Washington, D.C. – November 9, 2015 — The Niskanen Center has released a paper that assesses the economic benefits of using  online encryption.

“This paper aims to serve to spur more in-depth, quantitative analysis of the importance of encryption and online security mechanisms to the health of the Internet ecosystem,” said Ryan Hagemann, the Niskanen Center’s technology and civil liberties policy analyst.  “This is not an easy topic to address, but we hope that this report will inspire others to execute more rigorous studies on this topic.”

In recent weeks, the Niskanen Center and its allies have been pressing the Obama Administration to deliver a strong statement disavowing the need for legislation that would mandate the installation of “backdoors” into encryption products. This paper helps clarify just how important the use of strong, unbreakable encryption is for online users.

“Although FBI Director James Comey would have us believe that that law enforcement agencies are experiencing a ‘going dark’ problem with encryption, the numbers don’t support that conclusion,” Hagemann said. “In 2014, according to the Department of Justice’s own statistics, 3,554 federal and state wiretap orders were issued. Of those court orders, only 25 cases encountered encrypted devices, and in only 4 of those cases was the encryption found to be unbreakable. Those numbers, coupled with this paper’s assessment of the overwhelmingly positive economic benefits made possible by strong encryption, suggests that the FBI director is seeking a solution to a problem that doesn’t exist.”

The report uses a number of proxy measures, such as e-Commerce and online banking transactions, to assess the impact that online security tools have in contributing to the digital economy. Without strong encryption, the paper argues, the Internet ecosystem would be imperiled, putting trillions of dollars in online financial transactions at risk.


“The modern digital economy, like the market in general, is based on trust,” Hagemann said. “If consumers don’t trust that their personal and financial information is secured when engaging in online commerce, they won’t use these services. Rather than attempting to subvert this technology, director Comey and others should embrace encryption’s impact on economic growth and individual welfare.”

Established in 2014, the Niskanen Center is a libertarian 501(c) (3) advocacy organization that works to change public policy through direct engagement in the policymaking process.

Contact: Louisa Tavlas
Director of Communications, Niskanen Center