From: Duncan Frissell <frissell@panix.com>
Date: Wed, 12 Jan 94 10:12:09 PST
To: CYPHERPUNKS@toad.com
Subject: Public key encryption, in
Message-ID: <199401121808.AA18598@panix.com>
MIME-Version: 1.0
Content-Type: text/plain




R >As I see it, cryptography may extend similar conditions to 
R >information workers - programmers, architects, authors.  Naturally,
R >since a disproportionate number of those on the net fall into these 
R >categories, this seems like a revolutionary development.  But from the
R >larger perspective, it is not a major change.
R >
R >The fact is, information purchases are a small part of most people's
R >budgets.  If you add up all of what the average person purchases that
R >would fall into the general category of "information" - books,
R >magazines, newspapers, music, video - you probably won't exceed a few
R >percent of income.  Information, despite the hype, is not a dominant
R >part of our economy.

You left out a few information purchases: education, much of medicine, 
all of financial services, design, marketing, supervision, and management. 
 Note the current tendany to "unbundle" tasks and outsource them to 
other businesses will tend to encourage the development of "information 
only" companies.   

Once the interface is good enough, virtual offices with full workgroup 
interaction built of pure information will spring up and the "information" 
component of much of what we think of as physical work will become 
apparent.

I expect information purchases (broadly defined) to reach 90% of our GDP 
in a few years.  Agriculture once represented 90% of GWP (Gross World 
Product).  It is now down to the 5% range in the OECD countries.  Yet we 
eat better than our ancestors.  Goods industries (and real estate sales) 
can show a similar relative decline.  We will have more "stuff" than ever, 
it will just be a smaller part of the total economy.

What will cause this growth?  Humans are *thinking* machines.  We exist 
inside our minds.  We already exist as 100% information.  What we are 
doing is to map the rest of the world to bring it into congruance with 
what we already are.  We don't feel as many constraints in our mind as we 
do in our bodies.  We are deploying our minds to reduce the physical 
restraints under which we've labored.  (Just a guess...)

In any case, since the restraints are fewer in the non-physical universe 
than in the physical universe, costs are lower and much of the growth of 
the economy will be in the non-physical realm.  Certainly the non-physical 
parts of the economy have grown more than the physical ones in the OECD 
countries in recent years.  If there is also a *regulatory* difference 
between the physical and the non-physical worlds, then this switch to the 
non-physical will be exaserbated.

R >Particularly at the corporate level, the notion that cryptography 
R >will allow widespread tax cheating seems especially questionable. 

Did you see HP on 60 Minutes with Indian contract programmers hired 
cheaply in probable violatiion of US immigration law.  Companies are 
already setting up programming shops in India.  Once they are set up "in 
cyberspace" they will be harder to control.

R >I don't fully understand Duncan's arguments for how taxes can be
R >avoided through being a non-citizen.  I gather, though, that this would
R >require me to either move to another country, or to go to work for a
R >company that is in another country.  Neither seems likely in the next
R >few years for the majority of citizens.  

95% of the world's population are not US Citizens/Permanent Residents.  
You may not be willing to live in another country but they already are.  
Since other countries don't tax their expats (as the US does) it is easier 
for non-US expats to eliminate their tax liability.  In the past you had 
to be in the US to work here but foreigners will soon be able to work for 
US-based companies as easily as anyone else.  Because of tax savings, they 
will be able to underbid US workers.  Also companies (or more likely 
contract services firms) will be able to themselves locate in friendlier 
jurisdictions and still supply workers (from anywhere on earth to anywhere 
on earth) to companies that may be in the US or somewhere else.  Remember, 
under current law it is legal for a US company to hire workers overseas 
and US taxes are not owed.  There are technical questions of withholding 
from payments to entities located in non-tax-treaty jurisdictions but 
these problems can be planned around.  Offshore subsidiaries will also be 
very cheap to form.

If you wander down the shopping street of a future MUD/MOO and you buy or 
sell things, what nation has jurisdiction for tax purposes.  What if the 
MUD/MOO exists as a set of cooperative processes spread around the globe. 
 There is commerce there but who rules.  The proprietors not any 
government.  Look at the situation in this country vis a vis state income 
and sales taxes.  There is tremendous fiddling going on now in a country 
with the soverign jurisdiction of the federal government and concepts like 
"full faith and credit."  Imagine how much fiddling there will be when 
disperate soverignties are involved with no overall international 
authority.

Tax compliance is down anyway, it will further decline as more people are 
self-employed or "reside" in ambiguous jurisdictions.

DCF

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