Ed Dolan's Econ Blog

The Fourth Amendment and the Economic Spillover from NSA Surveillance to E-Commerce

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

All of us have read these words of the fourth amendment to the U.S. Constitution. Why were they written? Why don’t they include a national security exception—“except insofar as such searches be necessary to protect the security of the United States”? Is the fourth amendment a quaint anachronism that we can safely ignore today, or does doing so cause problems that would make the writers of the Bill of Rights weep, were they able to see what is now happening?

Both moral and commercial considerations lie behind the fourth amendment

Although the Bill of Rights, of which the fourth amendment is a part, was not originally a part of the constitution, the idea was proposed at the constitutional convention, and its ten amendments were added almost immediately after the constitution was ratified. Undoubtedly, the main reason for its quick adoption was that the founders of the American republic saw it as a moral imperative. They were, after all, raised on the writings of radicals like John Locke and Algernon Sydney, who taught that people really did have rights that stood higher than the prerogatives of government. Many people today still think so.

We should also keep in mind that the founders had personal experience of living under an oppressive government. In colonial times, British agents, operating under so-called general warrants, could snoop anywhere they wanted and grab whatever they found, whether it was a stash of contraband tea or stack of seditious literature. When the colonists protested, the British resorted to force and ultimately to a war in which thousands were killed. Given that traumatic experience, the drafters of the Constitution must have been courageous indeed to produce a document that limited the powers of government, rather than giving it unlimited power, out of fear that the redcoats might return, or that another enemy might threaten future generations.

But in addition to political theory and personal experience, commercial considerations also appear to have played a role in framing the fourth amendment. Many of the founders, such as Bill of Rights backers John Adams and Elbridge Gerry, were active in commerce or came from commercial families. In 1761, a group of 50 Boston merchants petitioned a court for relief from abusive general warrants and writs of assistance. A young John Adams, who listened in on the proceedings, is said to have regarded this as “the spark which originated the American Revolution.”

Fourth amendment rights today: The case of e-commerce

Violation of an inherent right is wrong in itself, whether or not the victim can prove actual damages. Still, as the founders knew, exposure to unreasonable searches and seizures can do real economic harm. That remains true today, as we can see from the case of e-commerce.

The web has been abuzz with commentary on the effects of NSA surveillance on e-commerce. Consider, for example, an interesting exchange that began last week when Lynne Kiesling of Northwestern University posted a brief item on her blog, The Knowledge Problem. She began by noting that NSA surveillance is “much in the nature of the ‘general warrants’ that were the whole reason the authors of the Bill of Rights put the Fourth Amendment in there in the first place,” and then added:

Make no mistake: this deep and broad US government surveillance diminishes trust not just in the federal government (as if there is any general trust in the federal government any more), but also in Internet companies — communications companies, ISPs, Apple, Google, Yahoo, Amazon, and so on. The economic implications of the deep and broad US government surveillance are profound. How much economic activity on the Internet will leave those companies? Will government surveillance be able to access substitutes for these companies in other countries, if substitutes come into being? Isn’t this going to cause the commercial Internet to shrink?

The federal government may not have intended to stifle the role of the Internet as an economic value-creating commercial platform, but that consequence is almost certain.

Kiesling’s contribution was reposted to Reddit, where a reader going by the screen name of Mkawick submitted this comment (slightly abbreviated here, with some acronyms spelled out in full):

Working for a small company who does business by selling small games, we have recently added a new networking component to allow people to chat while in game, make purchases online, etc. We use highly sanitized data so that even if someone captures our entire database, putting it back together is nigh impossible. So recently we talked about moving our server to Amazon because of bandwidth and latency.

But now with revelations of NSA, Amazon is no longer a viable option. We instead decided to host everything internally, behind pix, expand our infrastructure, and avoid the compromises that are sure to come as a result of the NSA backdoors that are ubiquitous. Every two days there is a new reveal from the NSA that they are invading users’ privacy even more or that they have some new back door previously unknown.

Is my company an outlier… probably. However, I know other startups that are also gnashing their teeth similarly and opting to not use Amazon or Google because of that. Add to that Apple’s vulnerability revealed last week (the developer site was compromised and possibly all developer info was stolen) and going to the Cloud is not even a good idea anymore.

. . .

Add to this the fact that most growth in the economy starts with small companies (depending on how you do the numbers), and if a lot more small companies are opting to take the more “secure” route and avoid Amazon because of the NSA, then this means that the NSA is in effect creating a new market. Already, new secure email systems are popping up (, secure chat (, and docs and on and on. These NSA revelations are having a profound impact, and the older companies like Google (15 years old) and Yahoo (only 18 years old now) are going to struggle being shackled to US Government bureaucracy and the NSA. In other words, the long slide away from being able to do business has already started for these well-established companies. Even Microsoft (especially them) admitted putting backdoors into Windows, and last week, I began REALLY using linux … which I have only been tinkering with for 15 years now.

