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Cloud computing services over the Internet have the potential to spur a significant increase in government efficiency and decrease technology costs, as well as to create incentives and online platforms for innovation. Adoption of cloud computing technologies could lead to new, efficient ways of governing.

On April 7, the Brookings Institution hosted a policy forum that examines the economic benefits of cloud computing for local, state, and federal government. Federal Chief Information Officer Vivek Kundra delivered a keynote address on the role of the government in developing and promoting cloud computing. Brookings Vice President Darrell West moderated a panel of experts and detailed the findings in his paper, "Saving Money through Cloud Computing," which analyzes its governmental cost-savings potential.

After the program, panelists took audience questions.

Video

• Cloud Computing a Fiscally Smart Move
• Cloud Computing Saves Money, Makes Government More Open
• Cloud Computing Will Fundamentally Change Government Operations
• Government on Cloud Will Yield Cost-Effective System

Audio

• The Economic Gains of Cloud Computing

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• Uncorrected Transcript (.pdf)

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EXECUTIVE SUMMARY

Many web services are examples of cloud computing, from storage and backup sites such as Flickr and Dropbox to online business productivity services such as Google Docs and Salesforce.com. Cloud computing offers a potentially attractive solution to customers keen to acquire computing infrastructure without large up-front investment, particularly in cases where their demand may be variable and unpredictable, as a means of achieving financial savings, productivity improvements and the wider flexibility that accompanies Internet-hosting of data and applications.

The greater flexibility of a cloud computing service as compared with a traditional outsourcing contract may be offset by reduced certainty for the customer in terms of the location of data placed into the cloud and the legal foundations of any contract with the provider. There may be unforeseen costs and risks hidden in the terms and conditions of such services.

This document reports on a detailed survey and analysis of the terms and conditions offered by cloud computing providers.

The survey formed part of the Cloud Legal Project at the Centre for Commercial Law Studies (CCLS), within the School of Law at Queen Mary, University of London, UK. Funded by a donation from Microsoft, but academically independent, the project is examining a wide range of legal and regulatory issues arising from cloud computing. The project's survey of 31 cloud computing contracts from 27 different providers, based on their standard terms of service as offered to customers in the E.U. and U.K., found that many include clauses that could have a significant impact, often negative, on the rights and interests of customers. The ease and convenience with which cloud computing arrangements can be set up may lull customers into overlooking the significant issues that can arise when key data and processes are entrusted to cloud service providers. The main lesson to be drawn from the Cloud Legal Project’s survey is that customers should review the terms and conditions of a cloud service carefully before signing up to it.

The survey found that some contracts, for instance, have clauses disclaiming responsibility for keeping the user’s data secure or intact. Others reserve the right to terminate accounts for apparent lack of use (potentially important if they are used for occasional backup or disaster recovery purposes), for violation of the provider’s Acceptable Use Policy, or indeed for any or no reason at all. Furthermore, whilst some providers promise only to hand over customer data if served with a court order, others state that they will do so on much wider grounds, including it simply being in their own business interests to disclose the data. Cloud providers also often exclude liability for loss of data, or strictly limit the damages that can be claimed against them – damages that might otherwise be substantial if a failure brought down an e-commerce web site.

Although in some U.S. states, in E.U. countries and in various other jurisdictions the validity of such terms may be challenged under consumer protection laws, users of cloud services may face practical obstacles to bringing a claim for data loss or privacy breach against a provider that seems local online but is, in fact, based in another continent. Indeed, service providers usually claim that their contracts are subject to the laws of the place where they have their main place of business. In many cases this is a US state, with a stipulation that any dispute must be heard in the provider’s local courts, regardless of the customer’s location.

Perhaps the most disconcerting discovery of the Cloud Legal Project’s survey was that many providers claimed to be able to amend their contracts unilaterally, simply by posting an updated version on the web. In effect, customers are put on notice to download lengthy and complex contracts, on a regular basis, and to compare them against their own copies of earlier versions to look for changes.

