This weekend, The Wall Street Journal ran my short letter to the editor entitled, “We Can Protect Children and Keep the Internet Free.” My letter was a response to columnist Peggy Noonan’s April 9 oped, “Can Anyone Tame Big Tech?” in which she proposed banning everyone under 18 from all social-media sites. She specifically singled out TikTok, Youtube, and Instagram and argued “You’re not allowed to drink at 14 or drive at 12; you can’t vote at 15. Isn’t there a public interest here?”

I briefly explained why Noonan’s proposal is neither practical nor sensible, noting how it:

would turn every kid into an instant criminal for seeking access to information and culture on the dominant medium of their generation. I wonder how she would have felt about adults proposing to ban all kids from listening to TV or radio during her youth. Let’s work to empower parents to help them guide their children’s digital experiences. Better online-safety and media-literacy efforts can prepare kids for a hyperconnected future. We can find workable solutions that wouldn’t usher in unprecedented government control of speech.

Let me elaborate just a bit because this was the focus of much of my writing a decade ago, including my book, Parental Controls & Online Child Protection: A Survey of Tools & Methods, which spanned several editions. Online child safety is a matter I take seriously and the concerns that Noonan raised in her oped have been heard repeatedly since the earliest days of the Internet. Regulatory efforts were immediately tried. They focused on restricting underage access to objectionable online content (as well as video games), but were immediately challenged and struck down as unconstitutionally overbroad restrictions on free speech and a violation of the First Amendment of the U.S. Constitution.

But practically speaking, most of these efforts were never going to work anyway. There was almost no way to bottle up all the content flowing in the modern information ecosystem without highly repressive regulation, and it was going to be nearly impossible to keep kids off the Internet altogether when it was the dominant communications and entertainment medium of their generation. The first instinct of every moral panic wave–from the waltz to comic books to rock or rap music to video games–has often been to take the easy way out by proposing sweeping bans on all access by kids to the content or platforms of their generation. It never works.

Nor should it. There is a huge amount of entirely beneficial speech, content, and communications that kids would be denied by such sweeping bans. That would make such ban highly counter-productive. But, again, usually such efforts just were not practically enforceable because kids are often better at the cat-and-mouse game than adults give them credit for. Moreover, imposing age limitations of speech or content are far more difficult than age-related bans on specific tangible products, like tobacco or other dangerous physical products.

Acknowledging these realities, most sensible people quickly move on from extreme proposals like flat bans of all kids using the popular media platforms and systems of the day. Over the past half century in the U.S., this has led to a flowering of more decentralized governance approach to kids and media that I have referred to as the “3E approach.” That stands for empowerment (of parents), education (of youth), and enforcement (of existing laws). The 3E approach includes a variety of mechanisms and approaches, including: self-regulatory codes, private content rating systems, a wide variety of different parental control technologies, and much more.

Over the past two decades, many multistakeholder initiatives and blue-ribbon commissions were created to address online safety issues in a holistic fashion. I summarized their conclusions in my 2009 report, “Five Online Safety Task Forces Agree: Education, Empowerment & Self-Regulation Are the Answer.” The crucial takeaway from all these task forces and commissions is that no silver-bullet solutions exist to hard problems. Child safety demands a vigilant but adaptive approach, rooted in a variety of best practices, educational approaches, and technological empowerment solutions to address various safety concerns. Digital literacy is particularly crucial to building wiser, more resilient kids and adults, who can work together to find constructive approaches to hard problems.

Importantly, our task here is never done. This is an ongoing and evolving process. Issues like underage access to pornography or violent content have been with us for a very long time and will never be completely “solved.” We must constantly work to improve existing online safety mechanisms while also devising new solutions for our rapidly evolving information ecosystem. Nothing should be off the table except the one solution that Noonan suggested in her essay. Just proposing outright bans on kids on social media or any other new media platform (VR will be next) is an unworkable and illogical response that we should dismiss fairly quickly. No matter how well-intentioned such proposals may be, moral panic-induced prohibitions on kids and media ultimately are not going to help them learn to live better, safer, and more enriching lives in the new media ecosystems of today or the future. We can do better.

