1. The Economics of Cyber Security
Brandon Valeriano
Cardiff University

2. The Perspective of the Cyber Moderate
The cyber security field has been divided into what is of thought of as two camps on the future of cyber conflict debate: the cyber prognosticators and the cyber skeptics.
We assert that there can be a middle point of view, what can be framed as cyber moderation.
“cyber conflict will occur but the conflicts themselves will be trivial, will rarely result in a change in behavior in the target, and will largely be regional cyber incidents connected to traditional international issues at stake between states. This leads us to question the direction of the future uses of the tactic”
Is there evidence of a new of way cyber crime? What does the economic of cyber security really change?

3. Cyber Crime
Cyber crime would be leveraging of digital technologies for criminal intent.
Not diplomatic or strategic, but either chaos or financially motivated activities.

4. Cyber Crime

5. Cyber Crime

6. Cyber shrinkage applied to Cyber Crime
A theory of cyber shrinkage would be based on the traditional concept of shrinkage given a liberal market economy.
One to two percent is an acceptable loss according to volume given a certain context founded on operating at a large volume.
Without putting crime in the proper context, securitizing cyberspace could be the result.
Citizens are limited to their online activities due to an artificial yet popular fear where governments pass laws based on a few popularized incidents such as the Sony hack.

7. Data Analysis
Four high profile data breaches on retailers in the last few years: Target, Home Depot, EBay, and Neiman Marcus.
We look at total revenues and online revenues, and then calculate net losses for the high-profile data breach and divide these losses by the total online revenues to see if there is evidence for cyber shrinkage.
For the most part, online sales are only a small fraction of these retailers’ revenues
Yet even in the face of being compromised by hackers; these companies continue to move more and more inventory online.

8. Data Analysis

9. Analysis
Regardless of the data breaches of the four cases presented above, all four large retailers are putting more and more of their inventory online.
It seems online sales are the future for these retailers, regardless of the treat from cyber crime.
This implies that the gains to be had from online sales still outweigh the losses. Even Target is moving forward with expanding their online inventory

10. Discussion
Assuming we accept a certain amount of cyber shrinkage, how to do we minimize these losses?
Sensitive information should be behind lock and key not accessible through regular channels.
To allow for more access would leave the producer of this information at risk.
Only by accepting risk and minimizing the damage done by control merchandise (information), can we move towards a feasible view of cyber security.

11. Conclusions
Once we move to this frame we can be begin to have a realistic debate about the dangers in the cyber realm.
With this step, we think that prognostications of cyber doom and threat are toothless.
There needs to be a recognizing at home, with defense the first step. Rather than moving first to blame the attack, look at the defense framework and why the attacker chooses a certain target.
Cyber interactions at not all that different than past physical interactions. Once we accept this reality we can move towards a nuanced view of cyber security.

12. The Cyber Future
Militarizing digital space leaves little room for civilian applications such as research, communication, education, and productivity
Given that we are in an era of cyber stability and peace, how do we encourage it to endure? The simplest way is to maintain that attacks by states and non-state actors alike on civilian populations are off limits.
Going further, institutions need to be built that might enforce these norms of non-action and cyber protection
Cyberspace can be controlled and made safe, but this requires us to understand it, to be aware of the possible escalation dynamics at hand in each conflict, and to be take in all the information possible - not just relying on one source or perspective.