Legalize Blackmail: An Example

post by rockthecasbah · 2020-10-14T21:18:40.765Z · score: 0 (5 votes) · LW · GW · 10 comments

This post is an example of the disutility of outlawing blackmail. It is an illustration of the argument made by Robin Hanson here

Background - Sallie Mae is a US company. For background, see here, pp. 807

On November 9, 2005, former Sallie Mae employee Michael Zahara filed a federal lawsuit against the company, alleging that it had a pattern and practice of granting forbearance in a purposeful effort to increase total student loan debt. On October 29, 2008, permission was granted to his legal counsel to withdraw from the case, citing "From counsel’s perspective, a breakdown in trust has resulted from the discovery that Relator has been arrested for extortion, the circumstances surrounding that arrest, and Relator’s failure to disclose the arrest to counsel."[36][37] On March 12, 2009, the court ruled "dismissal without prejudice" because "the plaintiff has failed to obtain substitute counsel by the deadline."[38] Zahara was seeking new counsel.[38]

Zahara was later exonerated of all charges, but was not able to resume the suit.

From a utilitarian perspective, whether Zahara did attempt to extort SM is of no relevance. Whether SM was purposefully inflating total student loan debt (which was in its interest), is massively important to the US federal budget, and to those students. Had blackmail been legal, we could better have policed Sallie Mae's behavior. This has convinced me to agree with Robin Hanson that blackmail should not be outlawed.

10 comments

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comment by Dagon · 2020-10-14T23:01:24.366Z · score: 9 (4 votes) · LW(p) · GW(p)

I don't understand how the example says anything about the benefits of blackmail.

Your link gives me a 403, so this may be clearer if I could read it.  More details in your summary might be necessary as well.  What stopped Zahara from publishing (or selling to anyone with standing, say a harmed student) the information?  Why was he unable to obtain counsel?  How does SM inflate "total student loan debt", and why is it criminal?

Most importantly, why would non-court-validated threat of publication be better than simple publication without blackmail?  In other words, why is blackmail preferable to whistleblowing?

comment by rockthecasbah · 2020-10-15T13:45:20.677Z · score: 3 (2 votes) · LW(p) · GW(p)

Here's another link https://www.cambridge.org/core/journals/perspectives-on-politics/article/reconstituting-the-submerged-state-the-challenges-of-social-policy-reform-in-the-obama-era/124850252051794EB3E1AE87E1D082C8 . Use www.sci-hub.se to get around the paywall.

  1. Zahara could publish, the court proceedings are publicly available from wikipedia. The challenge is that the public doesn't understand these more obscure privatized policies enough to represent their own interests.

  2. After he was arrested for extortion his lawyers refused him counsel, and he could not find replacement council. It appears that after his exoneration he still could not find council and gave up. I suspect the public humiliation of his arrest stopped him from continuing the case with the Justice Department.

  3. Forbearance = "a refraining from the enforcement of something (such as a debt, right, or obligation) that is due". In this case, Sally Mae was granting stays of payment to increase the principal of the debt. Normally, this is a risky thing for a lender to do. However, the taxpayer was on the hook for half of the interest and the insurance on the loans, so we were paying for the risk. The granting of forbearance effectively allowed Sallie Mae to subsidize itself at the taxpayers expense. This subsidy mechanism is less efficient than direct loans, see page 16 of this document.

Clearly this allowed a private company to transfer money from the treasury to themselves without improving the intended outcomes of the policy. Go ask a lawyer if that's criminal. I can only tell you its against the interest of the state and citizens.

  1. Because the presence of an anti-blackmail norm enables the company to accuse whistleblowers of blackmail. All Sallie Mae had to do was get Zahara arrested. The charges didn't stick but Zahara's public reputation was completely tarnished and the focus of the story moved. From a conversation about betrayal of the public trust, it became a story about Zahara's personal integrity and status-regulation.

The point is that for the US taxpayer, it does not matter if Zahara did blackmail them. It only matters if Sallie Mae was exploiting the public trust. Whatever the truth of the matter, the blackmail norm itself was a powerful red herring that asocial elites used to protect their misbehavior. If blackmail were legal, more people like Zahara would come forward, which would be awesome for the taxpayer.

