State – Technology Liberation Front https://techliberation.com Keeping politicians' hands off the Net & everything else related to technology Mon, 22 Jan 2024 15:51:44 +0000 en-US hourly 1 6772528 We Need Federal Preemption of State & Local AI Regulation https://techliberation.com/2024/01/22/we-need-federal-preemption-of-state-local-ai-regulation/ https://techliberation.com/2024/01/22/we-need-federal-preemption-of-state-local-ai-regulation/#comments Mon, 22 Jan 2024 15:51:44 +0000 https://techliberation.com/?p=77175

In my latest column for The Hill, I explore how “State and Local Meddling Threatens to Undermine the AI Revolution” in America as mountains of parochial tech mandates accumulate. We need a federal response, but we’re not likely to get the right one, I argue.

I specifically highlight the danger of new measures from big states like NY and California, but it’s the patchwork of all the state and local regs that will result in a sort of ‘death-by-a-thousand-cuts’ for AI innovation as the red tape grows and hinders innovation and capital formation.

What we need is the same sort of principled, pro-innovation federal framework or AI that we adopted for the Internet a generation ago. Specifically, we need some sort of preemption of most of the state and local constraints on what is inherently national (and even global) commerce and speech.

Alas, Congress appears incapable of getting even basic things done on tech policy these days. As far as I can tell, not a single AI bill in front of Congress today would preempt most of this state and local AI regulatory activity.

Worse yet, if Congress did somehow pass anything on AI right now, it’d probably just include even more anti-innovation mandates and agencies without preempting any of the state and local ones. Thus, America would just be piling bad mandates on top of bad mandates until we basically become like Europe, where innovation goes to die under piles of bureaucratic red tape.

It’s a miserable state of affairs with horrible consequences for the U.S. as global competition from China heats up on the AI front. America is sacrificing its competitive advantage on digital technology because fear-based thinking and partisan politics continue to prevent the adoption of a principled, bipartisan vision for artificial intelligence policy.

See my new Hill column for more discussion, and also make sure to check out my earlier Hill essay on “A balanced AI governance vision for America,” as well as these two big R Street Institute reports from last year about how Congress can craft sensible, pro-innovation AI policy for America:

And here is some additional reading on the dangerous regulatory situation we are facing today in terms of over-regulating artificial intelligence by treating innovators as guilty until proven innocent. America is about to shoot itself in the foot as the global race begins for the more important technological revolution of our lifetime:

]]> https://techliberation.com/2024/01/22/we-need-federal-preemption-of-state-local-ai-regulation/feed/ 498 77175 Skeptical Takes on Expansive Industrial Policy Efforts https://techliberation.com/2021/03/15/skeptical-takes-on-expansive-industrial-policy-efforts/ https://techliberation.com/2021/03/15/skeptical-takes-on-expansive-industrial-policy-efforts/#comments Mon, 15 Mar 2021 17:09:11 +0000 https://techliberation.com/?p=76845

[Last updated 3/25/22]

Industrial Policy is a red-hot topic once again with many policymakers and pundits of different ideological leanings lining up to support ambitious new state planning for various sectors — especially 5G, artificial intelligence, and semiconductors. A remarkably bipartisan array of people and organizations are advocating for government to flex its muscle and begin directing more spending and decision-making in various technological areas. They all suggest some sort of big plan is needed, and it is not uncommon for these industrial policy advocates to suggest that hundreds of billions will need to be spent in pursuit of those plans.

Others disagree, however, and I’ll be using this post to catalog some of their concerns on an ongoing basis. Some of the criticisms listed here are portions of longer essays, many of which highlight other types of steps that governments can take to spur innovative activities. Industrial policy is an amorphous term with many definitions of a broad spectrum of possible proposals. Almost everyone believes in  some form of industrial policy if you define the term broadly enough. But, as I argued in a September 2020 essay “On Defining ‘Industrial Policy‘,” I believe it is important to narrow the focus of the term such that we can continue to use the term in a rational way. Toward that end, I believe a proper understanding of industrial policy refers to targeted and directed efforts to plan for specific future industrial outputs and outcomes.

The collection of essays below is merely an attempt to highlight some of the general concerns about the most ambitious calls for expansive industrial policy, many of which harken back to debates I was covering in the late 1980s and early 1990s, when I first started a career in policy analysis. During that time, Japan and South Korea were the primary countries of concern cited by industrial policy advocates. Today, it is China’s growing economic standing that is fueling calls for ambitious state-led targeted investments in “strategic” sectors and technologies. To a lesser extent, grandiose European industrial policy proposals are also prompting new US counter-proposals.

All this activity is what has given rise to many of the critiques listed below. If you have suggestions for other essays I might add to this list, please feel free to pass them along. FYI: There’s no particular order here.

Scott Lincicome and Huan Zhu, “Questioning Industrial Policy: Why Government Manufacturing Plans Are Ineffective and Unnecessary,” Cato Institute Working Paper, June 16, 2021.

[I]ndustrial policy – properly defined – has an extensive and underwhelming history in the United States, featuring high costs (seen and unseen), failed objectives, and political manipulation. Surely, not every U.S. industrial policy effort has ended in disaster, but facts here and abroad argue strongly against new government efforts to boost “critical” industries and workers and thereby fix alleged market failures. Such efforts warrant intense skepticism – skepticism that today is unfortunately in short supply.

Adam Thierer, “Industrial Policy as Casino Economics,” The Hill, July 12, 2021.

While some government investments will always be necessary, policymakers engaging in casino economics means bad industrial policy bets and taxpayer money squandered on risky ventures best made by private actors. We need to keep Uncle Sam’s gambling habits in check.

Adam Thierer, “Thoughts on the America COMPETES Act: The Most Corporatist & Wasteful Industrial Policy Ever,” Technology Liberation Front, January 26, 2022.

As far as industrial policy measures go, the COMPETES Act is one of the most ambitious and expensive central planning efforts in American history. It represents the triumph of top-down, corporatist, techno-mercantilist thinking over a more sensible innovation policy rooted in bottom-up competition, entrepreneurialism, private investment, and free trade.

Adam Thierer & Connor Haaland, “Does the US Need a More Targeted Industrial Policy for AI & High-Tech?” Mercatus Center at George Mason University, Special Study, November 2021.

This paper considers how both the recent history of high-tech industrial policy efforts at the national and international level—as well as some state and local economic development efforts in the United States—might better inform the wisdom of proposed efforts for AI or other high-tech sectors. That history is spotted with some limited successes alongside a long string of costly failures. We explore the reasons for those failures and recommend that the US refocus on the policy prerequisites that helped give rise to the computing and internet revolutions: a more generalized approach to economic development rooted in light-touch regulation and taxation of emerging technology.

Samuel Gregg, “Can America Build A Broad-Based Economy?”  Law & Liberty, March 1, 2022

Of course, if a government decides to put enough money and resources behind a given industrial policy, it will likely produce some results. Yet the same is true of the gambler. If she stays in the casino long enough and spends enough money, she will win a few hands of cards. But the odds are that she will also lose a great deal of money, especially if she is as inept a gambler as the government is maladroit at identifying industry trends or entrepreneurial opportunities. Moreover, just as a compulsive gambler’s behavior will have numerous negative effects on her family’s well-being, so too does industrial policy risk inflicting wider damage upon a nation’s economy and political system. The harms range from gross misallocations of resources to the rampant cronyism and rent-seeking that seems inseparable from industrial policy (which, I again note, its advocates studiously avoid discussing), to name just a few.

Phil Gramm & Mike Solon, “Peace Through Strength Requires Economic Freedom,” Wall Street Journal, March 1, 2022.

The America Competes Act is the House’s effort to outdo the Chinese Communist Party’s latest five-year plan. The 2,900-page bill would make an old Soviet commissar blush.  [. . . ] America’s success in the world economy has never depended on industrial policy or government subsidies. It has come from the relative absence of government planning and subsidies. This is hardly news. The U.S. government provided support for the efforts of Samuel Langley, the greatest aviation expert of the 1890s, in his effort to make America first in powered flight. His manned Aerodrome flopped into the Potomac River. It was the Wright brothers, two unsubsidized but determined bicycle makers from Dayton, Ohio, who flew at Kitty Hawk, N.C., and changed the world.

Scott Lincicome, “Moving Fast and Breaking Things,” Capitolism, February 2, 2022.

Adam Thierer, “The Coming Industrial Policy Hangover,”  The Hill, February 16, 2022.

In the rush to pass legislation, we’ve barely heard a peep about the $250-$350 billion price tag. This follows a massive splurge of recent government borrowing, which led to the U.S. national debt hitting another lamentable new record: $30 trillion. China already owns over $1 trillion of that debt, making one wonder if we’re really countering China by adopting a massive, new and unfunded industrial policy that they will end up financing indirectly.

Podcast: “What’s Wrong with Industrial Policy,” Hold These Truths with Rep. Dan Crenshaw, February 16, 2022.

Tad DeHaven and Adam Thierer, “ The Military-Industrial Complex Offers a Cautionary Tale for Industrial Policy Planning,” Discourse, March 25, 2022.

Wayne Crews, “What To Do Instead Of The America COMPETES Act,” Forbes, February 2, 2022.

All this spending and expansion of the federal government, atop which our leaders would lay the America COMPETES Act and doubtless its own accompanying guidebook, has massive, ignored regulatory effects. Trillions in government spending (”investment”) have altered and will alter the entire trajectory and competitive environment of industries engaged in large-scale enterprises and transactions. This removes vast swaths of business activity from free competitive enterprise altogether, and creates displacements and distortions such that the restoration of free enterprise becomes a near-impossible disentanglement. The result is, after 100 years of big government and seduction of and fusion with big business, the greatest endeavors—from infrastructure to artificial intelligence, from smart cities to space—now consist of “partnerships” with governments rather than free enterprise, at scales and at costs so gigantic they can only be ignored.

Adam Thierer, “‘Japan Inc.’ and Other Tales of Industrial Policy Apocalypse,” Discourse, June 28, 2021.

Perhaps the most ironic indictment of industrial policy punditry lies in the way all the earlier books and essays about Japanese planning not only failed to forecast the many flops associated with it, but also did not foresee China as a potential future economic juggernaut. [. . .] What might that tell us about the ability of experts to predict the future course of countries and economies?

Adam Thierer, “Can Government Reproduce Silicon Valley Everywhere?”  Technology Liberation Front, September 12, 2021.

government efforts to artificially try to create regional innovation hubs in a top-down, technocratic fashion will almost certainly persist. As they do, some will argue that this time will be different! Perhaps, but it is more likely that the past is prologue; these new hubs will likely cause federal politicians to jockey for position to have their regions named one of the winners and get a big cut of all the new high-tech pork being served up by Washington.

Weifeng Zhong, “Beijing Can’t Make Sense of Biden’s China Strategy. Can Biden?” Washington Examiner, July 01, 2021.

America is not China, and it would be a fatal mistake to equate competing with China with imitating what China does. Doing so would risk the advantageous U.S. position as the world’s chief innovator, whose ideas are turned into products by vibrant private sectors both domestically and internationally.

Mike Watson, “Industrial Policy in the Real World,” National Affairs, Summer 2021.

