From: tcmay@netcom.com (Timothy C. May)
Date: Fri, 12 Aug 94 10:40:34 PDT
To: matsb@sos.sll.se (Mats Bergstrom)
Subject: Why Cash is So Important (was: National Health Care)
In-Reply-To: <Pine.3.85.9408121418.A24347-0100000@cor.sos.sll.se>
Message-ID: <199408121740.KAA01304@netcom5.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain


Mats Bergstrom writes:
> 
> Duncan Frissell wrote:
> 
> > There's no way you can have a government-directed, third-party-paid, health
> > care "system" without throwing privacy out the window. Bureaucracies *keep*
> > records, they don't destroy them.
> 
> Yes, this is a lesson history tells us. But maybe, theoretically, strong
> crypto could make a change. Nested information with keys known only to
> parties with legitimate interest in a specific info layer and the master
> key only known to the patient and programs for self destruction (including
> backups) of data no longer needed. I repeat, theoretically that is.

The simplest solution is *cash*. It's worth taking a minute to see why
cash is so important in this context, and why accounting-based systems
that compile records are inherently insecure.

The beauty of a cash transaction, throughout history, is *immediate
settelement*. Parties have to examine a deal, look for flaws, and then
make a judgement about whether to complete the deal. Once completed,
it's hard to change one's mind, go back on the deal, complain, etc.
This enforces a kind of due diligence. Cash on the barrelhead, as they
say.

Non-cash systems are of course sometimes desirable: credit cards,
insurance schemes, contractual relationships, leases, etc. All kinds
of variants.

However, these contractual relationships involved *time extent*, that
is, they are not settled immediately, on the spot. This has many
potentially negative effects:

- confusion of time...people evolve different expectations of a
contract, causing disputes

- people often fail to do the due diligence of a cash transaction (for
example, the very same people who are good at haggling at a flea
market, and understand "caveat emptor" implicitly, will bitch and
moan and complain about contracts...seeking more, changes,
adjustments, etc.--an interesting contrast).

- temporal extent implies record-keeping, such as insurance records,
hospital visits, etc. This is automatically a potential privacy
concern.

(And when the contract is more than just patient-doctor, but involves
other payers, the records-keeping mushrooms. When the government is
the ultimate payer, through mandatory plans, they'll have the records.
No amount of crypto can possibly change that.)

- efficiency. Parties in cash transactions get what they paid for,
else they wouldn't have made the transaction.

- fraud. While cash transactions can have fraud (con jobs, fake
merchandise, etc.), the opportunities for fraud increase dramatically
with non-cash systems. When others are paying, such as for health
care, the temptation to participate in frauds is higher. 

(When a patient pays cash, no problem. When a central service is used,
opportunities for fraud increase. Doctors with ghost patients,
kickbacks, etc. Any central-payment system must then have records and
investigations at that central point. Hence, a central bureaucracy.
Hence, a loss of privacy at that level.)

And so on. My point is mostly that cash has certain elegant properties
which are lost when replaced with a central accounting scheme.
"Locality of reference" is the computer-related equivalent.

Why should this matter to Cypherpunks, if you've read this far? (By
the way, yes, Hal, I *did* read to your "Has anyone read this far?"
question a few days ago.)

Systems which preserve this cash/locality of reference feature, such
as digital cash, digital postage, and the "Digital Silk Road" proposal
of Hardy and Tribble, have likely advantages over centralized,
record-oriented systems.

You all know that digital cash is important. This is why the National
Health Care Plan is a bad idea, will destroy privacy, and basically
can't be fixed by band-aids that allegedly protect patient records.

--Tim May


-- 
..........................................................................
Timothy C. May         | Crypto Anarchy: encryption, digital money,  
tcmay@netcom.com       | anonymous networks, digital pseudonyms, zero
408-688-5409           | knowledge, reputations, information markets, 
W.A.S.T.E.: Aptos, CA  | black markets, collapse of governments.
Higher Power: 2^859433 | Public Key: PGP and MailSafe available.
"National borders are just speed bumps on the information superhighway."