What exactly is the argument for outlawing blackmail? Protecting the asocial actions of elites?

comment by Dagon · 2020-10-15T14:42:44.474Z · score: 2 (1 votes) · LW(p) · GW(p)

Thanks for the detail.  You still haven't shown that, if his blackmail were allowed, it would have changed SM's behavior.  The (initial) lawsuit and publication of the activity clearly didn't.

What exactly is the argument for outlawing blackmail? Protecting the asocial actions of elites?

I don't have an argument - I wouldn't outlaw it if I were god-emperor.  But I also don't care very much that it's illegal - it's just not very important very often.  This example does not change that weighting, as I don't see how legal blackmail would have changed anything.  

Oh, wait - is your argument that "if blackmail were legal, this man's lawsuit would have been successful"?  That's REALLY tenuous, and is an argument against being punished for accusation of a crime, not against the crime itself.  IMO, once exonerated, the allegations of extortion should have been irrelevant.  As true for blackmail as murder.  And I suspect they were - no lawyer was prevented from taking the case, they likely all just expected to lose, and chose not to take it.

comment by rockthecasbah · 2020-10-15T17:42:00.944Z · score: 0 (2 votes) · LW(p) · GW(p)

Wait what? Obviously I'm not asserting the counterfactual the "the case definitely would have succeeded" with 100% probability. My argument clearly rests on the likelihood ratios, not a bizarre assertion that absolute certainty hinges on a particular law.

Let us consider two possibilities.

  1. The world in which Sallie Mae committed a crime. In this case, blackmail being illegal lowers the likelihood that they are convicted. SM only had to have Zahara arrested to tarnish his personal reputation and prevent whistleblowing. Future whistleblowers can see what happened to Zahara and will choose not to come forward.

  2. The world in which Sallie Mae is innocent. In this world blackmail is irrelevant to our practical concerns. Zahara would have lost the case either way.

We do not know if we live in world one or world two. We do know that, if blackmail were legal, we would have better information about which world we are in. In no world would we have perfect information (this is provable from Bayes theorem). We still want to be in a higher-information world about matters of the public trust.

Also public institutions sometimes commit misconduct which is not technically illegal. The public still benefits from having that information, in fact a great deal. Reducing the risks for both whistleblowers and extortionists achieves that objective.

comment by jbash · 2020-10-15T21:07:17.788Z · score: 3 (2 votes) · LW(p) · GW(p)

SM only had to have Zahara arrested to tarnish his personal reputation and prevent whistleblowing. Future whistleblowers can see what happened to Zahara and will choose not to come forward.

Well, OK, but in a counterfactual world with legal blackmail, other failure modes would surely show up. For example, if blackmail were legal, a target would have an easier time casting doubt on a whistleblower by claiming that the whole accusation was made up for financial reasons. Or finding something legitimately embarrassing and, well, blackmailing the whistleblower into silence. All completely legal, and much easier for a more powerful party to pull off than for a less powerful party.

For that matter, you could see other ways to chill legal process specifically. I have no idea what grounds this guy sued on to begin with, but I doubt it was airtight. You might get legal advice like "You have an iffy case suing over this, so why don't you just blackmail them?". You could even imagine a court saying "Well, you don't have standing because you didn't take a reasonably available option to remedy the harm to you, namely blackmailing the defendant".

... and if you just want to frame somebody for any old crime to discredit them, it's easy to substitute something else for blackmail. Very possibly even something else directly related to the case at hand.

Treating this case as an argument for legal blackmail seems like a weird cherry-picked argument that relies on very specific and unusual facts.

We do know that, if blackmail were legal, we would have better information about which world we are in.

Maybe in this case, but if blackmail were legal, there would, in general, be an incentive to monetize negative information about various actors, rather than publicizing it. How does that lead to more information?

So far as I can tell, if blackmail were legal...

  1. There would be some tiny additional risk to targets beyond their already large risk of being exposed. Very likely not enough risk to deter a significant amount of malfeasance before the fact.

  2. Financial incentives would convert some whistleblowers into blackmailers. Whereas a whistleblower may force some bad activity to stop, a blackmailer is really only guaranteed to collect money because of their knowledge.

I want to emphasize that... I don't see where blackmail would give ever anybody any incentive to actually stop any malfeasance.