Given the nature of industrial policymaking in the United States, there’s little reason to believe future attempts at industrial planning will result in a more coherent, rational, or strategic allocation of resources than they have in the past. [. . .] In short, industrial policy in the United States cannot be steered by a small group of enlightened individuals, because a small group of enlightened individuals will never be at the helm. Indeed, in some sense, there is no single “helm” to speak of.
 

Samuel Gregg, “Industrial Policy Mythology Confronts Economic Reality,” Law & Liberty, September 3, 2021.

If prizes in policy debates were given out for persistence, those advocating for more widespread use of industrial policy in America would be first in line. No matter how many times it is pointed out that they don’t understand the nature and workings of comparative advantage; or avoid acknowledging how industrial policy fosters rampant cronyism and corruption; or highlight what they consider examples of countries in which industrial policy has been employed successfully (only to have it demonstrated that it didn’t quite work out the way they suggested), they don’t give up.

Elizabeth Nolan Brown, “If This Is How America COMPETES, We’re Going to Lose,” Reason, January 26, 2022.

the bill can’t simply address one main issue or a few critical needs. Instead, it tries to insert the government into every aspect of all sorts of industries and markets and pretend that bureaucrats can solve complex social and cultural issues.

Chang-Tai Hsieh, “Countering Chinese Industrial Policy Is Counterproductive,” Project Syndicate, September 15, 2021.

US political leaders have long tried to counter Chinese industrial policy. And now they seem to have decided that the best way to do that is to emulate it. But their agenda betrays a profound lack of understanding of the unique challenge posed by China’s coupling of an authoritarian political regime with a dynamic market economy.

Adam Thierer, “Industrial Policy Advocates Should Learn from Don Lavoie,” Discourse, November 5, 2021.

“In light of the inherent deficiencies of central planning,” Lavoie said, “it might be argued that the U.S. should instead try to reduce current government interference with the competitive process to the absolute minimum consistent with other political goals.” It remains wise advice for today’s policymakers.
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Anne O. Krueger, “America’s Muddled Industrial Policy,” CGTN, June 25, 2021.

Governments have a poor track record of identifying “winners” – be it a company or a category of technology – whereas private companies have proved better at transforming new discoveries into new products or cost savings. That is why the U.S. state traditionally has stuck to funding basic research.

Eric Boehm, “Massive Subsidies Won’t Solve the Semiconductor Supply Chain Crisis,” Reason, January 28, 2022.

Tracy C. Miller, “The Case for Limiting Government Semiconductor Subsidies,” The Hill, June 26, 2021.

Without the subsidies, firms would be more cautious about building or expanding foundries. If long-term production capacity is truly insufficient, high prices and anticipated profits give firms the right incentives to build or expand and satisfy demand at cost-covering prices.

Scott Lincicome, “The ‘Endless Frontier’ and American Industrial Policy,” Cato Institute Blog, May 26, 2021.

U.S. industrial policy has a long history of struggling to overcome political pressures, just as public choice predicts, and the EFA is no different. None of this means that all legislating is bad, or that politicians don’t at least occasionally vote in the national interest. Instead, the public choice framework simply adds another hurdle—along with things like the “knowledge problem,” seen and unseen costs, and misaligned incentives—to designing and implementing commercial policies specifically intended to beat the admittedly messy and imperfect situation that the market generates. It’s imperative that we understand these risks before supporting policies that, while they might look good on paper, could easily morph into a counterproductive boondoggle—one we’ve seen countless times with respect to U.S. industrial policy.

Daniel W. Drezner, “Is the United States capable of industrial policy in 2021?” Washington Post, June 14, 2021.

To believe that the United States can pursue a high-caliber industrial policy, however, requires assuming a more competent state than I have seen in the past decade.

Douglas Holtz-Eakin, “The Nicest Thing I Can Write About Supply Chain Policy,” The Daily Dish, June 10, 2021.

Nevertheless, the Senate just passed a provision for $50 billion to subsidize chip fabrication – something the president had requested – and the House will doubtlessly concur. That might seem like an industry victory, but wait until it realizes that the administration will assume it gives it the right to insist on union jobs, micromanage the design of chips, and dictate the pricing and distribution of the products. Good luck with that. As the definitive volume on policy analysis (Benjamin Franklin’s Poor Richard’s Almanack) put it, “He that lieth down with dogs shall rise up with fleas.”

Lipton Matthews, “Industrial Policy—a.k.a. Central Planning—Won’t Make America Great,” Mises Wire, November 5, 2021.

Although industrial policy is in vogue, the evidence suggests that it is not necessary for long-term development. Moreover, despite the popularity of industrial policy in China, America remains the world’s economic power, and by following China, it may lose this vaunted position.

Richard Beason, “Japanese Industrial Policy: An Economic Assessment,” National Foundation for American Policy, November 2021.

There is no evidence to support the claim that Japanese industrial policy during the 1955-1990 period enhanced growth rates by sector, industries with economies of scale (greater efficiency when produced in increased amounts), productivity growth or “competitiveness.” The reality of the political process and government spending priorities makes it very difficult for such policies to be effective. Furthermore, even if political pressures had not intervened, it seems questionable to suggest that government policymakers would be better than actual market participants in determining the most efficient allocation of resources to produce the best economic outcomes.

Douglas Irwin, “ Memo to the Biden administration on how to rethink industrial policy,” Peterson Institute for International Economics, October 2020.

The challenge for policymakers is to identify such industries without succumbing to the notion that every industry is vital to some public objective. For example, the goal of “economic security” is so broadly defined and open-ended that virtually every domestic producer could claim the need for government support on that basis. The risk is that ill-conceived government programs will encourage corrupt behavior in which industries benefit themselves without contributing to national welfare.

Jim Pethokoukis, “Will Biden’s embrace of industrial policy pay off?” AEI Blog, January 15, 2021.

The history of such efforts in advanced capitalist economies gives ample reason for skepticism about the effectiveness of such top-down government planning, from Japanese economic stagnation to the now-mothballed Concorde supersonic jet to France’s failed attempt to create a thriving tech sector. The Internet might seem like the exception that negates the rule, but what turned out to be a successful partnership of government and entrepreneurs didn’t arise out of some master plan from Washington. And what do even the smartest plans look like when filtered through the dodgy quality of American governance? Maybe as an excuse for cronyism and protectionism.

Adam Thierer & Connor Haaland, “Should the U.S. Copy China’s Industrial Policy?” Discourse, March 11, 2021.

America needs to embrace its already vibrant venture capital market, the benefits of basic science and prize competitions, and a light-touch regulatory approach instead of gambling taxpayer dollars on grandiose industrial policy schemes that would likely become boondoggles.

Connor Haaland & Adam Thierer, “Can European-Style Industrial Policies Create Tech Supremacy?” Discourse, February 11, 2021.

Thus far, however, the Europeans don’t have much to show for their attempts to produce home-grown tech champions. Despite highly targeted and expensive efforts to foster a domestic tech base, the EU has instead generated a string of industrial policy failures that should serve as a cautionary tale for U.S. pundits and policymakers, who seem increasingly open to more government-steered innovation efforts.

Phil Levy & Christine McDaniel, “ Does the U.S. Need a Vigorous Industrial Policy?” Discourse, February 16, 2021.

we are certainly hearing new enthusiasm these days about industrial policy. It seems to have proponents or converts on both sides of the aisle. This either means that a new consensus has emerged, or it means that the term is being used so loosely that it has lost its original meaning. I’ll go with the latter; it now means different things to different people.

Wall Street Journal columnist Greg Ip discussing why “ The traditional skepticism toward industrial policy is well deserved.”

The traditional skepticism toward industrial policy is well deserved. Once Washington starts writing checks for semiconductors, other industries may get in line with the outcome determined more by political clout than economic merit. As in shipbuilding, the targeted companies may end up in perpetual need of federal protection and unable to compete internationally

David Ignatius, “The U.S. is quietly mobilizing its economy against China,” Washington Post, March 4, 2021.

The industrial policy the AI commission recommends could unlock talent and innovation. But if officials aren’t careful, government intervention could also afflict our best companies with the dead weight and dysfunction of our broken political system. We need government to spawn brainpower, not bureaucracy.

Veronique de Rugy, “Support for Industrial Policy is Growing,” AIER, January 18, 2020.

Looking at the federal government today tells me that the problems surrounding R&D programs in the past continue today, and will continue tomorrow, because they are simply a consequence of the normal functioning of government. It is hard to wish these problems away, even in the face of the private sector’s “imperfections.” Those arguing for more funding in R&D should proceed with caution.
This bill is proposing to give money with risk-averse restrictions to a risk-averse organization (the NSF) to be dispersed among other risk-averse organizations (Universities) into a system with increasingly risk-averse incentives. Note that I’m not saying “it’s all fubar’d lets burn it to the ground!” but I am suggesting that instead of slamming on the accelerator, we should be asking “what would a tune-up and an oil change look like instead?”

Ryan Bourne, “Do Oren Cass’s Justifications for Industrial Policy Stack Up?”  Cato Commentary, August 15, 2019.

Oren Cass asserts that markets cannot generally allocate resources efficiently by industry. Yet he provides no meaningful metrics to show this is the case, nor shows why his policies would deliver better outcomes. His two main claims about the benefits of a manufacturing sector — “stable employment” and “strong productivity growth” — are directly contradictory. A plethora of evidence suggests as countries’ get richer due to automation and technological improvements, they demand relatively more services, and so the industrial sector declines in employment terms.
Scott Lincicome, “ Manufactured Crisis: ‘Deindustrialization, Free Markets, and National Security,” Cato Policy Analysis No. 907, January 27, 2021.
This skepticism—mostly absent from Washington—is indeed warranted: analyses of the U.S. manufacturing sector and the relationship between trade and national security, as well as the United States’ long and checkered history of security‐​related protectionism, undermine the theoretical justifications for imposing protectionism and industrial policy in the name of national defense. Instead, open trade, freer markets, and global interdependence will in almost all cases produce better outcomes in terms of national security and, most importantly, preventing wars and other forms of armed conflict.
Matthew Lau, “Trudeau government’s ‘industrial policy’ creates all the wrong incentives,” Toronto Sun, March 16, 2021.
]]> https://techliberation.com/2021/03/15/skeptical-takes-on-expansive-industrial-policy-efforts/feed/ 4 76845 Evasive Entrepreneurs vs. Ridiculous Liquor Rules https://techliberation.com/2020/07/28/evasive-entrepreneurs-vs-ridiculous-liquor-rules/ https://techliberation.com/2020/07/28/evasive-entrepreneurs-vs-ridiculous-liquor-rules/#comments Tue, 28 Jul 2020 15:05:46 +0000 https://techliberation.com/?p=76776

Cheers to Post-Yoga BeersFew things unify people in America more than beer and liquor regulations. On one side you have the forces of repression, who either favor strong liquor taxes and regulations on moralistic grounds, or because they favor curtailing competition and choice for a variety of reasons. On the other side you have those of us looking to end the insanity of quasi-Prohibitionary rules that do nothing to boost public health but do plenty to annoy the living hell out of us (and cost us plenty). And the really interesting thing is that these two groups contain plenty of people of radically different political persecutions. Liquor regulations are the greatest destroyer of political partisanship ever!