On December 13th, I will be participating in an Atlas Network panel on, “Big Tech, Free Speech, and Censorship: The Classical Liberal Approach.” In anticipation of that event, I have also just published a new op-ed for The Hill entitled, “Left and right take aim at Big Tech — and the First Amendment.” In this essay, I expand upon that op-ed and discuss the growing calls from both the Left and the Right for a variety of new content regulations. I then outline the classical liberal approach to concerns about free speech platforms more generally, which ultimately comes down to the proposition that innovation and competition are always superior to government regulation when it comes to content policy.

In the current debates, I am particularly concerned with calls by many conservatives for more comprehensive governmental controls on speech policies enforced by various private platforms, so I will zero in on those efforts in this essay. First, here’s what both the Left and the Right share in common in these debates: Many on both sides of the aisle desire more government control over the editorial decisions made by private platforms. They both advocate more political meddling with the way private firms make decisions about what types of content and communications are allowed on their platforms. In today’s hyper-partisan world,” I argue in my Hill column, “tech platforms have become just another plaything to be dominated by politics and regulation. When the ends justify the means, principles that transcend the battles of the day — like property rights, free speech and editorial independence — become disposable. These are things we take for granted until they’ve been chipped away at and lost.”

Despite a shared objective for greater politicization of media markets, the Left and the Right part ways quickly when it comes to the underlying objectives of expanded government control. As I noted in my Hill op-ed:

there is considerable confusion in the complaints both parties make about “Big Tech.” Democrats want tech companies doing more to limit content they claim is hate speech, misinformation, or that incites violence. Republicans want online operators to do less, because many conservatives believe tech platforms already take down too much of their content.

This makes life very lonely for free speech defenders and classical liberals. Usually in the past, we could count on the Left to be with us in some free speech battles (such as putting an end to “indecency” regulations for broadcast radio and television), while the Right would be with us on others (such as opposition to the “Fairness Doctrine,” or similar mandates). Today, however, it is more common for classical liberals to be fighting with both sides about free speech issues.

My focus is primarily on the Right because, with the rise of Donald Trump and “national conservatism,” there seems to be a lot of soul-searching going on among conservatives about their stance toward private media platforms, and the editorial rights of digital platforms in particular.

In my new  Hill essay and others articles (all of which are listed down below), I argue there is a principled classical liberal approach to these issues that was nicely outlined by President Ronald Reagan in his 1987 veto of Fairness Doctrine legislation, when he said:

History has shown that the dan­gers of an overly timid or biased press cannot be averted through bureaucratic regulation, but only through the freedom and compe­tition that the First Amendment sought to guarantee.

Let’s break that line down. Reagan admits that media bias can be a real thing. Of course it is! Journalists, editors, and even the companies they work for all have specific views. They all favor or disfavor certain types of content. But, at least in the United States, the editorial decisions made by these private actors are protected by the First Amendment. Section 230 is really quite secondary to this debate, even though some Trumpian conservatives wrongly suggest that it’s the real problem here. In reality, national conservatives would need to find a way to work around well-established First Amendment protections if they wanted to impose new restrictions on the editorial rights of private parties.

But why would they want to do that? Returning to the Reagan veto statement, we should remember how he noted that, even if the First Amendment did not protect the editorial discretion of private media platforms, bureaucratic regulation was not the right answer to the problem of “bias.”  Competition and choice were the superior answer. This is the heart and soul of the classical liberal perspective: more innovation is always superior to more regulation.

For the past 30 years, conservatives and classical liberals were generally aligned on that point. But the ascendancy of Donald Trump created a rift in that alliance that now threatens to grow into a chasm as more and more Right-of-center people begin advocating for comprehensive control of media platforms.