A halfway competent blackmailer will make the demand more attractive (to the decision maker) than the consequences of exposure. Assuming the blackmailer could convince the target that the demand was supportable and that no insupportable future demands would be made, you'd expect the target to pay. And in a world with legal blackmail, the target would presumably have legal process available to keep the blackmailer from making extra demands later, so that "trust" would be easier to get (this system is really starting to look like a paradise for crazy legal games).

Once having paid, and thereby eliminated the immediate risk of exposure, the target would have no reason not to simply keep going with the bad behavior. If anything, the target might be hungrier for cash to pay ongoing blackmail.

The target's risk analysis after the blackmail is pretty much the same as it was before the blackmail. Obviously the target started the malfeasance in the first place, and has continued it thereafter, so that analysis must favor the malfeasance.

Of course, the blackmailer could make stopping part of the demand... but that demands an altruistic choice to demand "pay me and stop" rather than "pay me more". Even then, it only works if the target believes that the blackmailer can and will actually find out about any failure to stop.

comment by rockthecasbah · 2020-10-16T14:56:53.218Z · score: 1 (1 votes) · LW(p) · GW(p)

Thanks for responding directly to the arguments. It would be a waste of time to copy and paste all of Robin Hanson's points into this particular instance. I'm just posting a real world example which illustrates Hanson's argument. You can find these details more thoroughly explored on Overcoming Bias and in a past debate between Zvi and Hanson.

debate [LW · GW]

Original posts on overcoming bias

Finally, I recommend reading Mettler's article to motivate the issue.

comment by jbash · 2020-10-16T18:22:12.756Z · score: 3 (4 votes) · LW(p) · GW(p)

It would especially be a waste of time to copy and paste Hanson's stuff because, "Checkmate" subject lines aside, as far as I can tell, he's never posted anything that addressed anything I've said in this thread at all. And he keeps repeating himself while failing to engage properly with important objections... including clearly consequentialist ones.

We were talking about a case where the blackmailable behavior was already going on. As far as I can tell, Hanson hasn't mentioned the question of whether blackmail provides any meaningful incentive to stop an existing course of blackmailable behavior. I don't know what he'd say. I don't think it does.

If you want to broaden the issue to blackmail in general, Hanson's basic argument seems to be that having to pay blackmail is approximately as much a punishment for bad behavior as gossip would be, while the availability of cash payments would attract significantly more people who could actually administer such punishment. Therefore, if you want to see some particular behavior punished, you should permit blackmail regarding at least that kind of behavior.

He apparently takes it as given that blackmail being more available would meaningfully increase disincentives for "blackmailable" behavior, and would therefore actually reduce such behavior enough to be interesting. That's where he starts, and everything from then on is argued on that assumption. I don't see anywhere where he justifies it. He appears to think it's obvious.

I don't think it's true or even plausible.

I think Hanson probably overestimates how much legalized blackmail (and presumably more socially acceptable blackmail) would enlarge the pool of potential "enforcers". Blackmail is already somewhat hard to punish, so you'd expect formal legalization to have limited effect on its attractiveness. On the "supply side", it's much easier to act opportunistically on compromising information than it is to go into the business of speculatively trying to develop compromising information on specific targets.

But he could be right about that part, assuming a rational blackmailer. Legality has a big effect on large-scale, organized group activity. Maybe if it were legal, you really would have more organized, systematic attempts to investigate high-value targets with the idea of blackmailing them.

Where I think he's most surely wrong is on the strength of the effect that would have on the behavior of the potential blackmail-ee. I don't think that, in practice, significantly fewer people would choose to initiate blackmailable behavior.

Law, gossip, and illegal blackmail already produce most of the disincentives that legalized blackmail would. You already run a pretty large risk of anything you do being exposed. Much more importantly, it doesn't matter, because people don't react rationally or proportionately to that kind of disincentive.

People do not in fact think "I won't do this because I might be blackmailed". At the most, they may think "I won't do this because I might be found out", but they don't then break down the consequences of being found out into being blackmailed, being gossiped about, or just being thought badly of. Even noticing that something being found out might be an issue is more than most people will do. And forget about anybody consciously assigning an equivalent monetary value to being found out.

