The economics of spam

Junk emails cost $20bn a year. Not just an irritation.

Here's a fascinating new paper (pdf) from the Journal of Economic Perspectives on the economics of spam, by Justin Rao and David Reiley:

The negative externalities imposed by spam include wasted time for consumers: both wading through irrelevant advertisements in one’s inbox and missing an important message that went to the junk mail folder. They also include the costs important message that went to the junk mail folder. They also include the costs of server hardware, which requires more than five times as much capacity as would be required in the absence of spam, as well as the costs of spam prevention services provided by firms to reduce the burden on users. . .

Taken together, the total costs of spam worldwide today appear to be approximately $20 billion, in round numbers.

The authors review literature on the revenue of spammers, and find that it's likely to be around $300m a year. In other words, spam destroys around $19.7bn dollars of value every year. The authors compare this to car theft, which imposes societal costs of around $10bn and brings revenues to the thieves of around $1bn; and to driving a car, which imposes societal costs of around five cents a mile and brings in average revenue of around 60 cents a mile.

Clearly all these numbers are extremely rough estimates, but if they are even in the same ballpark as the truth then it is clear that spam ought to be a public policy priority to a far greater extent than it actually is. Imagine if the number of car thefts doubled overnight; would people really question whether that calls for governmental involvement?

The problem the authors identify is one of negative externalities, similar to the issues raised by carbon emissions. So one would expect the solution to be analogous to the solution economists often call for to deal with externalities, which is a Pigovian tax - charging someone who harms society an amount equivalent to the damage they do. Unfortunately, as the authors show, such a measure is pretty much impossible when it comes to email spam. The spammers would obviously not co-operate, and every alternative involves trying to graft on some form of payment mechanism to email, which is a protocol incredibly unsuited technologically to any such addition.

Instead, the best thing to do is probably to hit the spammers where it hurts: their revenues.

One fruitful avenue is to put legal pressure on domestic banks that process payments from foreign banks known to act on behalf of spam merchants. This could put downward pressure on conversion rates and with them, proifts. Another proposal comes from our colleague Randall Lewis, who imagines “spamming the spammers” by identifying spam emails and placing fake orders on spam-advertised stores. This step would increase the merchants’ costs dramatically, as they would find it much more difficult to fullfil orders, and their banks may raise their fees if they submit many invalid payment authorization requests. Of course, an unintended consequence is that from time to time, a legitimate merchant will be inundated with bogus product orders.

Commenting on the paper, Digitopoly's Joshua Gans points out that, under US law, that may not be entirely legal:

A few years back I contacted Yahoo and Google with an idea to counter spammers. What if for each spam email that they picked up, they responded — perhaps entering details into phishing forms? This would overwhelm spammers and they would not be able to find ‘legitimate’ responses from the gullible few. That would really alter their returns. Unfortunately, it was explained to me that such a measure would constitute an attack by a US corporation and, apparently, that is against US law.

Spam may be here to stay, then. The real solutions are technological, and don't involve fixing email so much as abandoning it altogether; the time for being able to accept free, unsolicited email from anyone seems to be coming to an end. Those who are trying to build its replacement will be happy indeed to hear that.

The full paper is a surprisingly good read; if you're looking for something to flick through on an e-reader over the weekend, why not give it a go?

Spam, spam, spam, spam, spam, spam, spam, spam, lovely spam, wonderful spam. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Former Irish premier John Bruton on Brexit: "Britain should pay for our border checks"

The former Taoiseach says Brexit has been interpreted as "a profoundly unfriendly act"

At Kapıkule, on the Turkish border with Bulgaria, the queue of lorries awaiting clearance to enter European Union territory can extend as long as 17km. Despite Turkey’s customs union for goods with the bloc, hauliers can spend up to 30 hours clearing a series of demanding administrative hoops. This is the nightmare keeping former Irish premier John Bruton up at night. Only this time, it's the post-Brexit border between Northern Ireland and the Republic, and it's much, much worse.   

Bruton (pictured below), Taoiseach between 1994 and 1997, is an ardent pro-European and was historically so sympathetic to Britain that, while in office, he was pilloried as "John Unionist" by his rivals. But he believes, should she continue her push for a hard Brexit, that Theresa May's promise for a “seamless, frictionless border” is unattainable. 

"A good example of the sort of thing that might arise is what’s happening on the Turkish-Bulgarian border," the former leader of Ireland's centre-right Fine Gael party told me. “The situation would be more severe in Ireland, because the UK proposes to leave the customs union as well."

