Chapter 7. Economics

The great fortunes of the information age lie in the hands of companies that have established proprietary architectures that are used by a large installed base of locked-in customers.

— Carl Shapiro and Hal Varian

There are two things I am sure of after all these years: there is a growing societal need for high assurance software, and market forces are never going to provide it.

— Earl Boebert

If you try to buck the markets, then the markets will buck you.

— Margaret Thatcher

Introduction

The economics of information security has recently become a thriving and fast-moving discipline. We started to realise round about 2000 that many security system failures weren't due to technical errors so much as to wrong incentives: the classic case is where the people who guard a system are not the people who suffer when it fails. Indeed, security mechanisms are often designed quite deliberately to shift liability, which often leads to trouble.

Economics has always been important to engineering, at the raw level of cost accounting; a good engineer was one who could build a bridge safely with a thousand tons of concrete when everyone else used two thousand tons. But the perverse incentives that arise in complex systems with multiple owners make economic questions both more important and more subtle for the security engineer. Truly global-scale systems like the Internet arise from the actions of millions of independent principals with divergent interests; we hope that reasonable ...

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