“Why hasn’t Europe fostered the kind of innovation that has spawned hugely successful technology companies?” asks James B. Stewart in an important new column for the New York Times (“A Fearless Culture Fuels U.S. Tech Giants“).
That’s a great question, and one that I have tried to answer in a series of recent essays. (See, for example, “Europe’s Choice on Innovation” and “Embracing a Culture of Permissionless Innovation.”) What I have suggested in those essays is that the starkly different outcomes on either side of the Atlantic in terms of recent economic growth and innovation can primarily be explained by cultural attitudes toward risk-taking and failure. “For innovation and growth to blossom, entrepreneurs need a clear green light from policymakers that signals a general acceptance of risk-taking—especially risk-taking that challenges existing business models and traditional ways of doing things,” I have argued. And the most powerful proof of this is to examine the amazing natural experiment that has played out on either side of the Atlantic over the past two decades with the Internet and the digital economy.
For example, an annual Booz & Company report on the world’s most innovative companies revealed that 9 of the top 10 most innovative companies are based in the U.S. and that most of them are involved in computing and digital technology. None of them are based in Europe, however. Another recent survey revealed that the world’s 15 most valuable Internet companies (based on market capitalizations) have a combined market value of nearly $2.5 trillion, but none of them are European while 11 of them are U.S. firms. Again, it is America’s tech innovators that dominate that list.
Many European officials and business leaders are waking up to this grim reality and are wondering how to reverse this situation. In his Times essay, Stewart quotes Danish economist Jacob Kirkegaard of the Peterson Institute for International Economics, who notes that Europeans “all want a Silicon Valley. . . . But none of them can match the scale and focus on the new and truly innovative technologies you have in the United States. Europe and the rest of the world are playing catch-up, to the great frustration of policy makers there.”
On Thursday, it was my great pleasure to participate in a Washington Legal Foundation (WLF) event on “Online Privacy Regulation: The Challenge of Defining Harm.” The entire event video can be found on YouTube here, but down below I pasted the clip of just my remarks. Other speakers at the event included: FTC Commissioner Maureen K. Ohlhausen, Commissioner; John B. Morris, Jr., the Associate Administrator and Director of Internet Policy athe U.S. Department of Commerce’s National Telecommunications and Information Administration; and Katherine Armstrong, Counsel at the law firm of Hogan Lovells. Glenn Lammi of the WLF moderated the session.
My remarks drew upon a few recent law review articles I have published relating digital privacy debates to previous debates over free speech and online child safety issues. (Here are those articles: 1, 2, 3).
The “Internet of Things” (IoT) is already growing at a breakneck pace and is expected to continue to accelerate rapidly. In a short new paper (“Projecting the Growth and Economic Impact of the Internet of Things“) that I’ve just released with my Mercatus Center colleague Andrea Castillo, we provide a brief explanation of IoT technologies before describing the current projections of the economic and technological impacts that IoT could have on society. In addition to creating massive gains for consumers, IoT is projected to provide dramatic improvements in manufacturing, health care, energy, transportation, retail services, government, and general economic growth. Take a look at our paper if you’re interested, and you might also want to check out my 118-page law review article, “The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation” as well as my recent congressional testimony on the policy issues surrounding the IoT.)
The FTC has now posted the videos from their workshop and down below I have embedded my particular panel. My remarks begin around the 5-minute mark of the video.
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 Commissionthat 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 Federal Trade Commission (FTC) is taking a more active interest in state and local barriers to entry and innovation that could threaten the continued growth of the digital economy in general and the sharing economy in particular. The agency recently announced it would be hosting a June 9th workshop “to examine competition, consumer protection, and economic issues raised by the proliferation of online and mobile peer-to peer business platforms in certain sectors of the [sharing] economy.” Filings are due to the agency in this matter by May 26th. (Along with my Mercatus Center colleagues, I will be submitting comments and also releasing a big paper on reputational feedback mechanisms that same week. We have already released this paper on the general topic.)
Relatedly, just yesterday, the FTC sent a letter to Michigan policymakers about restricting entry by Tesla and other direct-to-consumer sellers of vehicles. Michigan passed a law in October 2014 prohibiting such direct sales. The FTC’s strongly-worded letter decries the state’s law as “protectionism for independent franchised dealers” noting that “current provisions operate as a special protection for dealers—a protection that is likely harming both competition and consumers.” The agency argues that:
consumers are the ones best situated to choose for themselves both the vehicles they want to buy and how they want to buy them. Automobile manufacturers have an economic incentive to respond to consumer preferences by choosing the most effective distribution method for their vehicle brands. Absent supportable public policy considerations, the law should permit automobile manufacturers to choose their distribution method to be responsive to the desires of motor vehicle buyers.
The agency cites the “well-developed body of research on these issues strongly suggests that government restrictions on distribution are rarely desirable for consumers” and the staff letter continues on to utterly demolish the bogus arguments set forth by defenders of the blatantly self-serving, cronyist law. (For more discussion of just how anti-competitive and anti-consumer these laws are in practice, see this January 2015 Mercatus Center study, “State Franchise Law Carjacks Auto Buyers,” by Jerry Ellig and Jesse Martinez.) Continue reading →
Today, Eli Dourado, Ryan Hagemann and I filed comments with the Federal Aviation Administration (FAA) in its proceeding on the “Operation and Certification of Small Unmanned Aircraft Systems” (i.e. small private drones). In this filing, we begin by arguing that just as “permissionless innovation” has been the primary driver of entrepreneurialism and economic growth in many sectors of the economy over the past decade, that same model can and should guide policy decisions in other sectors, including the nation’s airspace. “While safety-related considerations can merit some precautionary policies,” we argue, “it is important that those regulations leave ample space for unpredictable innovation opportunities.”