The cloud computing market is still developing rapidly, and potential cloud customers should be aware that there may be a mismatch between their expectations and the reality of cloud providers' service terms, and be alive to the possibility of unexpected changes to the terms.

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Executive Summary

The move to the cloud is one of the defining information technology trends of the early 21st century. By providing businesses, universities, government agencies, and other entities with access to shared and often physically dispersed computing resources, cloud computing can simultaneously offer increased flexibility, reduced cost, and access to a wider array of services.

Cloud computing has also created a set of new challenges. For example, the issues of privacy and security in the cloud are well recognized and have been extensively discussed in the business and popular press. However, one critical issue that has received very little attention with respect to cloud computing is export control.

In the broadest sense, export control relates to regulations that the United States and many other countries have put in place to restrict the export of various sensitive items, information, and software.

There is an inherent tension between cloud computing and export control. While the concept of the cloud is centered on the premise of removing the need to track the details of data movement among various destinations, export control regulations are built largely around restrictions tied to those very movements.

If cloud computing is to reach its full potential, it is critical for providers and users of cloud services to address its implications with respect to export control. It is equally important to adapt the export control regulations to reflect the increasing prevalence of cloud computing in a manner that preserves the ability of American companies to benefit from the efficiencies of the cloud while also ensuring that American national security and foreign policy interests are adequately protected.

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The United States exports digital goods worth hundreds of billions of dollars across the Atlantic each year.  And both Silicon Valley and Hollywood do big business with Europe every year.  Differences in approaches to privacy have always made this relationship unsteady but the Snowden disclosures greatly complicated the prospects of a Transatlantic Trade and Investment Partnership.  In this paper Cameron Kerry examines that politics of transatlantic trade and the critical role that U.S. privacy policy plays in these conversations.

Kerry relies on his experience as the U.S.’s chief international negotiator for privacy and data regulation to provide an overview of key proposals related to privacy and data in Europe.  He addresses the possible development of a European Internet and the current regulatory regime known as Safe Harbor. Kerry argues that America and Europe have different approaches to protecting privacy both which have strengths and weaknesses.

To promote transatlantic trade the United states should:

• Not be defensive about its protection of privacy
• Provide clear information to the worldwide community about American law enforcement surveillance
• Strengthen its own privacy protection
• Focus on the importance of trade to the American and European economies

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INTRODUCTION

Influencing the Islamic Republic of Iran has proven to be a perennial conundrum for American presidents. The complexity of Iranian politics and the intractability of the problems posed by Tehran’s revolutionary theocracy may explain why, over the course of three decades, each U.S. administration has been forced to revise its initial approach to Iran in hopes of achieving better outcomes. The overall result has been an American tendency to oscillate between engagement and pressure, with frustratingly limited results.

And so it goes for the Obama administration. After an initial, high-profile effort to draw Tehran into a serious dialogue both to resolve the nuclear issue as well as transcend it, Washington now finds itself pivoting away from diplomatic engagement to a more coercive policy centered around economic pressure. The shift comes amidst a dramatic new context within the Islamic Republic, characterized by historic turmoil on the streets and bitter divisions among the elites, and at a moment when the international urgency surrounding Tehran’s nuclear ambitions has never been greater. This context raises the stakes and heightens the sensitivities of getting U.S. policy on Iran right after so many years of failure.

The turn toward sanctions is a predictable one. Sanctions have proven to be an instrument of American policy toward Tehran for the past thirty years. American use of economic pressure as a means of dissuading Iranian malfeasance began with the freezing of Iranian assets after Iranian students seized the U.S. Embassy in Tehran in 1979 and culminated in the nearly comprehensive ban on trade and investment in Iran that has been in place since the Clinton administration. But, despite the appeal of sanctions, their protracted duration underlines their limitations—particularly when they are unilateral—as a mechanism for categorically revising Iranian policy. Still, many find sanctions attractive because the overall track record of Iranian decision-making demonstrates that Tehran often considers the costs and benefits of its policy options in determining its course. As Iran’s internal strife exacerbates the regime’s vulnerabilities, the prospects for international consensus around new economic restrictions appear more realistic than ever before.