In the same vein, John Naughton, writes in The Guardian  that

The days of the internet as a truly global network are numbered. It was always a possibility that the system would eventually be Balkanized, i.e. divided into a number of geographical or jurisdiction-determined subnets as societies such as China, Russia, Iran and other Islamic states decided that they needed to control how their citizens communicated. Now, Balkanization is a certainty.

Commenting on the Naughton article, James Fallows of The Atlantic adds that

Because of what the U.S. government assumed it could do with information it had the technological ability to intercept, American companies and American interests are sure to suffer in their efforts to shape and benefit from the Internet’s continued growth.

  • American companies, because no foreigners will believe these firms can guarantee security from U.S. government surveillance
  • American interests, because the United States has gravely compromised its plausibility as world-wide administrator of the Internet’s standards and advocate for its open, above-politics goals.

. . .

The real threat from terrorism has never been the damage it does directly, even through attacks as horrific as those on 9/11. The more serious threat comes from the over-reaction, the collective insanity or the simple loss of perspective, that an attack evokes. Our government’s ambition to do everything possible to keep us “safe” has put us at jeopardy in other ways.

The bottom line

The bottom line is that the founders of our republic not only stood on solider moral ground than our present leaders, but they were also savvier about the practical reasons for insisting on observance of fundamental rights to life, liberty, and property. They did not insert a national security exception in the fourth amendment, or elsewhere in the Bill of Rights, not just because to do so would have been cowardly, but also because it would have been stupid to give the government that much rope.

Our current spymasters are not that smart. They have tunnel vision: Get the bad guys at any cost, regardless of the constitution and regardless of the collateral damage. We saw that mentality in action a couple of years ago when the CIA sent an agent with cover as a polio vaccination worker to gather DNA samples at Bin Laden’s compound in Pakistan. When revealed, the ruse stoked Pakistani paranoia about vaccinations, already at a troubling level, to a fever pitch.

They didn’t have to do it. It is highly unlikely that the choice of a different cover for the agent would have tipped the scales enough to let Bin Laden go free. What is certain, though, is that thousands of Pakistani kids will go unvaccinated, some of whom will die of polio or live a life of disability. Either our security folks didn’t think about those consequences, or more likely, they just didn’t care. Saving kids from polio is not their mandate, nor, they seem to think, is protecting the integrity of e-commerce.

Some reader will object, of course, that Congress has authorized everything that NSA is doing. To the shame of our Congress, there is some truth in that. The real question, though, is whether the law under which NSA claims to act complies with the fourth amendment.

Our president, the one-time constitutional law professor, seems to think it does. He apparently believes that the fig leaf of the secret FISA court, hand-picked for deference to the security establishment, is enough to bring PRISM, XKeyscore, and other snooping yet to be revealed into compliance with the requirement that warrants be “supported by oath or affirmation, and particularly describe the place to be searched, and the persons or things to be seized.” To my man-on-the-street reading of the Constitution, it sure doesn’t look like it.

3 Responses to “The Fourth Amendment and the Economic Spillover from NSA Surveillance to E-Commerce”

RikAugust 5th, 2013 at 4:45 am

It went wrong when the 'system' went from the 'likely bad guys' and 'not visible for the general population' to 'visible for and covering everybody'. Visible in the way that with several million people having access to Wikileaks secrets simply means you can wait for a situation like we have now (it starts to leak like a 95 year old).
Now it is simply on colision course. See which one will win. New equilibrium will have to develop, present thing simply looks unsustainable politically and socially.

RikAugust 5th, 2013 at 4:46 am

US companies simply as mentioned have become a security risk for everybody else. Especially the huge number of US companies involved in the set up means that it is easy to see how tradesecrets can end up with the US competition.
It also gives as mentioned other governments an excuse for setting up their own thing, be it for national security, privacy (those will be the ones mentioned) or merely market protection.
US companies involved will likely be getting a truckload of litigition because of this. Both civil (they broke contracts), criminal (it might have been allowed in the US, but it is not in most other jurisdictions) and regulatory (again in other jurisdictions).
The latter is imho the way to tackle this, bleed them dry so it will become from a thing to please the US regulator into a huge problem with their revenue providing customers.
And when your international customers take a walk elsewhere your competitive advantage is gone likely also on the home market.

simple mindAugust 5th, 2013 at 11:06 am

When I took a Business Ethics course 10 years ago, it was made plain to me that businesses and government will engage in shady and or intrusive activities if they have the means to do so and no law or enforcement agency stands in their way. If adventurers climb mountains "because they are there", then business and government will adopt unfair practices and snoop because they can, pure and simple. I would hope our national Government would apply curbs pronto, but there's no hope of that. The sheer power is too intoxicating, it's not even a question of ends justifying means.