Privacy versus government surveillance: where network effects meet public choice

The Snowden revelations teach us that many of the world's governments share
intelligence behind the scenes. Thirty years ago, a non-aligned country like India could happily buy its military aircraft from Russia; nowadays, although it still buys some planes from Sukhoi, it shares intelligence with the NSA. A rational actor will join the biggest network, and the Russians' network is much smaller. This points us to a deeper truth: that information economics applies to the public sector, just as it applies to private business. The forces that lead to pervasive monopolies in the information industries – network effects, technical lock-in and low marginal costs – are pervasive in the affairs of states too, once we look for them; they are just not yet recognised as such. There are many significant implications, from international relations through energy policy to privacy. Network effects make regulation hard; the USA failed to protect US attorney-client communications from Australian intelligence, just as Australia failed to protect its own citizens' personal health information from the NSA. There are some upsides too; but to identify and exploit them, we need to start thinking in a more grown-up way about what it means to live in a networked world. So, for that matter, must the international relations community.