For those of us who favor liberalization, as I write in my latest AIER column:

The good news is that evasive entrepreneurs and an increasingly technologically-empowered public will keep pushing back and hopefully whittle away at the continuing vestiges of Prohibition Era stupidity. Where there’s a will, there’s a way, and when people want a drink, crafty entrepreneurs will usually find a way to deliver.

I talk a walk back through history and discuss how efforts to evade ridiculous liquor controls have been a longstanding feature of the American experience. People can be remarkably creative when seeking to circumvent silly rules–both before, during, and after Prohibition. Indeed, the insanity continues today. I document several examples of how:

In the wake of the COVID lockdowns, some state and local governments relaxed liquor carryout and delivery laws to give bars, breweries, and distilleries a chance to weather the forced closings. Unfortunately, many of those laws also required those establishments to sell food as part of every transaction if they wanted to sell or serve drinks. The results were comical in many states as evasive entrepreneurs devised creative regulatory work-arounds to deal with these “gotta-eat-to-drink” edicts.

I provide examples of this happening in Pennsylvania, New York, Virginia, and DC with dumb rules like that. Finally, I also come clean about my own bootlegger past! Read on.

]]> https://techliberation.com/2020/07/28/evasive-entrepreneurs-vs-ridiculous-liquor-rules/feed/ 2 76776 Trump’s AI Framework & the Future of Emerging Tech Governance https://techliberation.com/2020/01/08/trumps-ai-framework-the-future-of-emerging-tech-governance/ https://techliberation.com/2020/01/08/trumps-ai-framework-the-future-of-emerging-tech-governance/#respond Wed, 08 Jan 2020 20:04:57 +0000 https://techliberation.com/?p=76648

This week, the Trump Administration proposed a new policy framework for artificial intelligence (AI) technologies that attempts to balance the need for continued innovation with a set of principles to address concerns about new AI services and applications. This represents an important moment in the history of emerging technology governance as it creates a policy vision for AI that is generally consistent with earlier innovation governance frameworks established by previous administrations.

Generally speaking, the Trump governance vision for AI encourages regulatory humility and patience in the face of an uncertain technological future. However, the framework also endorses a combination of “hard” and “soft” law mechanisms to address policy concerns that have already been raised about developing or predicted AI innovations.

AI promises to revolutionize almost every sector of the economy and can potentially benefit our lives in numerous ways. But AI applications also raise a number of policy concerns, specifically regarding safety or fairness. On the safety front, for example, some are concerned about the AI systems that control drones, driverless cars, robots, and other autonomous systems. When it comes to fairness considerations, critics worry about “bias” in algorithmic systems that could deny people jobs, loans, or health care, among other things.

These concerns deserve serious consideration and some level of policy guidance or else the public may never come to trust AI systems, especially if the worst of those fears materialize as AI technologies spread. But how policy is formulated and imposed matters profoundly. A heavy-handed, top-down regulatory regime could undermine AI’s potential to improve lives and strengthen the economy. Accordingly, a flexible governance framework is needed and the administration’s new guidelines for AI regulation do a reasonably good job striking that balance.

Background

Last February, the White House issued Executive Order 13859, on “Maintaining American Leadership in Artificial Intelligence.” The Order announced the creation of the “American AI Initiative,” an effort to “focus the resources of the Federal government to develop AI.” It prioritized investments in AI-focused research and development (R&D), building a workforce ready for the AI era, international engagement on AI priorities, and the establishment governance standards for AI systems to “help Federal regulatory agencies develop and maintain approaches for the safe and trustworthy creation and adoption of new AI technologies.”

Regarding that last objective, Order 13589 required the Office of Management and Budget (OMB) and the Office of Science and Technology Policy (OSTP) to develop a framework and set of principles for federal agencies to follow when considering the development of regulatory and non‑regulatory approaches for AI. Importantly, the Order also specified that the framework should seek to “advance American innovation” and “reduce barriers to the use of AI technologies in order to promote their innovative application while protecting civil liberties, privacy, American values, and United States economic and national security.”

That resulted in the memorandum sent to heads of federal departments and agencies this week entitled, “Guidance for Regulation of Artificial Intelligence Applications” (hereinafter AI Guidance). The draft version of the AI Guidance specifies that “federal agencies must avoid regulatory or non-regulatory actions that needlessly hamper AI innovation and growth.” More specifically:

“Agencies must avoid a precautionary approach that holds AI systems to such an impossibly high standard that society cannot enjoy their benefits. Where AI entails risk, agencies should consider the potential benefits and costs of employing AI, when compared to the systems AI has been designed to complement or replace.”

But the AI Guidance is certainly not a call for comprehensive deregulation or the abandonment of all AI federal oversight. The memorandum’s very title reflects an understanding that existing laws and agency rules will continue to play a role in guiding the development of AI, machine-learning, and autonomous systems.

Accordingly, and consistent with past executive orders and OMB regulatory guidance documents for federal agencies, the AI Guidance establishes a set of ten principles that agencies must take into consideration when considering AI policy:

  1. Public trust in AI: Requiring that “the government’s regulatory and non-regulatory approaches to AI promote reliable, robust, and trustworthy AI applications, which will contribute to public trust in AI.”
  2. Public participation: Agencies must provide “ample opportunities for the public to provide information and participate in all stages of the rulemaking process.”
  3. Scientific integrity and information quality: Agencies should “leverage scientific and technical information and processes” to build trust and ensure data quality and transparency.
  4. Risk assessment and management: Acknowledging that “all activities involve tradeoffs,” the AI Guidance requires that “a risk-based approach should be used to determine which risks are acceptable and which risks present the possibility of unacceptable harm, or harm that has expected costs greater than expected benefits.”
  5. Benefits and costs: As part of those risk assessments, agencies must “carefully consider the full societal costs, benefits, and distributional effects before considering regulations related to the development and deployment of AI applications. Such consideration will include the potential benefits and costs of employing AI, when compared to the systems AI has been designed to complement or replace, whether implementing AI will change the type of errors created by the system, as well as comparison to the degree of risk tolerated in other existing ones.”
  6. Flexibility: OMB encourages agencies to “pursue performance-based and flexible approaches that can adapt to rapid changes and updates to AI applications.”
  7. Fairness and non-discrimination: Acknowledging that “in some instances, introduce real-world bias that produces discriminatory outcomes or decisions that undermine public trust and confidence in AI,” the AI Guidance requires agencies to consider “issues of fairness and non-discrimination with respect to outcomes and decisions produced by the AI application at issue.”
  8. Disclosure and transparency: Agencies are encouraged to consider how greater “transparency and disclosure can increase public trust and confidence in AI applications.”
  9. Safety and security: Agencies are required to “promote the development of AI systems that are safe, secure, and operate as intended, and encourage the consideration of safety and security issues throughout the AI design, development, deployment, and operation process.”
  10. Interagency coordination: The guidance makes it clear that a “coherent and whole-of-government approach to AI oversight requires interagency coordination.”

Soft Law Ascends

Importantly, the AI Guidance also encourages agencies to be open to “non-regulatory approaches to AI” governance and specifies three particular models:

  • Sector-specific policy guidance or frameworks: OSTP writes that “agencies should consider using any existing statutory authority to issue non-regulatory policy statements, guidance, or testing and deployment frameworks, as a means of encouraging AI innovation in that sector.” The memorandum also notes that this can include “work done in collaboration with industry, such as development of playbooks and voluntary incentive frameworks.”
  • Pilot programs and experiments: The document encourages the use of “pilot programs that provide safe harbors for specific AI applications” which “could produce useful data to inform future rulemaking and non-regulatory approaches.”
  • Voluntary consensus standards: Before regulating, the AI Guidance encourages agencies to consider how voluntary consensus standards, assessment programs, and compliance programs might be used to address policy concerns.

These represent “soft law” approaches to technological governance and they are becoming all the rage in technology policy discussions today. Soft law mechanisms are informal, collaborative, and constantly evolving governance efforts. While not formerly binding like “hard law” rules and regulations, soft law efforts nonetheless create a set of expectations about sensible development and use of technologies. Soft law can include multistakeholder initiatives, best practices and standards, agency workshops and guidance documents, educational efforts, and much more.

Soft law has become the dominant governance approach for emerging technologies because it is often better able to address the “pacing problem,” which refers to the growing gap between the rate of technological innovation and policymakers’ ability to keep up with it. As I have previously noted, the pacing problem is “becoming the great equalizer in debates over technological governance because it forces governments to rethink their approach to the regulation of many sectors and technologies.”

Not only do traditional legislative and regulatory hard law systems struggle to keep up with fast-paced technological changes, but oftentimes those older mechanisms are just too rigid and unsuited for new sectors and developments. That is definitely the case for AI, which is multi-dimensional in nature and even defies easy definition. Soft law offers a more flexible, adaptive approach to learning on the fly and cobbling together principles and policies that can address new policy concerns as they develop in specific contexts, without derailing potentially important innovations.

Building on Past Governance Frameworks

In this sense, the Trump administration’s AI Guidance borrows from past policy frameworks by marrying up a desire to promote an exciting new set of emerging technologies alongside the need for reasonable but flexible oversight and governance mechanisms. At a high level, the AI Guidance builds on many of the same principles that motivated the Clinton administration’s Framework for Global Electronic Commerce, a statement of principles and policy objectives for the then-emerging Internet. The document, which was issued in July 1997, said that “governments should encourage industry self-regulation and private sector leadership where possible” and “avoid undue restrictions on electronic commerce.”

The Framework was a clean break from the top-down regulatory paradigm that had previously governed traditional communications and media technologies. Clinton’s Framework insisted that, to the extent government intervention was needed at all, “its aim should be to support and enforce a predictable, minimalist, consistent and simple legal environment for commerce.” The use of soft law and multistakeholder models was a key component of this vision, and those more flexible governance approaches were tapped by the subsequent administrations to address emerging tech policy concerns.

For example, the Obama administration considerably expanded the use of multistakeholder mechanisms and other soft law tools in response to the need of oversight of fast-moving technologies. The Obama administration had many different policy governance efforts underway for specific AI technologies and concerns, including workshops and multistakeholder efforts focused on the safety, security, and privacy-related issues surrounding “big data” systems, online advertising, connected cars, drones, and more.

Whereas the Obama administration was deeper in the weeds of the policy issues associated with specific AI and machine-learning applications, the Trump administration has sought to both build on those focused efforts while also stepping back to consider AI governance at the 30,000-foot level. In essence, the AI Guidance combines some of the aspirational elements found in the Clinton Framework alongside the Obama administration’s more targeted approach to consider specific policy concerns across many different sectors and technologies.

Trump’s AI Guidance adds an element of formality to this process regarding how federal agencies should address AI developments and formulate potential policy responses. It does so by counseling humility and even potential forbearance until all the facts are in. “Fostering innovation and growth through forbearing from new regulations may be appropriate,” the memorandum says. Agencies should consider new regulation only after they have reached the decision, in light of the foregoing section and other considerations, that Federal regulation is necessary.” Again, this is very much consistent with more general regulatory guidance issued by every administration since President Reagan was in office.

