First, we should clear something up. When you wrote, “The person you talk to online could be down the street or halfway across the world. How do you grant a country jurisdiction over something that doesn't belong to any one country. [sic] If people from all over the world participate in a forum where even criminal activity occurs, whose job is it to prosecute. [sic] Although we in the US often like to think we police the world, that is really neither our right nor our job, so how should one go about dealing with the Internet?” I at first thought you were arguing that we shouldn't try to regulate the Internet. Reading it again, however, and taking into consideration your more recent post, I see that you do agree we should regulate and are more worried with how and how much.
I'll stop here for a moment to draw out a short roadmap. First, I will describe why I still believe perfect anonymity is a bad thing. Then, since we agree that education will be an important part of improving the Internet in the years to come, I will briefly propose a way to spread such education. Finally, I'll talk a little about privacy concerns.
Against perfect anonymity
Even if the government still has the power, legally, to punish those who commit crimes online, sometimes legal means aren't enough. This is why we have quite a number of unenforced laws in this country. For example, due to difficulty, it is extremely unlikely that you will be fined for not filling out your 2010 census, even though you can legally be fined something in the order of thousands of dollars. This has led to a number of people to urge citizens to not fill out the census, due to the fear that the Socialist/Fascist/Nazi/Communist/Marxist/Antichrist (apparently these terms are thought to be interchangeable) Obama Administration will use the information to round up civilians like the government did to the Japanese after Pearl Harbor, back when that was legal. They are choosing their fear of the government over their own welfare. Census results are used to divvy up electoral votes and money given to states, so they're giving themselves less of a voice and less money (not that I will tell them that. GOGO 60 Electoral Votes for California!). Likewise, allowing a system to arise in which it is easy to obtain perfect anonymity would render the government powerless on the Internet.
The solutions you propose—education and self-regulation—work fine when we're dealing with anonymous speech and harassment. Yet my concerns with absolute anonymity and a lack of government power over what people due with or on the Internet lies elsewhere. In fact, I believe that in such a future, speech, harassment, and people's feelings will be the least of our problems. Blacker crimes would have the opportunity to flourish than defamation. The crimes I worry about are far more serious, such as viruses, hacking, DDOS attacks, and fraud. At the very least, enabling risk-free pursuit of these crimes would lead to an security arms race—a race severely disadvantageous to the “good guys.” So much financial information is online these days, with more and more banking and retail occurring through use of the Internet, that just a single negligent business or site that failed to keep up with security would cause a nasty leak of sensitive information. In short, I realize that there are a lot of good people who have made and will continue to try to make lawful, civil parts of the Internet, but if the government ever cedes or loses its ability to enforce laws, I don't think any amount of goodwill can stop viruses, attacks, and identity theft from occurring on an even greater scale. Businesses will suffer not from their customers who enter credit card numbers and other information you mentioned, but from people stealing this information and/or attacking their sites.
Regarding child pornography, you said that 1) kidnapping was a traceable crime and that 2) criminals might freely give identifying information to anonymous authorities. Regarding the first point, according to a study in three states, 96% of rape victims under the age of 12 knew their attackers. 50% of the offenders were friends or acquaintances (horrifyingly, the other 46% of offenders were relatives or parents). Kidnapping may be a traceable crime, but that relies on it kidnapping occurring in the first place. Regarding 2), without any kind of evidence other than what the criminal himself told the authorities, there is no way evidence would be strong enough to convict anyone. It would be (and kind of is already) tremendously easy, for example, for me to log on and start telling everyone, “hi2u, my name is Gabrielle Ehrlich. Here's some CP I made, lol.” Once again, it is easy for a careful criminal to avoid detection. It seems like you would trust pedophiles and other criminals to be careless more than you would trust the government to not abuse its ability to fight crime, which seems off to me.
In other words, I really, really don't think designing the network to support easy, perfect anonymity is a good idea. A very large degree of anonymity is certainly something of value, as we have agreed, but we should be weary of going too far. It's just like how some universities fought the RIAA lawsuits by redesigning their networks to forget any identifying information. While fighting the unreasonable and unfair RIAA lawsuits is certainly good, I don't think making it impossible to catch people stealing music from artists who legitimately deserve to be paid is a very good long-term solution. Anonymity is good, but perfect anonymity isn't. Rather than use technological “advances” to force the government to not regulate the Internet, I think we should use the law. While it would take longer to develop and pass, it is at least something that we can conceivably alter in the future, unlike widely-adopted technology.
Brief thoughts on education
I agree that education is a very good way to combat the problems of hateful speech and defamation online. I myself was shocked to learn that law firms around the country had decided to give trolls and flamers import by letting what they said affect their decision calculus. By educating people and teaching them to turn a blind eye/ear to what they read online, we disarm such trolls. I do have qualms with the idea that the best way to fix the Internet is to, by default, not take it seriously. I think it's a bit sad that it has come to this. Still, I believe that some degree of education would be helpful in any case. The best way I can see it is to include it as part of education standards. Of course, I don't believe this is possible on a federal level, and must be done state-by-state. I imagine most non-Amish schools these days already include some form of technology training; my elementary school taught typing and Internet/web design basics. It wouldn't be too difficult to add a few lessons about how to react and treat messages on the Internet. Another good way would be to encourage browsers to include links for first time Internet users on their default home pages. This way, older people who are using the Internet for the first time can get the information despite not being taught in school.
Protecting privacy
I think we agree for the most part that the government should be involved somewhat in making sure companies don't start abusing the (quite extensive) knowledge they have of us. You wrote, “By using Google, people are saying I want better service, and I'm willing to give up a little bit of privacy for it.” I don't think this is true for everyone, though. We are both knowledgeable enough about the technology to know the risks we are taking with our information, but most people are probably unaware. Certainly word is spreading more quickly about privacy concerns these days, but I think the risks aren't clear enough to people in general. Part of this, again, could be solved through education, and the companies technically do provide privacy policies in writing, but no average user ever reads them. In short, I agree that we should try as best we can not to harm any company's competitiveness, but we still need to either define/change what corporations can do with our information or at least make it more obvious.
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