[Here’s an oped of mine that recently ran on Reuters. Readers will recognize many of these themes and arguments since I have developed them here on the TLF many times before.]
by Adam Thierer, Mercatus Center at George Mason University
Would you like to pay $20 a month for Facebook, or a dime every time you did a search on Google or Bing? That’s potentially what is at stake if the Obama administration and advocates of stepped-up regulation of online advertising get their way.
The Internet feels like the ultimate free lunch. Once we pay for basic access, a cornucopia of seemingly free services and content is at our fingertips. But those services don’t just fall to Earth like manna from heaven. What powers the “free” Internet are data collection and advertising. In essence, the relationship between consumers and online content and service providers isn’t governed by any formal contract, but rather by an unwritten
quid pro quo: tolerate some ads or we’ll be forced to charge you for service. Most consumers gladly take that deal—even if many of them gripe about annoying or intrusive ads, at times. Continue reading →
[Note: This post is updated regularly as I discover relevant old or new material.]
“Regulatory capture” occurs when special interests co-opt policymakers or political bodies — regulatory agencies, in particular — to further their own ends. Capture theory is closely related to the “rent-seeking” and “political failure” theories developed by the public choice school of economics. Another term for regulatory capture is “client politics,” which according to James Q. Wilson, “occurs when most or all of the benefits of a program go to some single, reasonably small interest (and industry, profession, or locality) but most or all of the costs will be borne by a large number of people (for example, all taxpayers).” (James Q. Wilson,
Bureaucracy, 1989, at 76).
While capture theory cannot explain all regulatory policies or developments, it does provide an explanation for the actions of political actors with dismaying regularity. Because regulatory capture theory conflicts mightily with romanticized notions of “independent” regulatory agencies or “scientific” bureaucracy, it often evokes a visceral reaction and a fair bit of denialism. (See, for example, the reaction of New Republic’s Jonathan Chait to Will Wilkinson’s recent Economist column about the prevalence of corporatism in our modern political system.) Yet, countless studies have shown that regulatory capture has been at work in various arenas: transportation and telecommunications; energy and environmental policy; farming and financial services; and many others.
I thought it might be useful to build a compendium of quotes from various economists and political scientists who have studied the regulatory process throughout history and identified regulatory capture or client politics as a major problem. I would greatly appreciate having others suggest additional quotes and studies to add to this list since I plan to update it frequently and eventually work all of this into a future paper or book. [
Note: I have updated this compendium over a dozen times since the original post, so please check back for updates.]
The following list is chronological and begins, surprisingly, with the thoughts of progressive hero Woodrow Wilson…
Continue reading →
This is a response to Nick Carr’s recent piece, “The Attack on Do Not Track,” in which he goes after me for some comments I made in this essay about the trade-offs at work in the privacy and online advertising debates. In his critique of my essay, he argues:
What the FTC is suggesting is that the unwritten quid pro quo be written, and that the general agreement be made specific. Does Thierer really believe that invisible tradeoffs are somehow better than visible ones? Shouldn’t people know the cost of “free” services, and then be allowed to make decisions based on their own cost-benefit analysis? Isn’t that the essence of the free market that Thierer so eloquently celebrates?
My response to Nick follows. Continue reading →
The advocates of regulation pay lip service to the importance of advertising in funding online content and services but don’t seem to understand that this quid pro quo is a fragile one: Tipping the balance, even slightly, could have major consequences for continued online creativity and innovation.
Who is this handsome young man and why does he have “Mr. Yogato Stamped Me!!!” on his forehead? More importantly, why does he look so darn happy?
Flashback: Earlier this week, my partner Michael (pictured) and I visited Mr. Yogato, a frozen yogurt shop in Washington’s Dupont Circle neighborhood which describes itself as “the FUNNEST yogurt experience you’ll ever have.”
Apart from serving exceptionally tasty frozen yogurt and letting customers play a vintage Nintendo, Mr. Yogato is famous for the eight “Rules of Yogato,” which offer discounts if users achieve certain feats, including:
- Answering devilishly difficult trivia (10% off—or extra if you fail)
- Reciting the Stirling battlefield speech from Braveheart in a great Scottish accent (20% off)
But the best discount, which Michael does every time (unless I’m there to help identify, say, countries that end in ‘L’), is offered for wearing the Yogato stamp on your forehead. Being stamped is, of course,
almost as much fun as singing along to “Mr. Roboto” if you’re lucky enough to hear that played while you’re in the shop (10% off). But the real fun is in engaging passersby on the street about the icy-sweet joys of Yogato. It’s also, of course, probably the most effective advertising Mr. Yogato could ever want.
So, the next time you hear Adam Thierer and I talk about the benefits of advertising, especially online, just remember that while there is no free lunch (nor free frozen yogurt), there is discounted frozen yogurt. It’s a simple, obvious quid pro quo: 10% off in exchange for spreading the Gospel of Yogato. Continue reading →
This week I was pleased to join a diverse collection of think tanks and public interest groups in submitting joint comments to the FCC opposing the proposed content filtering mandate that would be part of a future AWS-3 auction. That’s the proposed auction that would create a “free” nationwide wireless broadband service. As part of the deal, the company would need to need to take steps to provide a “clean” Internet connection by filtering content. This joint filing points out why that is a bad idea:
- the reach of the filtering mandate is extraordinarily broad, and would attempt to censor content far beyond any content regulation regime that has been previously upheld in the face of constitutional challenge.
- even if the scope of the filtering mandate were more narrowly focused, it would conflict with the First Amendment analysis that the Supreme Court applied to Internet access in the seminal
Reno v. ACLU decision.
- even if the Commission were to require filtering on an “opt out” or “opt in” basis, the Constitutional problems would not be avoided. Opt-out filtering would impose an unconstitutional burden on listeners and recipients of Internet communications, and both opt-out and opt-in filtering would violate the First Amendment rights of speakers and other content providers on the Internet. Simply put, the First Amendment does not allow a government mandated “blacklist” of websites to be blocked.
- would also violate the terms and intent of two federal statutes – 47 U.S.C. § 326 (which prohibits the Commission from “interfer[ing] with the right of free speech”) and 47 U.S.C. § 230 (which promotes user control over content and limits burdens on service providers).
- would also limit what people could do online using the free AWS-3 service so dramatically that the usefulness of the service would be radically reduced.
- would also certainly lead to legal challenges that would delay the implementation of the proposed access service.
Continue reading →
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