Flexible, Adaptive Governance is Key

The AI Guidance foreshadows the future of not only AI governance but the governance of many other emerging technologies. Hard law will continue to provide a backstop and have a role in guiding technological developments. Toward that end, efforts like the new AI Guidance are important because it represents an effort to “regulate the regulators” by placing some ground rules on how they go about applying old law to new developments.

But soft law governance is where the real action is at, both for AI and almost all emerging technologies today. The Trump AI Guidance reflects the extent to which soft law has become the dominant governance paradigm for modern tech sectors. As my colleagues Jennifer Huddleston and Trace Mitchell have noted, soft law is already effectively the law of the land for driverless cars, for example. After years of congressional wrangling over a federal autonomous vehicle regulatory framework—one that has widespread bipartisan support, no less—we still do not have a law on the books. Instead, the Department of Transportation has been cobbling together informal “rules of the road” through informal guidance documents that have been “versioned” as if they were computer software (i.e., Version 1.0, 2.0, 3.0). Version 4.0 of the DoT guidance for automated vehicles was just released this week.

That is the same approach that the National Institute of Standards and Technology (NIST) has taken with the privacy guidelines it developed. NIST’s Privacy Framework: A Tool for Improving Privacy through Enterprise Risk Management is also versioned like software. And many other federal agencies, especially the Federal Trade Commission, have tapped a wide variety of soft law tools—such as agency workshops and workshop reports that recommended privacy best practices for various technologies. Meanwhile, the National Telecommunications and Information Administration (NTIA) has used multistakeholder processes to address privacy concerns surrounding a wide range of technologies, including drones and facial recognition. NIST, FTC, and NTIA have undertaken these informal governance efforts because, despite over a decade of debate, Congress still has not advanced comprehensive federal privacy legislation. For better or worse, soft law has filled that governance gap.

Addressing Likely Objections from Left & Right

Many people of varying ideological dispositions will object to the growing role of soft law as the primary governance tool for emerging technology policy. Some conservatives will cringe at the sound of giving regulators greater leeway to address amorphous policy concerns, fearing that it will result in unconstrained exercises of unaccountable, extra-constitutional power.

Some of those concerns are valid, but they fail to account for the fact that the prospects for agency downsizing or deregulation they prefer are extremely limited. Practically speaking, the administrative state isn’t going anywhere. In some cases, agencies can actually do some real good by encouraging innovators to think about how to “bake-in” sensible best practices to preemptively address concerns about the privacy, safety, security, and fairness of various AI systems. Better those concerns be addressed in more flexible, adaptive fashion than by a heavy-handed, overly-rigid regulatory approach. Soft law offers that possibility, even if legitimate concerns remain about agency accountability and transparency.

Many to the left of center will be critical of this governance approach as well, but on very different grounds. As Associated Press reporter Matt O’Brien notes, “the vagueness of the principles announced by the White House is unlikely to satisfy AI watchdogs who have warned of a lack of accountability as computer systems are deployed to take on human roles in high-risk social settings, such as mortgage lending or job recruitment.”

These concerns actually are addressed in several of the OSTP’s ten principles, including those which stress the need for fairness and non-discrimination, information quality, public participation, disclosure and transparency, and safety and security. Yet many on the left will claim these principles merely pay lip service to these values and that what is really needed is a full-blown regulatory regime and some sort of corresponding new federal AI agency, which would preemptively determine which AI technologies would be allowed into the wild.

Already, an Algorithmic Accountability Act was introduced in Congress last year that would ask the FTC to take a more active role in policing “inaccurate, unfair, biased, or discriminatory decisions impacting consumers” that may have resulted from “automated decision systems.” Meanwhile, some academics have called for the creation of a Federal Robotics Commission or a National Algorithmic Technology Safety Administration to preemptively oversee new AI developments.

The problem with overly-precautionary regulation of that sort could potentially unduly limit AI innovation and the many benefits it entails. There may be some AI applications that pose serious and immediate risks to humanity and which require preemptive restraints on their development and use. Autonomous military and law enforcement applications are the most obvious examples. But most AI applications do not rise to that same level of regulatory concern, and other governance approaches are required to balance the use and misuse of them. This is why a more open and flexible governance approach is needed. Moreover, the old regulatory system just cannot keep up anymore, and it is ill-suited to address most policy concerns in a timely or efficient fashion.

Cristie Ford, and advocate of greater regulatory oversight for fintech, notes in her latest book that the problem with “old-style Welfare State regulation” is that it is “a clumsy, blunt instrument for achieving regulatory objectives” due to its reliance upon “one-size-fits-all mandates, prohibitions, and penalties.” Ford acknowledges what many other regulatory advocates are reluctant to admit:  public policies toward fast-paced technology sectors can no longer be governed effectively using the Analog Era’s top-down, command-and-control regulatory processes. Far too many federal agencies rely on a “build-and-freeze model” of regulation that puts rules in stone to deal with one sets of issues one day, but then either fails to eliminate them later when they become obsolete or to reform those rules to bring them in line with new social, economic, and technical realities.

If we hope to encourage continued innovation in sectors that could produce profoundly important, life-enriching technologies, America’s regulatory approach for AI and emerging technology needs to move away from “build-and-freeze” and toward “build-and-adapt.” Regulation is still needed, but the old regulatory toolkit is badly broken. For better or worse, soft law is going to fill the resulting governance gap, regardless of objections from some on the left or the right. Pragmatic policymaking is going to carry the day for emerging technology governance.

Conclusion

The Trump Administration AI Guidance represents a continuation and extension of this trend toward more flexible, adaptive governance approaches for emerging technologies. It offers a pragmatic vision that builds on the policies and paradigms of the past, while also encouraging fresh thinking about how best to balance the need for continued innovation alongside the various concerns about disruptive technological change.

There are many challenging issues that lie ahead and the new AI Guidance cannot provide bright-line answers to all the hypothetical questions that people want answered today. No one possesses a crystal ball that will allow them to forecast the technological future. Only ongoing trial-and-error experimentation and policy improvisation will allow us to find sensible solutions. A policy approach rooted in humility, flexibility, and forbearance will help ensure that America’s regulatory policies continue to promote both innovation and the public good.

]]> https://techliberation.com/2020/01/08/trumps-ai-framework-the-future-of-emerging-tech-governance/feed/ 0 76648 Important New White House Report Documents Costs of Occupational Licensing https://techliberation.com/2015/07/29/important-new-white-house-report-documents-costs-of-occupational-licensing/ https://techliberation.com/2015/07/29/important-new-white-house-report-documents-costs-of-occupational-licensing/#comments Wed, 29 Jul 2015 22:25:37 +0000 http://techliberation.com/?p=75633

Yesterday, the White House Council of Economic Advisers released an important new report entitled, “Occupational Licensing: A Framework for Policymakers.” (PDF, 76 pgs.) The report highlighted the costs that outdated or unneeded licensing regulations can have on diverse portions of the citizenry. Specifically, the report concluded that:

the current licensing regime in the United States also creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities,  and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing.

The report supported these conclusions with a wealth of evidence. In that regard, I was pleased to see that research from Mercatus Center-affiliated scholars was cited in the White House report (specifically on pg. 34). Mercatus Center scholars have repeatedly documented the costs of occupational licensing and offered suggestions for how to reform or eliminate unnecessary licensing practices. Most recently, my colleagues and I have explored the costs of licensing restrictions for new sharing economy platforms and innovators. The White House report cited, for example, the recently-released Mercatus paper on “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem,’” which I co-authored with Christopher Koopman, Anne Hobson, and Chris Kuiper. And it also cited a new essay by Tyler Cowen and Alex Tabarrok on “The End of Asymmetric Information.”

Moreover, along with Christopher Koopman and Matt Mitchell, I recently submitted comments to the Federal Trade Commission for a sharing economy workshop. In those comments, as well as a recent paper on the same subject, we documented how occupational licensing rules were often “captured” by affected interests and are then used to discourage new forms of competition and innovation. This harms both consumers and workers by depriving them of new and better options. Many sharing economy operations are having great success in breaking down these barriers and proving that consumers and workers do better in an environment free of unnecessary and costly licensing restrictions. This suggests that consumer welfare would be improved even more by reforming other licensing regimes.

Mercatus has published dozens of other things related to this issue, many of which I have listed down below. Just recently, in fact, we published a new paper on “Breaking Down the Barriers: Three Ways State and Local Governments Can Improve the Lives of the Poor,” by economist Steven Horwitz. The report begins by documenting how “occupational licensure laws disproportionately burden the poor by requiring them to spend significant resources just to enter a market.” This is consistent with the findings from other Mercatus reports and other academic publications.

Anyway, check out the new White House report and, if you are serious about studying the issue of occupational licensing in more detail, you’ll want to take a closer look at some of these other Mercatus Center publications on the issue. The case for occupational licensing reform is strong and non-partisan, as the release of this White House report makes clear.

Mercatus Center publications and related material on occupational licensing & barriers to entry 

]]> https://techliberation.com/2015/07/29/important-new-white-house-report-documents-costs-of-occupational-licensing/feed/ 2 75633 New Filing & Working Paper on the Regulation of the Sharing Economy https://techliberation.com/2015/05/26/new-filing-working-paper-on-the-regulation-of-the-sharing-economy/ https://techliberation.com/2015/05/26/new-filing-working-paper-on-the-regulation-of-the-sharing-economy/#comments Tue, 26 May 2015 17:41:04 +0000 http://techliberation.com/?p=75562

Along with colleagues at the Mercatus Center at George Mason University, I am releasing two major new reports today dealing with the regulation of the sharing economy. The first report is a 20-page filing to the Federal Trade Commission that we are submitting to the agency for its upcoming June 9th workshop on “The “Sharing” Economy: Issues Facing Platforms, Participants, and Regulators.” We have been invited to participate in that event and I will be speaking on the fourth panel of the workshop. The filing I am submitting today for that workshop was co-authored with my Mercatus colleagues Christopher Koopman and Matt Mitchell.

The second report we are releasing today is a new 47-page working paper entitled, “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem.'” This study was co-authored with my Mercatus colleagues Christopher Koopman, Anne Hobson, and Chris Kuiper.

I will summarize each report briefly here.

In our new filing to the FTC, we address the five questions the Commission set forth in its workshop annoucement. Those five questions are as follows:

  • How can state and local regulators meet legitimate regulatory goals (such as protecting consumers, and promoting public health and safety) in connection with their oversight of sharing economy platforms and business models, without also restraining competition or hindering innovation?
  • How have sharing economy platforms affected competition, innovation, consumer choice, and platform participants in the sectors in which they operate? How might they in the future?
  • What consumer protection issues—including privacy and data security, online reviews and disclosures, and claims about earnings and costs—do these platforms raise, and who is responsible for addressing these issues?
  • What particular concerns or issues do sharing economy transactions raise regarding the protection of platform participants? What responsibility does a sharing economy platform bear for consumer injury arising from transactions undertaken through the platform?
  • How effective are reputation systems and other trust mechanisms, such as the vetting of sellers, insurance coverage, or complaint procedures, in encouraging consumers and suppliers to do business on sharing economy platforms?

We provide detailed answers to each of these questions as well as one additional major question that was not posed by the Commission in its workshop notice but which is, no doubt, on the minds of many at the agency and outside it: What should the FTC do about state and local barriers to entry and innovation that might be thwarting the growth of the sharing economy? (I blogged about that issue here a couple of weeks ago and our filing includes that discussion.)