The problems with that are numerous beginning with the fact that none of the old rationales for media controls work (and most of them never did). Consider the old arguments justifying widespread regulation of private media:

• “Scarcity” was the oldest justification for media regulation, but we live in the exact opposite world today, in which the most common complaint about media is the abundance of it!
• Conversely, the supposed “pervasiveness” of some media (namely broadcasting) was used as a rationale for government censorship in the past. But that, too, no longer works because in today’s crowded media marketplace and Internet-enabled world, all forms of communications and entertainment are equally pervasive to some extent.
• State ownership and licensing of spectrum was another rationale for control that no longer works. No digital media platforms need federal licenses to operate today. So, that hook is also gone. Moreover, the answer to the problem of government ownership of media is to stop letting the government own and control media assets, including spectrum.
• “Fairness” is another old excuse for control, with some regulatory advocates suggesting that five unelected bureaucrats at the Federal Communications Commission (or some other agency) are well-suited to “balance” the airing of viewpoints on media platforms. Of course, America’s disastrous experience with the Fairness Doctrine proved just how wrong that thinking was. [I summarize all the evidence proving that here.]

That leaves a final, more amorphous rationale for media control: ” gatekeeper” concerns and assertions that private media platforms can essentially become “state actors.” In the wake of Donald Trump’s “de-platorming” from Facebook and Twitter, many of his supporters began adopting this language in defense of more aggressive government control of private media platforms, including the possibility of declaring those platforms common carriers and demanding that some sort of amorphous “neutrality” mandates be imposed on them. But as Berin Szóka and Corbin Barthold of Tech Freedom note:

Where courts have upheld imposing common carriage burdens on communications networks under the First Amendment, it has been because consumers reasonably expected them to operate conduits. Not so for social media platforms. [. . . ] When it comes to the regulation of speech on social media, however, the presumption of content neutrality does not apply. Conservatives present their criticism of content moderation as a desire for “neutrality,” but forcing platforms to carry certain content and viewpoints that they would prefer not to carry constitutes a “content preference” that would trigger strict scrutiny. Under strict scrutiny, any “gatekeeper” power exercised by social media would be just as irrelevant as the monopoly power of local newspapers was in [previous Supreme Court holdings].

Put simply, efforts to stretch extremely narrow and limited common carriage precedents to fit social media just don’t work. We’ve already seen lower courts declare that recently when blocking the enforcement of new conservative-led efforts in Florida and Texas to limit the editorial discretion of private social media platforms. If conservatives really hope to get around these legal barriers to regulation, what would be needed would be a more far-reaching strike at the First Amendment itself. That would entail a jurisprudential revolution at the Supreme Court — reversing about a century of free speech precedents — or an some sort of an effort to amend the First Amendment itself. These things are almost certainly not going to occur.

But, again, this hasn’t stopped some conservatives from pitching extreme solutions in their efforts to regulate digital media at both the state and federal level. I discuss these efforts in previous essays on, “How Conservatives Came to Favor the Fairness Doctrine & Net Neutrality,“ “Sen. Hawley’s Radical, Paternalistic Plan to Remake the Internet,“ and “The White House Social Media Summit and the Return of ‘Regulation by Raised Eyebrow’.“ Perhaps some Trump-aligned conservatives understand that these legislative efforts are unlikely to work, but they continue to push them in an attempt to make life hell for tech platforms, or perhaps just to troll the Left and “own the Libs.”

On the other hand, some conservatives seem to really believe in some of the extreme ideas they are tossing around. What is particular troubling about these efforts is the way — following Trump’s lead — some conservatives, including even more mainstream conservative groups like the Heritage Foundation, are increasingly referring to private media platforms as “the enemy of the people.” That’s the kind of extremist language typically used by totalitarian thugs and Marxist lunatics who so hate private enterprise and freedom of speech that they are willing to adopt a sort of burn-the-village-to-save-it rhetorical approach to media policy.

And speaking of Marxists, here’s what is even more incredible about these efforts by some conservatives to use such rationales in support of comprehensive media regulation: It is all based on the “media access” playbook concocted by radical Leftist scholars a generation ago. As I summarized in my essay on, “The Surprising Ideological Origins of Trump’s Communications Collectivism“:

Media access advocates look to transform the First Amendment into a tool for social change to advance specific political ends or ideological objectives. Media access theory dispenses with both the editorial discretion rights and private property rights of private speech platforms. Private platforms become subject to the political whims of policymakers who dictate “fair” terms of access. We can think of this as communications collectivism.