To examine the options and implications for using sanctions to address the multi-faceted challenges of Iran, the Saban Center for Middle East Policy at the Brookings Institution held a half-day symposium in late October 2009. The workshop featured off-the-record panel discussions led by experts on Iranian internal politics and the key actors shaping the diplomatic landscape. The conclusions from that session are presented below.

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The potential for confrontation between the United States and Iran, stemming from ongoing tensions over Iran’s nuclear program and western covert actions intended to delay or degrade it, remains a pressing concern for U.S. policymakers. The Saban Center for Middle East Policy hosted a one-day crisis simulation in September that explored different scenarios should a confrontation occur.

The Saban Center's new Middle East Memo, A Series of Unfortunate Events: A Crisis Simulation of a U.S.-Iranian Confrontation, authored by senior fellow Kenneth M. Pollack, presents lessons and observations from the exercise.

Key findings include:

• Growing tensions are significantly reducing the “margin of error” between the two sides, increasing the potential for miscalculations to escalate to a conflict between the two countries.

• Should Iran make significant progress in enriching fissile material, both sides would have a powerful incentive to think short-term rather than long-term, in turn reinforcing the propensity for rapid escalation.

• U.S. policymakers must recognize the possibility that Iranian rhetoric about how the Islamic Republic would react in various situations may prove consistent with actual Iranian actions.

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With violent protests following the second anniversary of the Egyptian revolution, and calls for a new unified government amid dire comments about the stability of Egypt, the world’s attention is again on President Morsi and his country. This follows a tumultuous period last month, when Egyptians went to the polls and ratified a new constitution. The document, criticized as hurried, incomplete, and lacking in consensus is enormously contentious.

In the Saban Center’s newest Middle East Memo, The View From a Distance: Egypt’s Contentious New Constitution, nonresident fellow Mirette F. Mabrouk gives a broad overview of the new constitution, and provides context and analysis for specific sections.

Mabrouk outlines several ways in which, she argues, the document is shaky on the protection of freedoms and rights, particularly those of women, some religious minorities and minors. Mabrouk also encourages analysts to stop viewing this situation as an Islamist/ secular divide, arguing that idea is too simplistic, and lacks the context for greater understanding of Egypt’s domestic politics.

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• The View From a Distance: Egypt’s Contentious New Constitution

Last September, as part of its annual conference with the United States Central Command, the Saban Center for Middle East Policy at the Brookings Institution conducted a day-long simulation of a confrontation between the United States and Iran arising from a hypothetical scenario in which the Syrian opposition had made significant gains in its civil war and was on the verge of crushing the Assad regime.  

The simulation suggested that, even in the wake of President Rouhani’s ascension to power and the changed atmosphere between Tehran and Washington, there is still a risk of misunderstanding and miscalculation between the two sides.

This new Middle East Memo examines the possible U.S. foreign policy lessons that emerged from this crisis simulation, and stresses the importance of communication, understanding the Saudi-Iran conflict and the difficulty in limited interventions. 

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• Hard Road to Damascus: A Crisis Simulation of U.S.-Iranian Confrontation over Syria

Rumor has it that an economist started hitting the gym after finishing two milestone research papers, in expectation of a Nobel Prize, which is only rewarded to a living person. Almost no one denies that greater expectations translate into healthier behaviors, while the converse rarely enters the health policy discussion: expectations of a less-than-desirable future may lead to unhealthy behaviors, including smoking, excessive drinking, sedentary lifestyles, and drug abuse. The health issues of the deprived may have a deeper root in economics.

Professor Zhu Xi from Shanghai Jiao Tong University and I found evidence of this in our working paper “Affordable Care Encourages Healthy Living: Theory and Evidence from China's New Cooperative Medical Scheme”. Standard economic theory predicts that providing medical insurance encourages unhealthy behavior by mitigating economic consequences. We developed a novel theoretical framework in which the opposite is possible because insurance makes longevity more affordable and thus desirable.