Please take a look at our filing for detailed answers to each of these questions. (Incidentally, our filing is an extension of an earlier working paper that Koopman, Mitchell, and I released late last year on “The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change.”) But, to briefly highlight the thrust of our argument, here’s a passage from our new filing:

As the debate surrounding the sharing economy moves forward, policymakers must keep in mind that merely because regulations were once justified on the grounds of consumer protection does not mean they accomplished those goals or that they are still needed today. Even well-intentioned policies must be judged against real-world evidence. Unfortunately, the evidence shows that many traditional consumer protection regulations hurt consumers; in the words of New York Attorney General Eric Schneiderman, they are often “cumbersome, and some are just plain protectionist.” Markets, competition, reputational systems, and ongoing innovation often solve problems better than regulation when they are given a chance to do so. There are two reasons for this. First, market imperfections create powerful profit opportunities for entrepreneurs who are able to find ways to correct them. Second, regulatory solutions too often undermine competition and lock in inefficient business models.

We continue on to explain exactly why that is the case, while also offering some constructive solutions to other issues that are on the minds of regulators.

Meanwhile, the new working paper we are releasing today provides much greater detail on the fifth of the five questions the FTC posed in its workshop notice regarding reputation systems and other trust mechanisms. Here is the abstract from the paper:

This paper argues that the sharing economy—through the use of the Internet and real time reputational feedback mechanisms—is providing a solution to the lemons problem that many regulators have spent decades attempting to overcome. Section I provides an overview of the sharing economy and traces its rapid growth. Section II revisits the lemons theory as well as the various regulatory solutions proposed to deal with the problem of asymmetric information. Section III discusses the relationship between reputation and trust and analyzes how reputational incentives affect commercial interactions. Section IV discusses how information asymmetries were addressed in the pre-Internet era. It also discusses how the evolution of both the Internet and information systems (especially the reputational feedback mechanisms of the sharing economy) addresses the lemons problem. Section V explains how these new realities affect public policy and concludes that asymmetric information is not a legitimate rationale for policy intervention in light of technological changes. We also argue that continued use of this rationale to regulate in the name of consumer protection might, in fact, make consumers worse off. This has ramifications for the current debate over regulation of the sharing economy.

We believe that our research makes it clear “how the sharing economy relies upon—and has helped spur the growth of—sophisticated reputational feedback mechanisms that facilitate online trust and commerce, overcoming many of the information asymmetries that seemed intractable… just a generation ago. In combination with online review services and other information-sharing technologies enabled by the Internet,” we conclude, “these reputational tools can help create more effective, and largely self-regulating, markets that provide more information to more individuals than ever before.”

We look forward to continuing engagement with officials at the FTC and other policymakers at the federal, state, and even international level on these issues. We hope our research will help legislators and regulators find sensible ways to adjust policy for the sharing economy so as not to derail the sort of “permissionless innovation” that has thus far powered this exciting sector and produced the many pro-consumer benefits flowing from it. Check out our filing and new paper for more details.

]]> https://techliberation.com/2015/05/26/new-filing-working-paper-on-the-regulation-of-the-sharing-economy/feed/ 1 75562 New Paper on The Sharing Economy and Consumer Protection Regulation https://techliberation.com/2014/12/08/new-paper-on-the-sharing-economy-and-consumer-protection-regulation/ https://techliberation.com/2014/12/08/new-paper-on-the-sharing-economy-and-consumer-protection-regulation/#comments Mon, 08 Dec 2014 15:06:54 +0000 http://techliberation.com/?p=75035

Sharing Economy paper from MercatusI’ve just released a short new paper, co-authored with my Mercatus Center colleagues Christopher Koopman and Matthew Mitchell, on “The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change.” The paper is being released to coincide with a Congressional Internet Caucus Advisory Committee event that I am speaking at today on “Should Congress be Caring About Sharing? Regulation and the Future of Uber, Airbnb and the Sharing Economy.”

In this new paper, Koopman, Mitchell, and I discuss how the sharing economy has changed the way many Americans commute, shop, vacation, borrow, and so on. Of course, the sharing economy “has also disrupted long-established industries, from taxis to hotels, and has confounded policymakers,” we note. “In particular, regulators are trying to determine how to apply many of the traditional ‘consumer protection’ regulations to these new and innovative firms.” This has led to a major debate over the public policies that should govern the sharing economy.

We argue that, coupled with the Internet and various new informational resources, the rapid growth of the sharing economy alleviates the need for much traditional top-down regulation. These recent innovations are likely doing a much better job of serving consumer needs by offering new innovations, more choices, more service differentiation, better prices, and higher-quality services. In particular, the sharing economy and the various feedback mechanism it relies upon helps solve the tradition economic problem of “asymmetrical information,” which is often cited as a rationale for regulation. We conclude, therefore, that “the key contribution of the sharing economy is that it has overcome market imperfections without recourse to traditional forms of regulation. Continued application of these outmoded regulatory regimes is likely to harm consumers.”

We note that this is especially likely to be the case when the failure of traditional regulatory models is taken into account. As we document in the paper, all too often, well-intentioned “public interest” regulation is often captured by industry and used to to serve their interests:

by limiting entry, or by raising rivals’ costs, regulations can be useful to the regulated firms. Though regulations often make consumers worse off, they are often sustained by political pressure from consumer advocates because they can be disguised as “consumer protection.”

We provide evidence of the problem of regulatory capture and note it has been a particular problem in many of the sectors that are now being disrupted by sharing economy innovators–such as taxi and transportation services. It is evident that regulation has not lived up to its lofty expectations in many sectors. Accordingly, when market circumstances change dramatically—or when new technology or competition alleviate the need for regulation—then public policy should evolve and adapt to accommodate these new realities.

Of course, many bad laws and regulations that policymakers remain on the books and have constituencies who will defend them vociferously. Our paper concludes with some recommendations for how to “level the regulatory playing field” in a pro-consumer, pro-innovation fashion. We note that while differential regulatory treatment of incumbents and new entrants does represent a potential problem, there’s a sensible, pro-consumer and pro-innovation way to solve that problem:

such regulatory asymmetries represent a legitimate policy problem. But the solution is not to punish new innovations by simply rolling old regulatory regimes onto new technologies and sectors. The better alternative is to level the playing field by “deregulating down” to put everyone on equal footing, not by “regulating up” to achieve parity. Policymakers should relax old rules on incumbents as new entrants and new technologies challenge the status quo. By extension, new entrants should only face minimal regulatory requirements as more onerous and unnecessary restrictions on incumbents are relaxed.

Download this new paper on the Mercatus website or via SSRN or ResearchGate. Incidentally, we plan to release a much longer Mercatus Center white paper early next year that will explore reputational feedback mechanisms in far greater detail and explain how these systems help address the problem of “asymmetrical information” in these and other contexts.

Also see: “The Debate over the Sharing Economy: Talking Points & Recommended Reading,” which includes the following video of me on the Stossel Show discussing these issues recently.

]]> https://techliberation.com/2014/12/08/new-paper-on-the-sharing-economy-and-consumer-protection-regulation/feed/ 1 75035 Robert Graboyes on What the Internet Can Teach Us about Health Care Innovation https://techliberation.com/2014/11/10/robert-graboyes-on-what-the-internet-can-teach-us-about-health-care-innovation/ https://techliberation.com/2014/11/10/robert-graboyes-on-what-the-internet-can-teach-us-about-health-care-innovation/#respond Mon, 10 Nov 2014 18:56:06 +0000 http://techliberation.com/?p=74900

Robert-GraboyesI want to bring to everyone’s attention an important new white paper by Dr. Robert Graboyes, a colleague of mine at the Mercatus Center at George Mason University who specializes in the economics of health care. His new 67-page study, Fortress and Frontier in American Health Care, seeks to move away from the tired old dichotomies that drive health care policy discussions: Left versus Right, Democrat versus Republican, federal versus state, and public versus private, and so on. Instead, Graboyes seeks to reframe the debate over the future of health care innovation in terms of “Fortress versus Frontier” and to highlight what lessons we can learn from the Internet and the Information Revolution when considering health care policy.

What does Graboyes mean by “Fortress and Frontier”? Here’s how he explains this conflict of visions:

The Fortress is an institutional environment that aims to obviate risk and protect established producers (insiders) against competition from newcomers (outsiders). The Frontier, in contrast, tolerates risk and allows outsiders to compete against established insiders. . . .  The Fortress-Frontier divide does not correspond neatly with the more familiar partisan or ideological divides. Framing health care policy issues in this way opens the door for a more productive national health care discussion and for unconventional policy alliances. (p. 4)

He elaborates in more detail later in the paper:

the Frontier encourages creative destruction and disruptive innovation. Undreamed-of products arise and old, revered ones vanish. New production processes sweep away old ones. This is a place where unknown innovators in garages destroy titans of industry. The Frontier celebrates and rewards risk, and there is a brutal egalitarianism to the creative process. In contrast, the Fortress discourages creative destruction and disruptive innovation. Insiders are protected from competition by government or by private organizations (such as insurers and medical societies) acting in quasigovernmental fashion. In the Fortress, insiders preserve the existing order. Innovation comes from well-established, credentialed insiders who, it is presumed, have the wisdom and motives and competence to identify opportunities for innovation.

In framing the debate in this fashion, Graboyes hopes that we will start paying more attention to the supply side of health care policy debates:

The debate over coverage (and over related issues concerning how health care providers are paid) has focused attention almost exclusively on the demand side of health care markets—who pays how much to whom for which currently offered services. The debate underplays questions of supply—how innovation can alter the very nature of the health care delivery system. (p. 3-4)

This is where Graboyes brings the Internet and information technology into the story to illustrate a powerful point: We could unlock many important life-enriching and potentially life-saving innovations by embracing the same vision we applied to the Internet and IT sectors. Graboyes is kind enough to cite my work on permissionless innovation and the importance of not letting public policy be dictated by excessive fear of worst-case scenarios regarding new technological innovations. As I noted in my book on the topic, “living in constant fear of worst-case scenarios—and premising public policy upon them—means that best-case scenarios will never come about. When public policy is shaped by precautionary principle reasoning, it poses a serious threat to technological progress, economic entrepreneurialism, social adaptation, and long-run prosperity.”