The outlook for Ireland looks grim – and a world away from the dynamism of the Celtic Tiger days Bruton’s coalition government helped usher in. “There will be all sorts of problems," he said. "Separate permits for truck drivers operating across two jurisdictions, people having to pay for the right to use foreign roads, and a whole range of other issues.” 

Last week, an anti-Brexit protest on the border in Killeen, County Louth, saw mock customs checks bring traffic to a near standstill. But, so far, the discussion around what the future looks like for the 260 border crossings has focused predominantly on its potential effects on Ulster’s fragile peace. Last week Bruton’s successor as Taoiseach, Bertie Ahern, warned “any sort of physical border” would be “bad for the peace process”. 

Bruton does not disagree, and is concerned by what the UK’s withdrawal from the European Convention on Human Rights might mean for the Good Friday Agreement. But he believes the preoccupation with the legacy of violence has distracted British policymakers from the potentially devastating economic impact of Brexit. “I don’t believe that any serious thought was given to the wider impact on the economy of the two islands as a whole," he said. 

The collapse in the pound has already hit Irish exporters, for whom British sales are worth £15bn. Businesses that work across the border could yet face the crippling expense of duplicating their operations after the UK leaves the customs union and single market. This, he says, will “radically disturb” Ireland’s agriculture and food-processing industries – 55 per cent of whose products are sold to the UK. A transitional deal will "anaesthetise" people to the real impact, he says, but when it comes, it will be a more seismic change than many in London are expecting. He even believes it would be “logical” for the UK to cover the Irish government’s costs as it builds new infrastructure and employs new customs officials to deal with the new reality.

Despite his past support for Britain, the government's push for a hard Brexit has clearly tested Bruton's patience. “We’re attempting to unravel more than 40 years of joint work, joint rule-making, to create the largest multinational market in the world," he said. It is not just Bruton who is frustrated. The British decision to "tear that up", he said, "is regarded, particularly by people in Ireland, as a profoundly unfriendly act towards neighbours".

Nor does he think Leave campaigners, among them the former Northern Ireland secretary Theresa Villiers, gave due attention to the issue during the campaign. “The assurances that were given were of the nature of: ‘Well, it’ll be alright on the night!’," he said. "As if the Brexit advocates were in a position to give any assurances on that point.” 

Indeed, some of the more blimpish elements of the British right believe Ireland, wedded to its low corporate tax rates and east-west trade, would sooner follow its neighbour out of the EU than endure the disruption. Recent polling shows they are likely mistaken: some 80 per cent of Irish voters say they would vote to remain in an EU referendum.

Irexit remains a fringe cause and Bruton believes, post-Brexit, Dublin will have no choice but to align itself more closely with the EU27. “The UK is walking away,” he said. “This shift has been imposed upon us by our neighbour. Ireland will have to do the best it can: any EU without Britain is a more difficult EU for Ireland.” 

May, he says, has exacerbated those difficulties. Her appointment of her ally James Brokenshire as secretary of state for Northern Ireland was interpreted as a sign she understood the role’s strategic importance. But Bruton doubts Ireland has figured much in her biggest decisions on Brexit: “I don’t think serious thought was given to this before her conference speech, which insisted on immigration controls and on no jurisdiction for the European Court of Justice. Those two decisions essentially removed the possibility for Ireland and Britain to work together as part of the EEA or customs union – and were not even necessitated by the referendum decision.”

There are several avenues for Britain if it wants to avert the “voluntary injury” it looks set to inflict to Ireland’s economy and its own. One, which Bruton concedes is unlikely, is staying in the single market. He dismisses as “fanciful” the suggestions that Northern Ireland alone could negotiate European Economic Area membership, while a poll on Irish reunification is "only marginally" more likely. 

The other is a variation on the Remoaners’ favourite - a second referendum should Britain look set to crash out on World Trade Organisation terms without a satisfactory deal. “I don’t think a second referendum is going to be accepted by anybody at this stage. It is going to take a number of years,” he said. “I would like to see the negotiation proceed and for the European Union to keep the option of UK membership on 2015 terms on the table. It would be the best available alternative to an agreed outcome.” 

As things stand, however, Bruton is unambiguous. Brexit means the Northern Irish border will change for the worse. “That’s just inherent in the decision the UK electorate was invited to take, and took – or rather, the UK government took in interpreting the referendum.”