We test the theory utilizing a unique experiment of China introducing the New Cooperative Medical Scheme, unique in its long-term credibility necessary for their proposed channel. This scheme reduces cigarette use by around 9% and bolsters subjective perception of the importance of physical exercise and healthy diet. These effects depend significantly on the number of children and the local culture of elderly care. We can rule out alternative explanations of these robust results. The empirical evidence affirms a causal link between concerns about negative bequest and unhealthy behavior, and how to break it.

Breaking the causal link would not be an easy task, because bringing a brighter future to the deprived would not be. But this does not revoke the necessity of considering this “expectation” mechanism in designing health policies. For example, it is trendy to study how smokers may substitute other tobacco products for cigarettes and the ensuing health consequences. According to our analytical framework, the substitution could be broader, that is, a person expecting a miserable future would consciously or unconsciously resort to other means of shortening life. Case and Deaton, in their sensational paper, pinned down drug and alcohol poisonings, suicide, and chronic liver diseases and cirrhosis as the causes of the rising mortality in midlife among white Americans. The war against tobacco use may be complicated by this potential substitution.

In general, recognizing the source of a problem is the first step in solving it. The association between income and life expectancy in the United States is well identified by a Brookings study by Bosworth and Burke and a paper by Chetty et al. The hypothesis that poverty may rationally trigger unhealthy behaviors and thus shorter life expectancy is under-explored.

Our research suggests that constructing a social safety net – by subsidizing health or old-age insurance, for example – brightens the future and thus promotes healthy living. Libertarians who believe in “from each as they choose, to each as they are chosen” may frown upon the idea of expanding the government for the sake of saving people from their own poor choices. As usual, an argument could be made that the positive externality outweighs the cost. In this case, a better social safety net can make a person more forward-looking and thus more beneficial to the society.

Discovering hidden incentives and mechanisms is one of the primal tasks of economists. Our research suggests, surprisingly, that both the Center of Disease Control and Prevention and the Department of the Treasury are important players in promoting healthy living. Let them be.

No. We should exempt workers earning the lowest wages.

Social Security faces a serious funding problem. The program takes in too little money to pay all that has been promised to future beneficiaries. Government forecasters predict Social Security’s reserve fund will be depleted between 2030 and 2034. There are two basic ways we can eliminate the funding gap: cut benefits or increase contributions. A common proposal is to increase the age at which workers can claim full retirement benefits. For people nearing retirement today, the full retirement age is 66. As a result of a 1983 law, that age will rise to 67 for workers born after 1959.

When policymakers urge us to raise the retirement age, they are proposing to increase the full retirement age beyond 67, possibly to 70, for workers now in their 30s or 40s. This saves money, but it also cuts monthly retirement benefits by the same percentage for every worker, unless workers delay claiming benefits. The policy might seem fair if workers in future generations could all expect to share in gains in life expectancy. However, new research shows that gains in life expectancy have been very unequal, with the biggest improvements among workers who earn top incomes. Life expectancy gains for workers with the lowest incomes have been small or negligible.

If the full retirement age were raised, future retirees with high lifetime earnings can expect to receive some compensation when their monthly benefits are cut. Because they can expect to live longer than today’s retirees, they will receive benefits for a longer span of years after 65. For low-wage workers, there is no compensation. Since they are not living longer, their lifetime benefits will fall by the same proportion as their monthly benefits. Thus, “raising the retirement age” is a policy that cuts the lifetime benefits of future low-wage workers by a bigger percentage than it does of future high-wage workers.

The fact that low-wage workers have seen small or negligible gains in life expectancy signals that their health when they are past 60 is no better than that of low-wage workers born 20 or 30 years ago. This suggests their capacity to work past 60 is no better than it was for past generations. A sensible policy for cutting future benefits should therefore preserve current benefit levels for workers who have contributed to Social Security for many years but have earned low wages.

Editor's note: This piece originally appeared in CQ Researcher.