Had fear of potential worst-case outcomes driven policy for the Net, we might have never seen many of the life-enriching innovations that we enjoy today, as Graboyes explains eloquently in this passage:

Knowing what we know today, it would not be hard to persuade a cautious observer in 1989 to radically slow the pace of IT innovation. IT arguably poses personal risks as grave as those that health care poses. Cell phones have been essential components of improvised explosive devices in war zones. The 9/11 atrocities would have been difficult or impossible to carry out without cell phones. Thieves have used the Internet to steal. Stalkers have used the Internet to terrify their prey. Child predators find their victims on the web. People have been murdered by strangers they met in chatrooms. IT has allowed individuals and governments to violate others’ privacy in countless ways. Drug dealers and terrorist networks organize their efforts via cell phone and Internet. The Internet has greatly reduced the cost of destroying another’s reputation, and news accounts tell of suicides following cyberbullying. Our laws demand terribly high standards of safety and efficacy for drugs. We require no such standards for computers, cell phones, and software, but given the nefarious uses to which they are sometimes put, decades ago one could easily have argued for doing so. Had we done so, we would now be living in a much poorer, less interesting world—and perhaps one with even greater risks to life and limb than we have now. No online predators or improvised explosive devices, but also no OnStar to save you after an automobile crash or smartphone to alert police to your life-threatening situation and geographic location. (p. 41)

In other words–and this is another lesson I stress at length in my work–precautionary policies create profound trade-offs that are not always well understood upon enactment of new laws or regulations. As I noted in my book, “When commercial uses of an important resource or technology are arbitrarily prohibited or curtailed, the opportunity costs of such exclusion may not always be immediately evident. Nonetheless, those ‘unseen’ effects are very real and have profound consequences for individuals, the economy, and society.”

What Graboyes does so well in his new paper is prove that these trade-offs are already at work in the American health care system and that we had better get serious about acknowledging them before real damage is done. And what makes Fortress and Frontier such an enjoyable read is that Graboyes is a gifted story-teller who explains in clear terms how expanded health care innovation opportunities could improve the lives of real people. It’s not just abstract, textbook talk. We hear stories of real-world innovators and the patients who need their inventions. For example, Graboyes tells of “an unheralded doctor who pioneered stem-cell therapy in a small-town hospital, a carpenter and puppet-maker who invented functional prosthetic hands costing one-thousandth the price of professionally made devices (aided by an evolutionary biologist who started a worldwide consortium of amateur prosthetists), and college students who devised a low-cost treatment for clubfoot.” (p. 4) And much, much more.

“The most important thing to understand about disruptive innovation is that it often comes (perhaps usually comes) from strange and unexpected places,” Graboyes notes. (p. 20) “[A] shift from Fortress to Frontier would benefit the health and finances of Americans,” he argues, and “the task begins by easing limits on the supply of health care services, thereby clearing the way for innovators to take health care in directions we cannot yet imagine.” (p. 39)

Importantly, Graboyes also offers another reason why America should embrace the “frontier” spirit: Our global competitive advantage in this space is at risk if we don’t:

Moving health care from the Fortress to the Frontier may be more a matter of necessity than of choice. We are entering a period of rapid technological advances that will radically alter health care. Many of these advances require only modest capital and labor inputs that governments cannot easily control or prohibit. If US law obstructs these technologies here, it will be feasible for Americans to obtain them by Internet, by mail, or by travel. (p. 41-2)

He highlights several areas in which this debate will play out going forward including (and notice the intersection with the modern digital technologies and tech policy debates we often discuss here): genomic knowledge and personalized medicine, 3-D printing, artificial intelligence, information sharing via social media, wearable technology, and telemedicine.

To make sure that America can capitalize on the same innovative spirit that gave us the Information Revolution, Graboyes concludes his study with a laundry list of needed policy reforms. These include:

  • reform of FDA drug & device approval process to expedite reviews.
  • ensure that Americans have a “right to know” about themselves and their health (i.e., that individuals have a right to possess their own genetic information and to receive information about how to interpret the results.)
  • abolish state certificate-of-need laws, which unnecessarily “require that hospital developers obtain government permission before building a new facility, or expanding an existing one, or even adding a specific piece of medical equipment.”
  • reform state-based licensing laws, which “put barriers in the way of doctors moving from other states” and create physician shortages. Also need to reform state laws to allow nurse practitioners, optometrists, and others to practice independently of physicians.
  • reform tort law by capping noneconomic damages, instituting a “loser pays” rule to discourage frivolous lawsuits, establishing safe harbors for vaccine developers, and more.
  • revising tax laws to make sure medical devices are not hit with discriminatory tax burdens that discourage innovation, and then also revising other taxes that skew incentives in the health insurance marketplace.

Graboyes itemizes dozens of other potential reforms to give policymakers a smorgasbord of options from which to choose. It is unlikely that all the reforms he lists will be adopted, but even if policymakers would just pick a few of those proposed action items, it could provide a real boost to medical innovation in the short term. Importantly, most of these proposed reforms could be implemented without stirring up contentious debate over the future of the Affordable Care Act (ACA).

Needless to say, I highly recommend Fortress and Frontier and I very much hope that the vision that Graboyes articulates in it comes to influence public thinking and future policymaking in the health care arena. In a follow-up post, I will also discuss how Fortress versus Frontier provides us with another “innovation paradigm” that can help us frame future innovation policy debates in many other contexts.

]]> https://techliberation.com/2014/11/10/robert-graboyes-on-what-the-internet-can-teach-us-about-health-care-innovation/feed/ 0 74900 FCC Commish Ajit Pai on Protectionism & Cronyism in the Tech Sector https://techliberation.com/2013/07/11/fcc-commish-ajit-pai-on-protectionism-cronyism-in-the-tech-sector/ https://techliberation.com/2013/07/11/fcc-commish-ajit-pai-on-protectionism-cronyism-in-the-tech-sector/#comments Thu, 11 Jul 2013 13:20:05 +0000 http://techliberation.com/?p=45129

Ajit Pai FCCAjit Pai, a Republican commissioner at the Federal Communications Commission (FCC), had an outstanding op-ed in the L.A. Times yesterday about state and local efforts to regulate private taxi or ride-sharing services such as Uber, Lyft, and Sidecar. “Ever since Uber came to California,” Pai notes, “regulators have seemed determined to send Uber and companies like it on a one-way ride out of the Golden State.” Regulators have thrown numerous impediments in their way in California as well as in other states and localities (including here in Washington, D.C.). Pai continues on to discuss how, sadly, “tech start-ups in other industries face similar burdens”:

For example, Square has created a credit card reader for mobile devices. Small businesses love Square because it reduces costs and is convenient for customers. But some states want a piece of the action. Illinois, for example, has ordered Square to stop doing business in the Land of Lincoln until it gets a money transmitter license, even though the money flows through existing payment networks when Square processes credit cards. If Square had to get licenses in the 47 states with such laws, it could cost nearly half a million dollars, an extraordinary expense for a fledgling company.

He also notes that “Obstacles to entrepreneurship aren’t limited to the tech world”:

Across the country, restaurant associations have tried to kick food trucks off the streets. Auto dealers have used franchise laws to prevent car company Tesla from cutting out the middleman and selling directly to customers. Professional boards, too, often fiercely defend the status quo, impeding telemedicine by requiring state-by-state licensing or in-person consultations and even restricting who can sell tooth-whitening services.

What’s going on here? It’s an old and lamentable tale of incumbent protectionism and outright cronyism, Pai notes:

These are just the latest chapters in an old economic story. Incumbents have long promoted regulation in the name of protecting consumers when their actual goal is to block new entrants and stifle competition. As Milton Friedman observed, “The pressure on the legislature to license an occupation rarely comes from the members of the public … the pressure invariably comes from members of the occupation itself.”

Indeed, this is exactly the sort of cronyist nightmare that Brent Skorup and I documented in our new Mercatus Center report, “A History of Cronyism and Capture in the Information Technology Sector.” Our 73-page working paper outlines the evolution of government-granted privileges in America’s information and communications technology marketplace and in the media-producing sectors. Sadly, there are all too many examples of special interests seeking to commandeer the levers of government power to distort market outcomes and head off disruptive forms of innovation or new competition.

“Consumer protection is important,” Pai notes, “and rules to ensure safety and to deter fraud are necessary. But many regulations aren’t about safeguarding consumers; they’re about entrenching incumbents (at consumers’ expense), and they’re typically created by the very agencies that are supposed to oversee those incumbents.” he correctly observes.

The costs of cronyism can be significant. In our paper, Skorup and I note that when companies seek and receive favors from government, it can dull entrepreneurialism and competition in this highly innovative sector since time and resources spent on influencing politicians and capturing regulators cannot be spent competing and innovating in the marketplace. Every dollar spent trying to influence government is a dollar that could have been better spent trying to develop the next iPhone or other innovative gadget or service. Thus, cronyism can negatively impact consumer welfare by denying consumers more and better products and services. Additionally, consumers might end up paying higher prices or higher taxes due to government privileges for industry.

Worse yet, cronyism also raises the specter of greater government control of the Internet and of the digital economy. When policymakers dispense favors, they usually expect something in return. Just ask the agriculture and transportation sectors how their experience with favor-seeking has worked out. Yes, they have often received the special favors and benefits they sought, but along with the goodies came a litany of demands from lawmakers and regulators about how to run their businesses.

At the end of the day, it all goes back to the consumer and how they get screwed in this process. As Pai eloquently puts it:

Heavy-handed regulations hurt the very consumers they’re supposed to help. Consumers fare best when the barriers to business entry are low, which helps ensure that the market — any market — becomes competitive and stays that way. …  Governments at all levels should guard against this tendency by prioritizing innovation and removing unnecessary regulations that burden risk-taking entrepreneurs.

Amen, brother! If only all government officials thought this way. I hope some of them at least take the time to read Commissioner Pai’s excellent essay.

]]> https://techliberation.com/2013/07/11/fcc-commish-ajit-pai-on-protectionism-cronyism-in-the-tech-sector/feed/ 2 45129 New Paper on “A History of Cronyism & Capture in the Information Technology Sector” https://techliberation.com/2013/07/02/new-paper-on-a-history-of-cronyism-capture-in-the-information-technology-sector/ https://techliberation.com/2013/07/02/new-paper-on-a-history-of-cronyism-capture-in-the-information-technology-sector/#comments Tue, 02 Jul 2013 13:48:02 +0000 http://techliberation.com/?p=45048

WP coverThe Mercatus Center at George Mason University has just released a new paper by Brent Skorup and me entitled, “A History of Cronyism and Capture in the Information Technology Sector.” In this 73-page working paper, which we hope to place in a law review or political science journal shortly, we document the evolution of government-granted privileges, or “cronyism,” in the information and communications technology marketplace and in the media-producing sectors. Specifically, we offer detailed histories of rent-seeking and regulatory capture in: the early history of the telephony and spectrum licensing in the United States; local cable TV franchising; the universal service system; the digital TV transition in the 1990s; and modern video marketplace regulation (i.e., must-carry and retransmission consent rules, among others.

Our paper also shows how cronyism is slowly creeping into new high-technology sectors.We document how Internet companies and other high-tech giants are among the fastest-growing lobbying shops in Washington these days. According to the Center for Responsive Politics, lobbying spending by information technology sectors has almost doubled since the turn of the century, from roughly $200 million in 2000 to $390 million in 2012.  The computing and Internet sector has been responsible for most of that growth in recent years. Worse yet, we document how many of these high-tech firms are increasingly seeking and receiving government favors, mostly in the form of targeted tax breaks or incentives.

We argue that the creeping cronyism could have two major negative ramifications. First, it could dull entrepreneurialism and competition in this highly innovative sector since time and resources spent on influencing politicians and capturing regulators cannot be spent competing and innovating in the marketplace. Cronyism will also negatively impact consumer welfare by denying consumers more and better products and services. Additionally, consumers might end up paying higher prices or higher taxes due to government privileges for industry.