We continue on in our filing to note that “while the FAA’s NPRM is accompanied by a regulatory evaluation that includes benefit-cost analysis, the analysis does not meet the standard required by Executive Order 12866. In particular, it fails to consider all costs and benefits of available regulatory alternatives.” After that, we itemize the good and the bad of the FAA propose with an eye toward how the agency can maximize innovation opportunities. We conclude by noting:
The FAA must carefully consider the potential effect of UASs on the US economy. If it does not, innovation and technological advancement in the commercial UAS space will find a home elsewhere in the world. Many of the most innovative UAS advances are already happening abroad, not in the United States. If the United States is to be a leader in the development of UAS technologies, the FAA must open the American skies to innovation.
A bill before Congress would for the first time require radio broadcasters to pay royalty fees to recording artists and record labels pursuant to the Copyright Act. The proposed Fair Play Fair Pay Act (H.R. 1733) would “[make] sure that all radio services play by the same rules, and all artists are fairly compensated,” according to Congressman Jerrold Nadler (D-NY).
… AM/FM radio has used whatever music it wants without paying a cent to the musicians, vocalists, and labels that created it. Satellite radio has paid below market royalties for the music it uses …
The bill would still allow for different fees for AM/FM radio, satellite radio and Internet radio, but it would mandate a “minimum fee” for each type of service for the first time.
A February report from the U.S. Copyright Office cites the promotional value of airtime as the longstanding justification for exempting terrestrial radio broadcasters from paying royalties under the Copyright Act.
In the traditional view of the market, broadcasters and labels representing copyright owners enjoy a mutually beneficial relationship whereby terrestrial radio stations exploit sound recordings to attract the listener pools that generate advertising dollars, and, in return, sound recording owners receive exposure that promotes record and other sales.
The Copyright Office now feels there are “significant questions” whether the traditional view remains credible today. But significant questions are not the same thing as clear evidence. Continue reading →
In a recent Senate Commerce Committee hearing on the Internet of Things, Senators Ed Markey (D-Mass.) and Richard Blumenthal (D-Conn.) “announced legislation that would direct the National highway Traffic Safety Administration (NHTSA) and the Federal Trade Commission (FTC) to establish federal standards to secure our cars and protect drivers’ privacy.” Spurred by a recent report from his office (Tracking and Hacking: Security and Privacy Gaps Put American Drivers at Risk) Markey argued that Americans “need the equivalent of seat belts and airbags to keep drivers and their information safe in the 21st century.”
Among the many conclusions reached in the report, it says, “nearly 100% of cars on the market include wireless technologies that could pose vulnerabilities to hacking or privacy intrusions.” This comes across as a tad tautological given that everything from smartphones and computers to large-scale power grids are prone to being hacked, yet the Markey-Blumenthal proposal would enforce a separate set of government-approved, and regulated, standards for privacy and security, displayed on every vehicle in the form of a “Cyber Dashboard” decal.
Leaving aside the irony of legislators attempting to dictate privacy standards, especially in the post-Snowden world, it would behoove legislators like Markey and Blumenthal to take a closer look at just what it is they are proposing and ask whether such a law is indeed necessary to protect consumers. Continue reading →
A new bipartisan “sense of the Senate” resolution was introduced today calling for “a national strategy for the Internet of Things to promote economic growth and consumer empowerment.” [PDF is here.] The resolution was cosponsored by U.S. Senators Deb Fischer (R-Neb.), Cory A. Booker (D-N.J.), Kelly Ayotte (R-N.H.), and Brian Schatz (D-Hawaii), who are all members of the Senate Commerce Committee, which oversees these issues. Just last month, on February 11th, the full Commerce Committee held a hearing titled “The Connected World: Examining the Internet of Things,” which examined the policy issues surrounding this exciting new space.
[Update: The U.S. Senate unanimously approved the resolution on the evening of March 24th, 2015.]
The new Senate resolution begins by stressing the many current or potential benefits associate with the Internet of Things (IoT), which, it notes, “currently connects tens of billions of devices worldwide and has the potential to generate trillions of dollars in economic opportunity.” It continues on to note how average consumers will benefit because “increased connectivity can empower consumers in nearly every aspect of [our] daily lives, including in the fields of agriculture, education, energy, healthcare, public safety, security, and transportation, to name just a few.” And then the resolution also discussed the commercial benefits, noting, “businesses across our economy can simplify logistics, cut costs in supply chains, and pass savings on to consumers because of the Internet of Things and innovations derived from it.” More generally, the Senators argue “the United States should strive to be a world leader in smart cities and smart infrastructure to ensure its citizens and businesses, in both rural and urban parts of the country, have access to the safest and most resilient communities in the world.”
In light of those amazing potential benefits, the resolution continues on to argue that while “the United States is the world leader in developing the Internet of Things technology,” an even more focused and dedicated policy vision is needed to promote continued success. “[W]ith a national strategy guiding both public and private entities,” it argues, “the United States will continue to produce breakthrough technologies and lead the world in innovation.” Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology. Learn more about TLF →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.