People might, maybe, think separately about the consequences of being punished criminally, but honestly I think the psychological mechanism there is much more "I don't want to see myself as a criminal", than "I don't want to get punished". People who actually commit crimes overwhelmingly don't expect to get caught, whether or not that expectation is rational. No plausible amount of blackmail-oriented investigation is going to change that expectation, any more than the already fairly large amount of government criminal investigation does.

Hanson seems to want to talk about a world of logically omniscient, rational , consequentialist actors, with unlimited resources to spend on working out the results of every alternative, and the ability to put a firm monetary value on everything. On a lot of issues, the vast majority of humans are not even approximately logically omniscient, rational, consequentialist actors, and the monetary values they assign to things are deeply inconsistent. Deviant behavior is one of the areas where people are least rational. Blackmail is all about deviant behavior, so Hanson's whole analytical framework is inapproprate from the get-go. It's probably a bit less unreasonable for modeling the conduct of blackmailers, but it's wholly wrong for modeling the behavior of blackmail-ees.

Speaking of that "rationality differential", there was also a suggestion in comments that legalized blackmail would give potential blackmailers an incentive to induce blackmailable behavior. That's pretty plausible and actually happens. It's 101 material in spy school, for example. It's often done by intentionally exploiting flaws in the target's rationality.

As far as I could see, Hanson just ignored that part of the comment. I'm tempted to put words into his mouth and imagine him saying "Why would you let a blackmailer induce you into blackmailable behavior? That's stupid.". Well, maybe it is stupid, but it happens all the time. So we have at least one unambiguously negative effect that he's totally ignored. All by itself, that one negative effect would probably create more blackmailable behavior than fear of blackmail would deter.

Hanson doesn't even concede enough to address the fact that the risk of blackmail is more manageable, and therefore possibly more appealing, than the risk of actual exposure, so a somewhat-less-extremely-unrealistic human actor might actually be more inclined to engage in "blackmailable" behavior if they expected anyone who happened to discover their behavior to blackmail them, rather than to simply expose them.

He's also talking about changes to law, but he ignores all of the factors that make legal systems gameable and load those systems up with friction. Unless forced, he more or less models the legal system as purely mechanical, and doesn't care to get into how actors actually use and abuse legal processes, nor systematic differences in various actors' sophistication, skills or resources for doing so. When negative effects based in those areas are brought up in comments, he just doubles down and suggests creating ever larger, more sweeping, systemwide legal changes essentially by fiat... which is politically impossible. He might as well suggest changing the law of gravity.

The behavior of homo economicus in a frictionless environment is simply uninteresting, and isn't quite as cut-and-dried as Hanson would have it anyway. The observed behavior of real humans suggests significant negative effects from putting his proposal into actual practice, and argues against the idea than any of his suggested benefits would be realized. And suggesting policy changes that are politically impossible is largely pointless anyway.

Personally, I'm not sure legalized blackmail would make a big difference in the world as a whole, but, if it did, I would expect it to be far more negative than positive. I would expect it to create a world with more snares, more fear, much more deliberately induced bad behavior, significantly more system gaming of all kinds, while not deterring much if any pre-existing bad behavior. Hanson hasn't said anything that changes that impression.

I will now go back to my usual policy of ignoring Hanson completely...

comment by TAG · 2020-10-20T21:53:33.356Z · score: 1 (1 votes) · LW(p) · GW(p)

Because the presence of an anti-blackmail norm enables the company to accuse whistleblowers of blackmail.

An anti blackmail norm can be balanced out by a pro whistle blowing norm . Which isn't the same thing as a pro blackmail norm.

comment by TAG · 2020-10-20T21:50:33.438Z · score: 1 (1 votes) · LW(p) · GW(p)

Legal blackmail as a means of uncovering wrongdoing needs to be compared.against the alternatives...which are chiefly legallt protected whistleblowing, and legally protected journalism. To cut a long story short , journalists have a direct financial incentive to publish, whistle blowers are neutral , and rational blackmailers are incentivised not to disclose information, but rather to keep their victims paying on the threat of disclosure.

comment by Dagon · 2020-10-22T23:20:58.458Z · score: 2 (1 votes) · LW(p) · GW(p)

For clarity, the case for blackmail is not that it's a means for uncovering.  It's a means for reducing the undesirable behavior without uncovering.