[arin-ppml] CGN multiplier was: RE: Input on an article by Geoff Huston (potentially/myopically off-topic addendum)

Tom Vest tvest at eyeconomics.com
Wed Sep 14 14:11:53 EDT 2011

On Sep 14, 2011, at 11:53 AM, Chris Engel wrote:

> Ultimately organizations are going to do what feels works best for them, both in the short term and in the long term. Some, perhaps many, organizations may be mistaken about what really is in their best interest...but isn't that their right as free entities? What makes the internet great is it's diversity. 


Hi Chris, 

Actually I agree entirely -- and that's precisely why I have been tossing this same argument up for 4-5 years now. Diversity is a great but ultimately fragile thing in systems -- like the Internet as well as monetary/banking sector -- that are absolutely critical to the everyday affairs of lots of non-industry members, but which as an intrinsic/unavoidable feature of their design invest individual system participants with significant power to affect other system members, directly or transitively, whether they like it or not. In systems like this, the self-evident virtues of diversity start to peter out in practice as more and more system members individually elect to exercise their unlimited freedom of private action in ways that impose unwelcome affects (aka negative externalities) on other system participants. 

There is no possible doubt that most/all senior decision makers in the financial sector understood all of this -- it's a pretty conventional view of how monetary & banking systems work/fail to work -- and also not much doubt that many of them recognized that the mix of "exotic" business practices that had become ever more prevalent during the last decade was ultimately unsustainable. However we can be even more certain that they were all very aware of the private benefits that could be realized by moving business out of activities that were subject to statutory reporting requirements, and into spheres where only they and their counter-parties knew anything. What is harder to understand is why they continued to believe that even the counter-parties themselves could be assumed to know anything useful when they were unavoidably aware of the fact that at least one counter-party (themselves) had been actively engaged in strategic obfuscation for some indeterminate period. Perhaps many made no assumptions at all, but simply believed that it would always be safe, for them at least -- or too competitively risky for them not to push the envelope (aka tax test system's systemic vulnerabilities) just a little further. But one day it actually wasn't safe enough -- and now almost every other stakeholder in the world economy has been stuck with paying down the very steep price for those miscalculations for several years, and no clear sign of relief in the immediate future.

In a sane world, one of the first consequences of such an epic failure would be the involuntary, external imposition of consequences, including new industry rules that severely restrict industry diversity by limiting industry participant-level freedom or private action. That's what has invariably happened in the past, and it may yet happen again this time. It's also possible that we no longer live in a sane world. Either way, the Internet is ruled by the same sort of systemic dynamics, and driven by the same sort of competitive pressures that led to the current global financial unpleasantness. The only major differences are that, at present (1) the Internet is not uniformly vertically partitioned along national lines the way that banking systems now are, and (2) within that currently de-facto global operating theater most network operators enjoy a degree of externally acknowledged and sanctioned "freedom to diversify" that banks absolutely lost (probably forevermore) over a century ago. 

Many banks and financial industry operators used to enjoy that same freedom. Now none do (at least not without the risk of force closure and serious jail time). Do present-day centralized national banking systems actually work better then the old quasi "free banking" arrangements that they displaced, e.g., in the US, Scotland, Northern Europe, and several other countries? Could some kind of updated version of "free banking" provide for a better, more dynamic economic environment at some point in the future? It doesn't matter, because these are all moot questions now. Short of a world revolution, we'll never know, because they'll never get a chance to give it another try.

The value of unbounded industry diversity and commercial freedom of private action is appx. 0.00 if it means that little or no industry or commerce is possible as a result. But industries that are as central and critical to the economy as banking -- and now the Internet -- rarely if ever get a chance to test this proposition fully. At some point every exercise of freedom to diversify starts to trigger an equivalent or stronger countervailing pressure to homogenize. 

Eventually some balance point will be selected and maintained, regardless of the added difficulties posed by the looming inflection point in IP addressing. Either this will happen under the stewardship of an extra-territorial, technically and operationally informed multi-stakeholder "community," or not. Either way the jurisdictional contours of the party or parties that establishes that new balance will also come to define the max. scope for unmediated Internet traffic exchange for all time thereafter.  

Where would you draw the line?



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