I believe a case can be made that trade secrets [intellectual property]
which allegedly foster competitive enterprise are conceptually different
from "national security" secrets.  The indirect costs for the former are
more benign [loss of competitive advantage] and incompatible with the notion
of dynamic adjustment.  The indirect cost for the latter appear to me
irrevocable from a geo-political equilibrium viewpoint.

-----Original Message-----
From: Daljit Dhadwal [mailto:[EMAIL PROTECTED]]
Sent: Thursday, July 06, 2000 4:08 PM
Subject: Efficient secrets

When firms decide not to patent a product, how do they decide which level
of secrecy is appropriate in protecting their invention? Would any of the
analysis be applicable to government secrets? (see the article below)


Forwarded message:
> The Wall Street Journal
> July 5, 2000
> Case of Hard Drives Shows Weakness Of U.S. Systems for Protecting Secrets
> WASHINGTON -- Was the problem of the lost-and-found hard drives at
> Los Alamos the result of not enough secrecy -- or too much?
> A failed effort to reform the Department of Energy's secrecy policy
> suggests the latter.
> President Clinton's first energy secretary, Hazel O'Leary, tried to boost
> controls on the most sensitive information -- such as the nuclear-design
> plans contained on the hard drives -- while beating back the number of
> overall secrets. Her argument was simple: If everything is deemed a
> secret, officials will be less likely to protect the really important
> ones. 
> After three years of bickering, the Pentagon balked at the proposal last
> year, saying it would require costly new storage facilities and more
> people with top-secret clearance. Efforts to whittle away at the millions
> of documents deemed secret have failed, beaten down by bureaucratic
> inertia and politicized disasters such as the Wen Ho Lee spy case at the
> Los Alamos, N.M., nuclear-weapons laboratory. 
> Mass-Produced Secrets
> Ms. O'Leary's plan was just one of many put forward by a bipartisan cast
> in recent years to revamp how the U.S. manages its towering mound of
> classified information. Except for a few presidential orders, all have
> failed. Meanwhile, the federal government continues to churn out new
> secrets at a mind-boggling clip. In 1998, 7.2 million bits of information
> -- ranging from cables on the minutiae of diplomatic life to Osama bin
> Laden's search for chemical weapons -- were stamped secret. 
> "We have a broken system that is manufacturing way too many secrets," says
> Mark Bradley, a staff member for New York Democratic Sen. Daniel Patrick
> Moynihan, who has led the antisecrecy crusade for years. 
> The case of the two Los Alamos hard drives, lost and then mysteriously
> found last month, shows how scarred the system now is with partial efforts
> at reform. 
> Classified as "secret," the hard drives contained reams of information on
> U.S. and other countries' nuclear-weapons designs. This included data on
> how to defeat safety devices intended to stop a terrorist from exploding a
> stolen weapon. Yet dozens of people could remove the hard drives from a
> high-security vault without leaving any record, thanks to cost-saving
> measures begun under President Bush. 
> Those changes were put in place under pressure from U.S. contractors, who
> complained that strict tracking of all secrets was becoming increasingly
> burdensome and expensive. Instead of reducing the number of secrets to be
> tracked, the half-reform cut back on security measures. 
> Ms. O'Leary sought to strengthen the system. Her idea was to increase
> controls around a core of highly sensitive nuclear information even while
> declassifying lesser secrets. Experts say the plan, known as the Higher
> Fences Initiative, would almost certainly have tightened controls on the
> hard drives by boosting their classification to "top secret." 
> But the Department of Defense -- which shares responsibility for nuclear
> weapons with the Energy Department -- opposed the plan. The Pentagon
> called the procedure overly bureaucratic and expensive, and a hindrance to
> discourse between scientists and foreign governments. 
> Republican Criticisms
> Many Republicans continue to blame Ms. O'Leary for giving away too much
> information when she declassified documents going back to the 1950s.
> Others say the most recent Los Alamos debacle has vindicated her
> arguments. "What we have now are often-stupid secrets piling up all over
> the place and leaking out the sides," says Steven Aftergood, director of
> the Project on Government Secrecy at the Federation of American
> Scientists. "Either we limit the flow of new secrets and concentrate on
> what matters, or we have problems," he says. 
> The end of the Cold War promised a new age of openness. Even the Central
> Intelligence Agency, in 1992, said it was ready to share more information
> with reporters, historians and the interested public. In 1994, President
> Clinton ordered bulk release of World War II-era records and Cold War
> satellite imagery. He followed up the next year with an executive order
> mandating the massive declassification of documents 25 years or older. 
> Even Capitol Hill hawks such as Republican Sen. Jesse Helms of North
> Carolina became believers. "When everything is secret, nothing is secret,"
> Mr. Helms argued in 1997, championing a bill sponsored by Mr. Moynihan
> that was meant to revise how the U.S. creates and protects its classified
> information. 
> But despite significant progress on declassifying millions of old files,
> neither Congress nor the White House has done much to curtail the creation
> of new secrets, now running at about 20,000 a day. Newspaper stories often
> turn up classified. The CIA has stamped its total budget figure "secret,"
> and protected that right in court. The agency refuses to release an
> 88-year-old recipe for invisible ink and directs its "declassifiers" to
> black out any mention of its overseas missions, including stunningly
> obvious ones in Moscow and Beijing. 
> Automatic Expiration Date
> The Moynihan bill proposed stricter criteria for deeming information
> secret with an automatic 10-year expiration date, unless the president
> ordered otherwise. It also sought to open the classification system to
> greater public oversight. The bill bounced around the Senate for two years
> until it died last autumn, labeled by both the Pentagon and the CIA as a
> threat to national security. By then, the political atmosphere was already
> thick with allegations of shoddy security and nuclear espionage at the
> nation's weapons labs. 
> There have been some small but important steps forward. Most newly
> classified documents now have built-in expiration dates, often less than
> 10 years. And the number of officials with the power to create secrets has
> been whittled to 3,900 from 5,661 in 1993. 
> But protecting secrets remains complex and hugely expensive. The secrecy
> apparatus -- everything from background checks to security vaults -- costs
> taxpayers well over $5 billion a year, by the government's own account.
> Private companies doing government work often see costs jump by a third
> when a project is designated secret. 
> After sifting through millions of declassified documents, Thomas Blanton,
> who heads the National Security Archives at George Washington University,
> says that protecting the nation is rarely the motivation for stamping
> documents secret. The real reason, he claims, is for policy makers to
> "avoid the embarrassment" of having their deliberations and mistakes made
> public. 
> Write to Neil King Jr. at [EMAIL PROTECTED]

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