1. “Permissionless Innovation” vs. the
“Precautionary Principle”
Jerry Brito, Eli Dourado & Adam Thierer
Senior Research Fellows
Mercatus Center at George Mason University
July 2013

2. Outline of discussion
1. What is “permissionless innovation”?
– Why is it important?
2. What is the “precautionary principle”?
– What are its costs?
3. Case studies: Why permissionless innovation is
worth preserving
– Commercial drones
– Bitcoin
– 3D printing
– Other emerging technologies
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3. “Permissionless Innovation”
the general freedom
to experiment & learn
through trial-and-error
experimentation
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4. When the Internet was
“permissioned” (pre-1990s)
a warning to students from a 1982 MIT handbook for
the use of ARPAnet, the progenitor of what would
become the Internet:
“It is considered illegal to use the ARPAnet for anything
which is not in direct support of government business...
Sending electronic mail over the ARPAnet for commercial
profit or political purposes is both anti-social and illegal.
By sending such messages, you can offend many people,
and it is possible to get MIT in serious trouble with the
government agencies which manage the ARPAnet.”
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5. Permissionless innovation gave us
today’s Net & digital revolution
• It has driven the explosion of Internet
entreprenuerialism over past 2 decades.
• Again, before early 1990s, online innovation &
commercial activity wasn’t even allowed.
• But the commercial opening of the Net
changed all that. The rest is history.
• We need same revolutionary approach to new
technology, whether based on bits (digital
economy) or atoms (industrial economy).
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6. “Precautionary Principle”
= Crafting public policies to control or limit new
innovations until their creators can prove that they
won’t cause any harms.
– this “better to be safe than sorry” mentality leads to
“Mother, May I” (“permissioned”) policy prescriptions
& preemptive regulation by bureaucracies
– It is the opposite of permissionless innovation
• Rationales for “precautionary” regulation:
– safety & security
– public morals
– privacy
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7. The Precautionary Principle vs. Permissionless Innovation
A Range of Responses to Technological Risk
Prohibition
Censorship
Info suppression
Product bans
Anticipatory
Regulation
Administrative mandates
Restrictive defaults
Licensing & permits
Industry guidance
Resiliency
Education & Media Literacy
Labeling / Transparency
User empowerment
Self-regulation
Adaptation
Experience / Experiments
Learning / Coping
Social norms & pressure
Top-down
Solutions
Bottom-up
Solutions
Precautionary Principle
Permissionless Innovation
Permissioned Innovation
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8. Better way to respond to risk?
Bottom-up approaches to new tech risks:
• Education
• Empowerment
• New norms
• Ongoing experimentation
• Adaptation
• Self-regulation
• Torts, property rights, contracts & other existing
legal standards
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9. The problem with
“permissioning” innovation
• lost entreprenurialism / less innovation
• diminished marketplace entry / rivalry
• stagnant markets
• protectionism / cronyism
• loss of int’l competitive advantage
• higher prices & fewer services / choices for
consumers
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10. Bottom Line: What’s good for the Net
is good for everything else!
• Net freedom advocates are right to extol the
permissionless innovation model—but they
are wrong to believe that it need be unique to
the Internet.
• We can legalize innovation in the physical
world, too.
• All it takes is a recognition that real-world
innovators should not have to ask permission
either.
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11. Case Study #1:
Commercial Drones
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12. Commercial Drones
• Currently illegal to operate a drone for profit
• FAA must integrate commercial drones in US
airspace by 2015
– Regulations are under consideration now
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13. Private Uses of Drones
• Tacocopter
• Agriculture
• Freight
• Google Loon
• We don’t know what else yet
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14. What about safety?
• Go to court
• Could quickly become safer than cars
– Compare risk of pizza delivery by auto vs. by
quadrocopter
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15. What about privacy?
• Go to court
• There are already federal, state, and local laws
that protect privacy
• Proposed rules are absurd
• Social adaptation
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16. Give adaptation a chance
“Instantaneous photographs and newspaper
enterprise have invaded the sacred precincts of
private and domestic life; and numerous
mechanical devices threaten to make good the
prediction that ‘what is whispered in the closet
shall be proclaimed from the house-tops.’”
— Samuel D. Warren and Louis D. Brandeis, 1890
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17. Case Study #2:
Bitcoin
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18. Bitcoin
• World’s first completely decentralized digital
currency
– Solves the ‘double spending problem’
– Pseudonymity
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19. Benefits
• Cheaper and quicker than traditional networks
– Small business alternative to payment networks
– Micropayments
– Remittances
• Privacy
• Access to capital
• Inflation resistant
• Bitcoin as a platform (permissionless)
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20. Challenges
• Pseudonymity
– Illicit drugs (Silk Road)
– Child exploitation
– Money laundering
• Consumer Protection
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21. Bitcoin’s Future
• Silicon Valley VCs are investing millions
• Could disrupt the payments industry
• Biggest threat to this potential revolution
– Overbroad money laundering regulations
– State money service business licensing
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22. Case Study #3:
3D Printing
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23. 3D Printing
• Benefits
• Challenges
– Guns
– Piracy
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24. Permissionless innovation & the future
tech economy…
• Driverless cars & “smart transportation”
• Wearable computing / Google Glass
• “Smart energy” & “smart grids”
• Geolocation / Geotagging / RFID
• Facial recognition & biometrics
• Robotics & nanotechnology
• “Internet of Things”
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25. 25
The opportunities before us…

26. related Mercatus Center research:
Papers & Filings
• Mercatus filing to FAA on Unmanned Aircraft System Test Site Program
• Mercatus filing to FTC on Privacy and Security Implications of the Internet
of Things
• Technopanics, Threat Inflation, and the Danger of an Information
Technology Precautionary Principle (Thierer)
• Bitcoin: A Primer for Policymakers (Brito)
Articles & Blog Posts
• Who Really Believes in “Permissionless Innovation”? (Thierer)
• “Permissionless Innovation” Offline as Well as On (Thierer)
• The Third Industrial Revolution Has Only Just Begun (Dourado)
• Mr. Bitcoin Goes to Washington (Brito)
• The Next Internet-Like Platform for Innovation? Airspace (Think Drones)
(Dourado)
• Domestic Drones Are Coming Your Way (Brito)
• When It Comes to Information Control, Everybody Has a Pet Issue &
Everyone Will Be Disappointed (Thierer)
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