From 1996 to 2006–A Retrospective

by on January 4, 2006

I started work at the Cato Institute at the beginning of 1997, and here it is 2006. As I write, I know that very few of the reforms that I and other free-marketers advocate have ever been enacted. Some bad legislation has been prevented (opt-in!); some unconstitutional legislation has been voided; the FCC has continued to move towards something more like real property rights in spectrum at an absurdly incremental pace. But universal service has not been abolished or even replaced with targeted subsidies or auctions. Indecency rules continue to be used to harass broadcasters. A few predicted that the Net would make censorship impossible, or that cyberspace would become its own sovereign nation. Yet China censors the Net with mixed success; Yahoo and other companies must cooperate or get out.

In spite of this, I am full of hope for the future…

Commerce seems to be moving so much faster than politics that its cutting edge has not been blunted. Censorship is not impossible, but much harder than ever before. Ebay has shown that consumers were ripe for revolt against top-down imposition of caveat vendor; they were ready to save a little or a lot. On the one hand, this is encouraging; it shows the power of the individual in a market economy. As a reform-minded lawyer, though, this is not all that encouraging; the legal system has remained almost completely intractable. Gains have come in spite of, not because of, the state of the law. At least the law did not prevent this; that which is not expressly forbidden is still allowed.

Another drama is playing out, though, almost without notice. That is the enforcement question. Legal academics never devoted much attention to enforcement issues–that was that blue-collar police stuff. Civil libertarians paid somewhat more, but almost always to those parts of enforcement that were most disfunctional. The parts that were ordinary, that worked reasonably well, were taken for granted. As noted above, with the advent of the Net, substantial enforcement difficulties were anticipated–some libertarians celebrated these; others anticipated government pressure on the weak or centralized parts of the system–large commercial firms, the root directory, and so on.

What has happened since is a combination. Governments have managed to tighten the reins in some respects on issues that particular governments care most about. Censorship of political information in China, for example. Where they have not succeeded much is in the realm of enforcement that actually protects individuals or businesses from real harms such as fraud. The brunt of protection from fraud in my own email system, for example, is provided by software. Libertarian types such as myself of course celebrated the loss of enforcement by censors. But I for one never thought much about the long-term consequences of the weakening of many other types of enforcement efforts across the board; if anyone had asked, I would not have been worried, I would expect mechanisms outside of government to arise (ebay’s feedback system and insurance, for example).

In intellectual property, the traditional mechanisms of enforcement have been weakened. Individual suits against individual file sharers, for example, are too few and far between to have much deterrent effect. Libertairans take note: the weakening of enforcement affects not only statutory IP, which some would discard, but contractual and technological attempts to create boundaries as well. Consumers want to be protected from fraud, spam, viruses, etc., so the market has stepped in there. But they don’t necessarily want to be protected from free media. But it is hard to have any kind of market in media without enforceable boundaries. So the legal system is flailing about a bit in an attempt to compensate (vicarious liability, the DMCA, etc.).

I confess that often what keeps me going is simply curiousity to see what lies ahead. I do not see that we can have business without law, and law without enforcement. But the world is changing very fast. Certainly traditional forms of law and traditional models of enforcement must evolve too. Governments will innovate to keep control, with good intentions and bad. Perhaps the role of policy analysts will be to make sure that this centralized process does as little harm as possible. Can we also be more forward-looking, and come up some new institutions that are compatible with markets and help preserve freedom? Beware fatal conceit. My thought is that we can only tinker at the edges; the real leaders will be entrepreneurs. Hang on tight!

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