Media access doctrine is rooted in an arrogant, elitist, anti-property, anti-freedom ethic that suggest the State is a better position to dictate what can and cannot be said on private speech platforms. “It’s astonishing, yet nonetheless true,” I continued on in that essay, “that the ideological roots of Trump’s anti-social media campaign lie in the works of those extreme Leftists and even media Marxists. He has just given media access theory his own unique nationalistic spin and sold this snake oil to conservatives.” Yet, Trump and other national conservatives are embracing this contemptible doctrine because now more than ever the ends apparently justify the means in American politics. Nevermind that all this could come back to haunt them when the Left somehow leverages this regulatory apparatus to control Fox News or other sites and content that conservatives favor! Once media platforms are viewed as just another thing to be controlled by politics, the only question is which politics and how are those politics enforced? Certainly both the Left and the Right cannot both have their way given all that current divides them.

Finally, what is utterly perplexing about all this is how much thanks national conservatives really owe to the major digital platforms they now seek to destroy. As I noted in my new Hill op-ed:

There has never been more opportunity for conservative viewpoints than right now. Each day on Facebook, the top-10 most shared links are dominated by pundits such as Ben Shapiro, Dan Bongino, Dinesh D’Souza and Sean Hannity. Right-leaning content is shared widely on Twitter each day. Websites like Dailywire.com and Foxnews.com get far more traffic than the New York Times or CNN.

Thus, conservatives might be shooting themselves in the foot if they were able to convince more legislatures to adopt the media access regulatory playbook because it could have profound unintended consequences once the Left uses those tools to somehow restrict access to “hate speech” or “misinformation” — and then define it so broadly so as to include much of the top material posted by conservatives on Facebook and Twitter ever day.

Not all conservatives have drank the media access kool-aid. In the wake of Trump’s deplatforming from a few major sites, a wave of new Right-leaning digital services are being planned or have already launched. (Axios and Forbes recently summarized some of these efforts.) I don’t know which will of these efforts will succeed, but more competition and platform-building are certainly superior to current calls by some Trump supporters for government regulation of mainstream social media services.

Again, this is the old Reagan vision at its finest! We can achieve a better media landscape, “only through the freedom and compe­tition that the First Amendment sought to guarantee,” not through bureaucratic regulation. It remains the principled path forward.

Additional Reading :

• “Left and right take aim at Big Tech — and the First Amendment“
• “When It Comes to Fighting Social Media Bias, More Regulation Is Not the Answer“
• “FCC’s O’Rielly on First Amendment & Fairness Doctrine Dangers“
• “Conservatives & Common Carriage: Contradictions & Challenges“
• “The Great Deplatforming of 2021“
• “A Good Time to Re-Read Reagan’s Fairness Doctrine Veto“
• “Sen. Hawley’s Radical, Paternalistic Plan to Remake the Internet“
• “How Conservatives Came to Favor the Fairness Doctrine & Net Neutrality“
• “Sen. Hawley’s Moral Panic Over Social Media“
• “The White House Social Media Summit and the Return of ‘Regulation by Raised Eyebrow’“
• “The Not-So-SMART Act“
• “The Surprising Ideological Origins of Trump’s Communications Collectivism“

Older essays & testimony :

• Adam Thierer, “Why Regulate Broadcasting: Toward a Consistent First Amendment Standard for the Information Age,” Catholic University Law School, 15 CommLaw Conspectus (Summer 2007): 431-482.
• Adam Thierer, Testimony at FCC’s Hearing on “Serving the Public Interest in the Digital Era”, March 3, 2010.
• Adam Thierer, “FCC v. Fox and the Future of the First Amendment in the Information Age,” Federalist Society, Engage (Feb. 2009).

Over at Discourse magazine, Connor Haaland and I have an new essay (“Can European-Style Industrial Policies Create Tech Supremacy?”) examining Europe’s effort to develop national champion in a variety of tech sectors using highly targeted industrial policy efforts. The results have not been encouraging, we find.

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.

We examine case studies in internet access, search, GPS, video services, and the sharing economy. We then explore newly-proposed industrial policy efforts aimed at developing their domestic AI market. We note how:

no amount of centralized state planning or spending will be able to overcome Europe’s aversion to technological risk-taking and disruption. The EU’s innovation culture generally values stability—of existing laws, institutions and businesses—over disruptive technological change. […] There are no European versions of Microsoft, Google or Apple, even though Europeans obviously demand and consume the sort of products and services those U.S.-based companies provide. It’s simply not possible given the EU’s current regulatory regime.

