, working as little as possible, and being safe". Nothing can be more dangerous than half the truth.

For Professor Morris, no doubt "Jimmy Wales, who co-founded Wikipedia as a not-for-profit organisation" is a greedy, lazy and fearful fellow, the same as its army of anonymous, unpaid, voluntary contributors. "In their mid-20s, male and typically "geeky", [Tim Bradshaw quotes] Mr Wales [to say]" (***), must they all drool with envy at the thought of the employee stock options backed by "Facebook's $50bn valuation"?

The truth is there is also such a thing as social solidarity and human progress actually runs on a two-stroke engine. At any one time, "there will be many people who will stretch the limits of whatever specific rules are implied" but fortunately most will play fair as long as they are told the rules of the game in advance. Needless to say, people are labile and no such label can be pinned on them on a permanent basis.

With this in mind, it is a mistake to think that laws are primarily made with the wicked in mind. Their goal is to guide the righteous.

Read the Bible. The Ten Commandments handed down to Moses for God's chosen people are its major rules. Jesus later sums them all up in two principles, love of God and neighbor. The contrast is striking, principles tend to be positive but vague, rules specific but negative. Yet neither directions in which to go nor limits not to transgress tell those they intend to guide what to do in practice. They must freely find their own way.

As the wicked scoff at both directions and limits, Justice is designed to deal with them. Human justice however is slow, costly and imperfect.

Think of "Pfc. Bradley Manning", "locked in a tiny cell at the Quantico Marine Corps Base in Virginia". "Asked why the case appears to be moving so slowly, an Army spokeswoman [...] said the defense had requested a delay", reports Scott Shane (****). Physical confinement is not the only pain faced by those accused of wrongdoing. The Renault three, suspected of having sold company secrets to a foreign organization and fired by their employer, will find their minds locked in the tightest of vices for years to come. As one of their lawyers stated, "his client remains ignorant of what he's being charged with", writes David Jolly (*****).

In both cases, the rule broken is clear, "you shall not steal". But when someone's confidential information is repurposed by an employee authorized to access it, the evidence lies in bits and pieces and proof is hard to come by. Visiting punishment on innocent and criminal alike before reaching its judgment, prone to creating pseudo rules in hindsight, Justice, while necessary, is a blunt instrument.

Some rules therefore are not only to guide, but to trigger alarms. Such tripwires can be quite arbitrary. Still isn't it easier for all involved if the evidence is made loud and obvious and Justice fast and perhaps much lighter, the crime prevented by a misdemeanor? Sure Jérôme Kerviel played loose with his bank trading rules but was the Société Générale entirely blameless as it appeared to have neglected its own alarm system?

To avoid silly rules, John Kay advises to "establish structures [...] that frame attitudes and styles of behavior". I do not disagree. Isn't human justice itself a structure? But I prefer Philip Stephens's prescription. "Collisions are inevitable. [...] The shared interest lies in rules, mechanisms and structures to manage differences" (******). He was writing about the relationship between China and the US. Isn't it true of Society at large?

This sets the context for a synthesis. John Kay is right to castigate bad rules. These are rules so prescriptive, they micromanage the righteous while adding nothing to the alarm system. Better make sure the watchers stay awake and do not shut down the alarms lest their sleep be troubled. On the other hand do not assume one can do without rules. It is only the wicked whose interest it is to reject all guidance and insist on self-regulation.

John Kay is also right to push for structures. But, like rules, not all structures are efficient and, in the wrong hands, a civil service turns into a bureaucracy, a court system into the prop of a dictatorship. Censorship, whether on clothes or on speech, is as much a structure as it is a rule. Instead of censorship, safe harbor mechanisms will probably receive John Kay's endorsement, in which case I concur.

For instance, pending a wider principle giving people ownership of their own data, the same right legitimately claimed by Renault and the US Army, I urge rulemakers to forbid the use of irrelevant criteria in targeted advertising (1). Who will dare mark Martin Luther King's day by opposing such a narrow rule, knowing without it car manufacturers would be free to collect the skin color of consumers so targeted and naive enough to respond?

Were such a non controversial rule to survive the pressure of pronaocratic interests, one would of course face the proverbial devil in the details. John Kay would sharpen his pen anew as the idea of Brussels bureaucrats toiling away on the code of all possible relevant criteria, or even the index of all illegal criteria, for all possible advertising situations. Soon someone would find it easier to submit all targeted advertising to prior censorship.

The solution is not to strike down the rule but to turn around the structure of censorship into a safe harbor, the censor into a mentor. Just like mentors ought to tell insecure UBS junior bankers how long to go on hair length and how short on hemlines, a positive nod by a targeted advertising board would protect the prudent advertiser while adventurous ones would be free to bypass the process altogether, taking their legal responsibilities.

Mechanisms can be of great help too. So good civil servants lack neither tools nor moral support. But do they read my fillips?

Philippe Coueignoux

• (*) ........... A smart business is dressed in principles not rules, by John Kay (Financial Times) - January 12, 2011
• (**) ......... East and West converge on a problem, by Martin Wolf (Financial Times) - January 12, 2011
• (***) ....... Wikipedia plans diverse approach to improve global access, by Tim Bradshaw (Financial Times) - January 14, 2011
• (****) ..... Wikileaks Founder on Estate; Accused Soldier Waits in Brig, by Scott Shane (New York Times) - January 14, 2011
• (*****) ... Renault Files Criminal Complaint of Industrial Espionage, by David Jolly (New York Times) - January 14, 2010
• (******) . The perils of mutual miscalculation, by Philip Stephens (Financial Times) - January 14, 2010
• (1) see my submission to the European Commission Justice Directorate, in cooperation with Marc Leprat, as European citizens