Second, cronyism also raises the specter of greater government control of the Internet and of the digital economy. When policymakers dispense favors, they usually expect something in return. They also become accustomed to having greater informal powers over the sector receiving favors, and contribute to DC’s infamous “revolving door” problem.

High-tech America’s recent embrace of Washington could take it down the familiar path followed by the agriculture, telecommunications, and automotive sectors (among many others), with government becoming both protector and punisher of industry. Today’s dynamic tech industries will increasingly come under the “Mother, may I?” permission-based regulatory regime that encumbered the older information technology sectors.

Tech Lobbying sectoral breakdown

Finally, this paper offers strategies for stalling and diminishing the cronyism already taking root in the high-tech sector. We suggest several targeted reforms to limit or undo cronyism. Generally speaking, however, we note that, as economist David R. Henderson argued in an earlier Mercatus Center report, “There is only one way to end, or at least to reduce, the amount of cronyism, and that is to reduce government power.”

The paper can be downloaded from the Mercatus website, SSRN, or Scribd. The Scribd version is embedded down below. (Also, here’s some coverage of the paper over at the Washington Post’s “Wonkblog” from our old colleague Tim Lee. Here’s more coverage from Bloomberg Businessweek and the San Francisco Chronicle. And here’s a U.S. News oped that Brent and I wrote condensing our paper into just 600 words. Finally, a short 3-minute video of me discussing the problem of tech cronyism is also embedded below.)

A History of Cronyism and Capture in the Information Technology Sector [Thierer and Skorup – July 2013] by Adam Thierer

]]> https://techliberation.com/2013/07/02/new-paper-on-a-history-of-cronyism-capture-in-the-information-technology-sector/feed/ 1 45048 On Mandating “Simplified” Privacy Policies https://techliberation.com/2013/02/08/on-mandating-simplified-privacy-policies/ https://techliberation.com/2013/02/08/on-mandating-simplified-privacy-policies/#comments Fri, 08 Feb 2013 15:35:16 +0000 http://techliberation.com/?p=43659

Via a Twitter post this morning, privacy lawyer Stephen Kline (@steph3n) brings to my attention this new California bill that “would require the privacy policy [of a commercial Web site or online service] to be no more than 100 words, be written in clear and concise language, be written at no greater than an 8th grade reading level, and to include a statement indicating whether the personally identifiable information may be sold or shared with others, and if so, how and with whom the information may be shared.”

I’ve always been interested in efforts — both on the online safety and digital privacy fronts — to push for “simplified” disclosure policies and empowerment tools. Generally speaking, increased notice and simplified transparency in these and others contexts is a good norm that companies should be following. However, as I point out in a forthcoming law review article in the Harvard Journal of Law & Public Policy, we need to ask ourselves whether the highly litigious nature of America’s legal culture will allow for truly “simplified” privacy policies. As I note in the article, by its very nature, “simplification” likely entails less specificity about the legal duties and obligations of either party. Consequently, some companies will rightly fear that a move toward more simplified privacy policies could open them up to greater legal liability. If policymakers persist in the effort to force the simplification of privacy policies, therefore, they may need to extend some sort of safe harbor provision to site operators for a clearly worded privacy policy that is later subject to litigation because of its lack of specificity. If not, site operators will find themselves in a “damned if you do, damned if you don’t” position: Satisfying regulators’ desire for simplicity will open them up to attacks by those eager to exploit the lack of specificity inherent in a simplified privacy policy.

Another issue to consider comes down to simple bureaucratic sloth: Mandatory “simplification” efforts means a team of bureaucrats somewhere in this world — in this case in Sacramento, California, I guess — will have to become code cops. Websites and apps will suddenly become subject to a new regulatory regime and all that it entails. So, even if those enterprising trial lawyers don’t get online innovators first, the bureaucrats could make their lives miserable with reams of red tape over time (especially because it would be silly to think that this sort of meddling with end with “simplification” mandates.) That could mean a lot less “permissionless innovation” and many more “Mother May, I?” permissioned proceedings instead.

Further, do we really want such Internet mandates to spring from the state-level? As I noted in my recent essay on “The Perils of Parochial Privacy Policies,” such state-based Internet meddling — even when well-intentioned — could quickly become a confusing morass of over-lapping, contradictory rules. Fifty different state Internet Bureaus aren’t likely to help the digital economy or serve the long-term interests of consumers. It could also open the door to potential Net-meddling on other fronts (online free speech, copyright, cybersecurity, online authentication, etc.) If “simplified” policies can be mandated at the state level for privacy, why not everything else? So, some degree of preemption may be in order here. If the movement of digitized bits across the Net isn’t “interstate commerce,” then I don’t know what is.

Just as an aside, it’s worth pointing out that simply because consumers do not necessarily read or understand every word of a company’s privacy policy does not mean that “market failure” exists. In my forthcoming Harvard Journal piece I discuss how disclosure policies or labeling systems work in other contexts and note that it is highly unlikely that consumers read or fully understand every proviso contained in the stacks of paper placed in front of them when they sign home mortgages, life insurance policies, or car loans and warranties. Such documents are full of incomprehensible provisions and stipulations, even though regulations govern many of these contracts. In these cases, I could argue that consumers face far more “risk” than they face by not fully comprehending online privacy policies. But life goes on. Consumers will never be perfectly informed in these or other contexts because they are busy with other things. In a similar way, a certain amount of “rational ignorance” about privacy policies should be expected.

Let me close by reiterating that increased notice and transparency in privacy and data collection/use policies is generally a good operational norm. But not every smart norm makes a smart law, and in this case there are some thorny unintended consequences that must be considered when policymakers propose “simplifying” privacy policies via state-based regulatory mandates.

[On a related note, my colleague Jerry Brito brought to my attention this interesting 2011 NPR piece on “Why Are Credit Card Agreements So Long?]

]]> https://techliberation.com/2013/02/08/on-mandating-simplified-privacy-policies/feed/ 624 43659 Drunk on Wireless Taxes https://techliberation.com/2011/07/01/drunk-on-wireless-taxes/ https://techliberation.com/2011/07/01/drunk-on-wireless-taxes/#comments Fri, 01 Jul 2011 14:39:16 +0000 http://techliberation.com/?p=37651

As we’ve noted here before, state and local politicians just love wireless taxes. They are going up, up, up. Dan Rothschild outlined this disturbing trend in his recent Mercatus Center paper making “The Case Against Taxing Cell Phone Subscribers,” and I discussed it in my recent Forbes essay lambasting the “Talking Tax.”  Another new study by Glenn Woroch of the Georgetown University School of Business notes how “The ‘Wireless Tax Premium’ Harms American Consumers and Squanders the Potential of the Mobile Economy.” Woroch estimates that “the American consumer forgoes over $15 billion in surplus annually compared to when cell phones receive the same tax treatment  as other goods and service.” Read the entire study but I want to draw everyone’s attention to this chart that appears on page 7 of the report comparing state and local wireless taxes burdens to beer taxes.  It really makes you realize just how drunk on wireless taxes are local lawmakers have become! [Click to enlarge. Red bar = wireless taxes.]

]]> https://techliberation.com/2011/07/01/drunk-on-wireless-taxes/feed/ 7 37651 3 Cheers for Hillary Clinton’s Stand on Religious Defamation https://techliberation.com/2009/10/27/3-cheers-for-hillary-clintons-stand-on-religious-defamation/ https://techliberation.com/2009/10/27/3-cheers-for-hillary-clintons-stand-on-religious-defamation/#comments Tue, 27 Oct 2009 23:48:49 +0000 http://techliberation.com/?p=23003

Well, I don’t often get a chance to sing the praises of Hillary Clinton, so let me take the opportunity to loudly applaud her stand on religious defamation policies, which are becoming a growing international concern. According to The Washington Post, while unveiling the State Department’s 2009 Report on International Religious Freedom:

Secretary of State Hillary Rodham Clinton criticized on Monday an attempt by Islamic countries to prohibit defamation of religions, saying such policies would restrict free speech. … While unnamed in Clinton’s speech, the Organization of the Islamic Conference, a group of 56 Islamic nations, has been pushing hard for the U.N. Human Rights Council to adopt resolutions that broadly bar the defamation of religion. The effort has raised concerns that such resolutions could be used to justify crackdowns on free speech in Muslim countries.

Here’s specifically what Secretary Clinton had to say:

some claim that the best way to protect the freedom of religion is to implement so-called anti-defamation policies that would restrict freedom of expression and the freedom of religion. I strongly disagree. The United States will always seek to counter negative stereotypes of individuals based on their religion and will stand against discrimination and persecution.  But an individual’s ability to practice his or her religion has no bearing on others’ freedom of speech. The protection of speech about religion is particularly important since persons of different faiths will inevitably hold divergent views on religious questions. These differences should be met with tolerance, not with the suppression of discourse.

Quite right.  Thank you, Secretary Clinton, for this bold stand.  Freedom of religious worship and expression — including the criticism of religion — is essential.  Now, can we talk about your old positions on video game regulation?!

http://c.brightcove.com/services/viewer/federated_f8/1705667530]]> https://techliberation.com/2009/10/27/3-cheers-for-hillary-clintons-stand-on-religious-defamation/feed/ 6 23003 List of Recent of State Cyberbullying Measures https://techliberation.com/2009/09/14/list-recent-of-state-cyberbullying-measures/ https://techliberation.com/2009/09/14/list-recent-of-state-cyberbullying-measures/#comments Tue, 15 Sep 2009 01:19:26 +0000 http://techliberation.com/?p=21516

Cyberbullying constitutes one of the largest growth categories of recent cyberlaw legislative proposals, and many state legislatures have already enacted measures aimed at combating this problem using a variety of approaches.  Those attempting to monitor ongoing developments in this field might find it useful to examine this National Conference of State Legislatures (NCSL) compendium of recent state cyberbullying bills.

In June, Berin Szoka and I published a PFF white paper, “Cyberbullying Legislation: Why Education is Preferable to Regulation.”  That paper mostly address federal legislation and, in particular, we contrasted the approaches set forth in Rep. Linda Sánchez’s (D-CA) “Megan Meier Cyberbullying Prevention Act,” versus the “School and Family Education about the Internet (SAFE Internet) Act,” which was introduced in the Senate by Sen. Robert Menendez (D-NJ) and in the House by Rep. Debbie Wasserman Schultz (D-FL).  Whereas the Sánchez bill would create a new federal felony to address these problems, the SAFE Internet Act proposes an education-based approach to the issue.

Generally speaking, Berin and I favor the latter approach, to the extent federal legislators feel the need to act. But we argued that state experimentation on this front may be the better way to go at this time.  As the NCSL survey suggests, states are pursing a variety of strategies and will continue to do so.  In light of that, I’m not sure why any federal legislation is needed at this time.  If the feds are really eager to push something at the national level, perhaps a generic public awareness / PSA campaign would make the most sense while more tailored state-based experimentation continues.  This is rare example of where state-based experimentation with a cyberlaw issue actually makes a lot of sense.