It seems unlikely that Europe will have much better luck developing home-grown champions in AI and robotics using this same playbook. “American academics and policymakers with an affinity for industrial policy might want to consider a model other than Europe’s misguided combination of fruitless state planning and heavy-handed regulatory edicts,” we conclude.

Head over to Discourse  to read the entire essay.

With many conservative policymakers and organizations taking a sudden pro-censorial turn and suggesting that government regulation of social media platforms is warranted, it’s a good time for them to re-read President Ronald Reagan’s 1987 veto of Fairness Doctrine legislation. Here’s the key line:

History has shown that the dan­gers of an overly timid or biased press cannot be averted through bureaucratic regulation, but only through the freedom and compe­tition that the First Amendment sought to guarantee.

That wisdom is just as applicable today when some conservatives suggest that government intervention is needed to address what they regardless as “bias” or “unfair” treatment on Twitter, Facebook, YouTube, or whatever else. Ignoring the fact that such meddling would likely violate property rights and freedom of contract — principles that most conservatives say they hold dear — efforts to empower the Federal Communications Commission, the Federal Trade Commission, or other regulators would be hugely misguided on First Amendment grounds.

President Reagan understood that there was a better way to approach these issues that was rooted in innovation and First Amendment protections. Here’s hoping that conservatives remember his sage advice. Read his entire veto message here.

Additional Reading:

• “FCC’s O’Rielly on First Amendment & Fairness Doctrine Dangers“
• “Sen. Hawley’s Radical, Paternalistic Plan to Remake the Internet“
• “How Conservatives Came to Favor the Fairness Doctrine & Net Neutrality“
• “Sen. Hawley’s Moral Panic Over Social Media“
• “The White House Social Media Summit and the Return of ‘Regulation by Raised Eyebrow’“
• “The Not-So-SMART Act“
• “The Surprising Ideological Origins of Trump’s Communications Collectivism“

[Co-authored with Connor Haaland and originally published on The Bridge as, “Do Our Leaders Believe in Free Speech and Online Freedom Anymore?”]

A major policy battle has developed regarding the wisdom of regulating social media platforms in the United States, with the internet’s most important law potentially in the crosshairs. Leaders in both major parties are calling for sweeping regulation.

Specifically, President Trump and his presumptive opponent in the coming presidential election, former Vice President Joe Biden, have both called for “Section 230” of the Communications Decency Act to be repealed. Last week, the president took a misguided step in this direction by signing an executive order that, if fully carried out, will result in significantly greater regulation of the internet and of speech.

A Growing Call to Regulate Internet Platforms

The ramifications of these threats and steps could not be more profound. Without Section 230—also known as “the 26 words that created the internet”—we would have a much less advanced internet ecosystem. Twitter, Facebook, YouTube, and Wikipedia would have never grown as quickly. Indeed, the repeal of Section 230 means many fewer jobs, less information distribution, and, frankly, less joy.

Shockingly, by backing Trump’s recent push for regulating these internet platforms, many conservatives are betraying their own principles—the ones that support freedom of expression and the ability to run private businesses without government interference.

Section 230 limits the liability online intermediaries face for the content and communications that travel over their networks. The immunities granted by Section 230 let online speech and commerce flow freely, without the constant threat of legal action or onerous liability looming overhead for digital platforms. To put it another way, without this provision, today’s vibrant internet ecosystem likely would not exist.

For completely different reasons, however, Biden and Trump want it axed. “Section 230 should be revoked, immediately should be revoked, number one. For [Facebook CEO Mark] Zuckerberg and other platforms,” said Biden in a New York Times interview. Like many other Democrats, Biden wants social media platforms to do far more to block speech they find to be offensive in various ways. If they fail to do more, Biden and other Democrats want Sec. 230 revised or repealed.

In contrast, Trump and his allies want these same platforms to do far less to curate content. Although lacking any empirical evidence, they allege that massive anti-conservative bias exists across today’s most popular platforms. As a result, they want Sec. 230 gutted. “Repeal 230,” said Trump in a tweet. Tensions reached a boiling point last week following a public fight between the president and Twitter after the social networking platform on May 27 added a fact-check notice to one of the president’s tweets about the supposed dangers of mail-in voting.

Retaliating Against Social Media

On May 28, Trump struck back against Twitter by signing an executive order on “preventing online censorship.” The EO cited Twitter six times but also went after Facebook, Instagram, and YouTube by name. Paradoxically, it also noted that the “freedom to express and debate ideas is the foundation for all of our rights as a free people,” even though the order will result in arbitrary government rule over our free speech rights.

Indeed, Trump’s executive order runs afoul of traditional conservative principles in several ways:

1. It expands the power of the government by delegating more authority to the administrative state and expanding arbitrary bureaucratic rule and regulatory abuse. It encourages the Federal Communications Commission (FCC) and the Federal Trade Commission to take a more active interest in content policy decisions, which is of dubious legality. Section 3 of the EO also says the Department of Justice “shall review the viewpoint-based speech restrictions imposed by each online platform identified in the report … and assess whether any online platforms are problematic vehicles for government speech due to viewpoint discrimination, deception to consumers, or other bad practices.” (emphasis added)

   What do other bad practices entail, and who in the government gets to make the call? It is not prudent to delegate authority over something as sacred as our rights to free speech to unelected government bureaucrats. Such power will stifle civil discourse and increase the possibility for special interests to co-opt the government by using its power for their own desires.

2. It undermines property rights of private companies by letting Big Government dictate how they use their business platforms. Carrying out the president’s executive order would amount to a taking of private property by the government, an action that conservatives have historically loathed. Our Founding Fathers considered property rights to be the cornerstone of a free and just society, yet Trump pays that fact little respect in this EO, running afoul of a centuries-old American tradition.

3. It will encourage frivolous lawsuits. By gutting Sec. 230, a law that protects online platforms from punishing liability for third-party speech, Trump’s EO would empower trial lawyers. We are already too litigious a country, filing over 80 million cases in state courts every year, and we do not need another reason to be in the courtroom. Repealing 230 would open the floodgates to endless lawsuits about online speech and clog up our judicial system, using resources that could be directed to more important matters.

4. It undermines free speech and would likely hurt conservative voices most. Trump’s executive order makes a mockery of the First Amendment by applying the Fairness Doctrine and net neutrality notions to social media, regulations that conservatives have vociferously opposed. A recent lawsuit filed by the Center for Democracy and Technology that seeks to challenge the EO alleges this exact point, saying it could chill free speech. In the past we have seen such concepts applied arbitrarily, harming free speech and media competition.

   For instance, our colleague Brent Skorup, has written on how the FCC exploited another arbitrary rule—the “public interest” standard. He points to the fact that a documentary portraying former Sen. John Kerry in a negative light was taken off the air thanks to the authority of the public interest standard as a paradigmatic example of how arbitrary regulatory power can harm free speech. The EO also undermines platforms that have greatly amplified conservative voices in recent years. On Facebook, for instance, 7 of the top 10 most cited news outlets were conservative. Meanwhile, Trump and other conservative leaders have tapped the power of Twitter to directly communicate with their base. The EO would therefore likely result in much conservative content being removed quickly to avoid legal hassles with regulators or the courts.

5. The combined effect of all these other factors will undermine the global competitiveness of US-based firms, potentially benefiting Chinese internet companies the most. Willingly giving up a comparative advantage would be foolish, considering how America’s tech companies are the envy of the world. Not only does the EO affect existing social platforms, but it could stifle innovation throughout the digital economy moving forward. Who wants to try and innovate in a field that is subject to regulations that can change on a president’s whim?

6. It could be used by future politicians against conservative platforms, like Fox News and other right-leaning outlets. This is clearly not the intent of Trump’s executive order, but that will eventually be the result nonetheless. Going forward, we will have different presidents with different political outlooks. When making laws, regulations, and executive orders, it is always important to consider how they could be applied by successive administrations with opposite political and ideological stripes.