]]> https://techliberation.com/2009/09/14/list-recent-of-state-cyberbullying-measures/feed/ 10 21516 Against Techno-Panics https://techliberation.com/2009/07/15/against-techno-panics/ https://techliberation.com/2009/07/15/against-techno-panics/#comments Thu, 16 Jul 2009 03:16:21 +0000 http://techliberation.com/?p=19471

I’ve just had a new article published by the American Legislative Exchange Council (ALEC) in which I make the case against “techno-panics,” which refers to public and political crusades against the use of new media or technologies by the young. The article is entitled “Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics‘” and it appears in the July 2009 Inside ALEC newsletter.  This is something I have spent a lot of time writing about here in recent years (See 1, 2, 3, 4, 5) and I finally got around to putting it altogether in a concise essay here.  I have pasted the full text below. [And I just want to send a shout-out to my friend Anne Collier of Net Family News.org, whose work on this topic has been very influential on my thinking.]

“Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics‘” by Adam Thierer

A cursory review of the history of media and communications technologies reveals a reoccurring cycle of “techno-panics” — public and political crusades against the use of new media or technologies by the young.  From the waltz to rock-and-roll to rap music, from movies to comic books to video games, from radio and television to the Internet and social networking websites, every new media format or technology has spawned a fresh debate about the potential negative effects they might have on kids.

Inevitably, fueled by media sensationalism and various activist groups, these social and cultural debates quickly become political debates. Indeed, each of the media technologies or outlets mentioned above was either regulated or threatened with regulation at some point in its history. And the cycle continues today. During recent sessions of Congress, countless hearings were held and bills introduced on a wide variety of media and content-related issues. These proposals dealt with broadcast television and radio programming, cable and satellite television content, video games, the Internet, social networking sites, and much more.  State policymakers, especially state Attorneys General (AGs), have also joined in such crusades on occasion.  The recent push by AGs for mandatory age verification for all social networking sites is merely the latest example.

What is perhaps most ironic about these techno-panics is how quickly yesterday’s boogeyman becomes tomorrow’s accepted medium, even as the new villains replace old ones.  For example, the children of the 1950s and 60s were told that Elvis’s hip shakes and the rock-and-roll revolution would make them all the tools of the devil. They grew up fine and became parents themselves, but then promptly began demonizing rap music and video games in the ‘80s and ‘90s.  And now those aging Pac Man-era parents are worried sick about their kids being abducted by predators lurking on MySpace and Facebook. We shouldn’t be surprised if, a decade or two from now, today’s Internet generation will be decrying the dangers of virtual reality.

These techno-panics are almost always disproportionate to the real risk posed by new media and technology, which typically do not have the corrupting influence on youth that older generations fear.  Parents and public policymakers alike need to remember they were once kids, too, and managed to live through many of the same fears and concerns about media and popular culture. As the late University of North Carolina journalism professor Margaret A. Blanchard once noted: “[P]arents and grandparents who lead the efforts to cleanse today’s society seem to forget that they survived alleged attacks on their morals by different media when they were children. Each generation’s adults either lose faith in the ability of their young people to do the same or they become convinced that the dangers facing the new generation are much more substantial than the ones they faced as children.” And Thomas Hine, author of The Rise and Fall of the American Teenager, argues that: “We seem to have moved, without skipping a beat, from blaming our parents for the ills of society to blaming our children. We want them to embody virtues we only rarely practice. We want them to eschew habits we’ve never managed to break.”

The better response by both parents and policymakers is a measured and balanced approach to children’s exposure to media content and online interactions.  All-or-nothing extremes are never going to work.  In particular, techno-panics are hopelessly counter-productive. “Fear, in many cases, is leading to overreaction, which in turn could give rise to greater problems as young people take detours around the roadblocks we think we are erecting,” argue John Palfrey and Urs Gasser, authors of Born Digital: Understanding the First Generation of Digital Natives. What parents, educators, and policymakers need to understand, they argue, “is that the traditional values and common sense that have served them well in the past will be relevant in this new world, too.”

Most simply, we need to be willing to talk to our kids about the new technologies and cultural developments that shape their generation. When we as parents (or policymakers) do not fully comprehend or appreciate the new-fangled gadget in our kids’ pocket—or whatever they are playing, watching, or listening to on it—instead of engaging in demagoguery and driving a wedge between us and them, we should instead invite them to have a conversation with us about it.  Ask three simple questions to get that conversation started: “What is this new thing all about?”  “Tell me how you use it.”  “Why is it important to you?”  Once you’ve got them talking to you, good ‘ol fashion common sense and timeless parenting principles should kick in. “Do you understand why too much of this might be bad for you?” “Will you please come talk to me if you don’t understand something you’ve seen or heard?” And so on.

In sum, it’s about parental responsibility and rational, measured responses. The “techno-panic” mentality, by contrast, creates distrust and distance between our kids and us. As Anne Collier of Net Family News notes, techno-panics “cause fear, which interferes with parent-child communication, which in turn puts kids at greater risk.”

Parents and policymakers need to engage kids in an ongoing conversation about the technologies du jour—even when we don’t fully understand or appreciate them.

————— [printable Scribd version follows] —————

“Against Techno-Panics” by Adam Thierer, PFF (July 2009 – Inside ALEC) http://d.scribd.com/ScribdViewer.swf?document_id=17392730&access_key=key-2gdkqylyeu5h376buyyi&page=1&version=1&viewMode=

]]> https://techliberation.com/2009/07/15/against-techno-panics/feed/ 159 19471 YouTube, Power Laws & the Persistence of Media Inequality https://techliberation.com/2009/07/09/youtube-power-laws-the-persistence-of-media-inequality/ https://techliberation.com/2009/07/09/youtube-power-laws-the-persistence-of-media-inequality/#comments Fri, 10 Jul 2009 01:43:29 +0000 http://techliberation.com/?p=19351

“Liberty upsets patterns.” That was one of the many lessons that the late Harvard philosopher Robert Nozick taught us in his 1974 masterpiece “Anarchy, State, and Utopia.” What Nozick meant was that there is a fundamental tension between liberty and egalitarianism such that when people are left to their own devices, some forms of inequality would be inevitable and persistent throughout society. (Correspondingly, any attempt to force patterns, or outcomes, upon society requires a surrender of liberty.)

No duh, right? Most people understand this today–even if some of them are all too happy to hand their rights over to the government in exchange for momentary security or some other promise.  In the world of media policy, however, many people still labor under the illusion that liberty and patterned equality are somehow reconcilable. That is, some media policy utopians and Internet pollyannas would like us to believe that if you give every man, woman, and child a platform on which to speak, everyone will be equally heard.  Moreover, in pursuit of that goal, some of them argue government should act to “upset patterns” and push to achieve more “balanced” media outcomes. That is the philosophy that has guided the “media access” movement for decades and it what fuels the “media reformista” movement that is led by groups like the (inappropriately named) Free Press, which was founded by neo-Marxist media theorist Robert McChesney.

Alas, perfect media equality remains an illusive pipe dream. As I have pointed out here before, there has never been anything close to “equal outcomes” when it comes to the distribution or relative success of books, magazines, music, movies, book sales, theater tickets, etc.  A small handful of titles have always dominated, usually according to a classic “power law” or “80-20” distribution, with roughly 20% of the titles getting 80% of the traffic / revenue.  And this trend is increasing, not decreasing, for newer and more “democratic” online media.

For example, recent research has revealed that “the top 10% of prolific Twitter users accounted for over 90% of tweets” and  “the top 15% of the most prolific [Wkipedia] editors account for 90% of Wikipedia’s edits.” As Clay Shirky taught us back in 2003 in this classic essay, the same has long held true for blogging, where outcomes are radically inegalitarian, with a tiny number of blogs getting the overwhelming volume of blogosphere attention.  The reason, Shirky pointed out, is that:

In systems where many people are free to choose between many options, a small subset of the whole will get a disproportionate amount of traffic (or attention, or income), even if no members of the system actively work towards such an outcome. This has nothing to do with moral weakness, selling out, or any other psychological explanation. The very act of choosing, spread widely enough and freely enough, creates a power law distribution.

The latest proof of the persistence of power laws in the media world comes from Slate’s Chris Wilson, who recently analyzed traffic distribution over on YouTube to answer the question: “Will My Video Get 1 Million Views on YouTube?” Alas, YouTube proves every bit as anti-egalitarian as every other media platform throughout history:

This is the great promise of YouTube: Your video can soar in popularity through sheer word-of mouth—or rather, click-of-mouth—until eventually people are making T-shirts about it. No one ever said this was going to happen for everyone. So, what are your chances of achieving YouTube stardom? I crunched the numbers to find out what percentage of YouTube videos hit it big, cracking even 10,000 or 100,000 views. The results: You might have better odds playing the lottery than of becoming a viral video sensation.

And after he runs the numbers to show how such a small percentage of videos dominate YouTube, Wilson goes on to note:

These figures certainly don’t ratify the grand promise of social media. Not everyone uses YouTube to launch their showbiz or political career, but the potential to do so is central to the Web 2.0 narrative that figures in so many newsmagazine panegyrics. When the odds of even 1,000 people viewing your video in a month’s time are only 3 percent, however, it’s tough to argue that hitting it big on YouTube is anything more than dumb luck. You could argue that this is the way it’s always been in show biz, and you’d be right. But wasn’t the Web supposed to change all that?

Indeed, why is that?  After all, as Wilson suggests, the Internet, blogs, social networks, Twitter, YouTube, and so on, were the revolutionary platforms that were supposed to democratize all media and give everyone a fighting chance to be heard.  Instead, power laws and media inequality have proven relentlessly persistent.  Here’s how I explained why this is the case in an earlier essay:

There are several reasons that power laws always exist in all media contexts. We used to think it was because the economics of media are quite different than most other industries. Namely, media industries typically exhibit “public good” qualities; high fixed (production costs), but lower distribution costs.  But the primary reason why power laws are probably more prevent in media industries than other sectors of the economy is because the creation and consumption of news and popular culture is a truly social phenomenon. Think of it as the economics of popular choice and the sociology of fashion and fads. People (and consumers) react to what others are reading or watching. Word-of-mouth counts. Bandwagon effects exist. First-mover advantages are significant. And so on.  The end result is a hopeless imbalance of outcomes or outputs.  Media egalitarianism is simply an impossibility.

OK, so now that I’ve said all this and rained on the New-Media-Will-Produce-Perfect-Outcomes-Parade, let me explain why NONE OF THIS MAKES A DAMN BIT OF DIFFERENCE.   What is really important is equality of media opportunity, not equality of media outcomes.  A focus on the latter is both foolish and destructive. It is foolish because media equality is an impossibility absent extreme measures, which in turn explains why it is destructive. We would need totalitarian government controls on media outputs and consumption in order to achieve anything remotely close to “balance” or “equality” in terms of media results.

Again, all that really counts is that people have a chance to be heard, not whether millions are listening.  New media platforms really do change some things for the better because at least we now all have an equal chance to make a go at it and grab a bit of that audience. That’s certainly more than could be said back in the old analog media world, in which we suffered from outlet scarcity and information poverty. Today, by contrast, will live in a wonderful world of media abundance, where every man, woman, and child really does have a soapbox on which to stand and speak to the world.

Of course, no one may be listening.  And there will always be someone else who will nab greater audience share than you.

Get used to it. It is the way the media world has always worked, and it is the way every media platform will work until the end of time.  So long as citizens are free to choose, media inequality is inevitable.

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