Today’s social media platforms are not perfect, but it is impossible for them to please everyone. There is no Goldilocks formula whereby they can get speech policies just right and make everyone happy. Instead, the ideal policy for speech platforms is: Let a thousand flowers bloom. One-size-fits-all content management and community standards shouldn’t be the goal. We need diverse platforms and approaches for a diverse citizenry.

But when presidential candidates and their allies line up in support of repealing Sec. 230 and opening the door to speech controls, the end result will be homogenized conformity with the will of those in power. That’s a horrible result for a nation that values diversity of opinion and freedom of speech, and it will only end up hurting those who seek to change the conversation.

Also see: Brent Skorup, “The Section 230 Executive Order, Free Speech, and the FCC,” Technology Liberation Front, June 3, 2010.

President Trump and his allies have gone to war with social media sites and digital communications platforms like Twitter, Facebook, and Google. Decrying supposed anti-conservative “bias,” Trump has even floated an Executive Order aimed at “Preventing Online Censorship,” that entails many new forms of government meddling with these private speech platforms. Section 230 is their crosshairs and First Amendment restraints are being thrown to the wind.

Various others have already documented the many legal things wrong with Trump’s call for greater government oversight of private speech platforms. I want to focus on something slightly different here: The surprising ideological origins of what Trump and his allies are proposing. Because for those of us who are old-timers and have followed communications and media policy for many decades, this moment feels like deja vu all over again, but with the strange twist that supposed “conservatives” are calling for a form of communications collectivism that used to be the exclusive province of hard-core Leftists.

To begin, the truly crazy thing about President Trump and some conservatives saying that social media should be regulated as public forums is not just that they’re abandoning free speech rights, it’s that they’re betraying property rights, too. Treating private media like a “public square” entails a taking of private property. Amazingly, Trump and his followers have taken over the old “media access movement” and given it their own spin.

Media access advocates look to transform the First Amendment into a tool for social change to advance specific political ends or ideological objectives. Media access theory dispenses with both the editorial discretion rights and private property rights of private speech platforms. Private platforms become subject to the political whims of policymakers who dictate “fair” terms of access. We can think of this as communications collectivism.

The media access movement’s regulatory toolkit includes things like the Fairness Doctrine and “neutrality” requirements, right-of-reply mandates, expansive conceptions of common carriage (using “public forum” or “town square” rhetoric), agency threats, and so on. Even without formal regulation, media access theorists hope that jawboning and political pressure can persuade private platforms to run more (or perhaps sometimes less) of the content that they want (or don’t) on media platforms.

The intellectual roots of the media access movement were planted by leftist media theorists like Jerome Barron, Owen Fiss in 1960s and 1970s, and later by Marxist communications scholar Robert McChesney. In 2005, I penned this short history of media access movement and explored its aims. I also wrote two old books with chapters on the dangers of media access theory and calls for collectivizing communications and media systems. Those books were: Media Myths (2005) and A Manifesto for Media Freedom (2008, w Brian C. Anderson). The key takeaway from those essays is that the media access movement comes down to control.

The best book ever written about dangers of media access movement was Jonathan Emord’s 1991, Freedom, Technology and the First Amendment. He perfectly summarizes their goals (and now Trump’s) as follows:

• “In short, the access advocates have transformed the marketplace of ideas from a laissez-faire model to a state-control model.”
• “Rather than understanding the First Amendment to be a guardian of the private sphere of communication, the access advocates interpret it to be a guarantee of a preferred mix of ideological viewpoints.
• “It fundamentally shifts the marketplace of ideas from its private, unregulated, and interactive context to one within the compass of state control, making the marketplace ultimately responsible to government for determinations as to the choice of content expressed.”

“This arrogant, elitist, anti-property, anti-freedom ethic is what drives the media access movement and makes it so morally repugnant,” I argued in that old TLF essay. That is still just as true today, even when it’s conservatives calling for collectivization of media.

It’s astonishing, yet nonetheless true, that the ideological roots of Trump’s anti-social media campaign lie in the works of those extreme Leftists and even media Marxists. He has just given media access theory his own unique nationalistic spin and sold this snake oil to conservatives.

There certainly could come a day where his opponents on the Left just take this media access playbook up again and suggest this is exactly what’s needed for Fox News and other right-leaning media outlets. If and when that does happen, Trump and other conservatives will have no one to blame but themselves for embracing this contemptible philosophical vision simply because it suited their short-term desires while they were in power.

I hope that conservatives rethink their embrace of communications collectivism, but I fear that Trump and his allies have already convinced themselves that the ends justify the means when it comes to advancing their causes or even just “owning the libs.” But there really is a strong moralistic slant to what Trump and many of his allies want. They think they are on the right side of history and that the opponents–including most media outlets and plaforms–are evil. Trump and his allies have repeatedly referred to the press as the “enemy of the American people” and endlessly lambasted social media platforms for not going along with his desires. This reflects a core tendency of all communications collectivists: a sort of ‘you’re-either-with-us-or-against-us’ attitude.

Steve Bannon scripted all this out back in 2018. Go back and read this astonishing CNN interview for a preview of what could happen next. Here’s the rundown:

>> Bannon said Big Tech’s data should be seized and put in a “public trust.” Specifically, Bannon said, “I think you take [the data] away from the companies. All that data they have is put in a public trust. They can use it. And people can opt in and opt out. That trust is run by an independent board of directors. It just can’t be that [Big Tech is] the sole proprietors of this data…I think this is a public good.” Bannon added that Big Tech companies “have to be broken up” just like Teddy Roosevelt broke up the trusts.” >> Bannon attacked the executives of Facebook, Twitter and Google. “These are run by sociopaths,” he said. “These people are complete narcissists. These people ought to be controlled, they ought to be regulated.” At one point during the phone call, Bannon said, “These people are evil. There is no doubt about that.” >> Bannon said he thinks “this is going to be a massive issue” in future elections. He said he thinks it will probably take until 2020 to fully blossom as a campaign issue, explaining, “I think by the time 2020 comes along, this will be a burning issue. I think this will be one of the biggest domestic issues.”

This is now Trump’s playbook. It’s incredibly frightening because, once married up with Trump’s accusations of election fraud and other imagined conspiracies, you can sense how he’s laying the groundwork to call into question future election results by suggesting that both traditional media and modern digital media platforms are just in bed with the Democratic party and trying to rig the presidential election. I don’t really want to think about what happens if this situation escalates to that point. These are very dark days for the American Republic.

[Originally published on the Cato Institute blog.]

Examples were everywhere. Distilleries started producing hand sanitizers to address shortages while average folks began sharing do‐​it‐​yourself sanitizer recipes online. The Food and Drug Administration (FDA) looked to modify hand sanitizer guidelines quickly to allow for it, but few really cared because those rules weren’t going to stop them. Gray markets in face masks, medical face shields, and respirators developed. Some people and organizations worked together to make medical devices using off‐​the‐​shelf hardware and open source software. More simply, others just fired up sewing machines to make masks—and then, faced with an emerging public health consensus, the guidance from the federal government shifted dramatically: where formerly ordinary people were instructed not to buy or use masks, within a matter of days, the policy reversed, and all were encouraged to make and use cloth protective masks.

Meanwhile, doctors and nurses started “writing the playbook for treating coronavirus patients on the fly” by improvising treatments and then sharing them on social media. A few doctors even converted breathing machines to ventilators themselves using 3-D printed parts to address shortages for their patients even though the FDA had not yet authorized it.

Social media sites were also suddenly filled with discussions about how average people might come together to build tools or share information to assist with virus testing or treatments. A 17‐​year‐​old used his coding skills to build one of the most popular coronavirus‐​tracking websites in the world (ncov2019.live) after noticing how hard it was to use government sites. And two high school science teachers in Tennessee set up testing operations in their school lab to help reduce testing time in their area.

Meanwhile, journalists and columnists like the  Wall Street Journal’s Andy Kessler cheered on such activity, encouraging the public to “innovate from your couch.” Modern digital technologies and platforms that had been pariahs and the target of a regulatory‐​minded “techlash” just a few months earlier suddenly became essential public services that were showered with praise for helping people cope with social distancing and the solitude associated with shelter‐​in‐​place requirements. Headlines in major media outlets explained how “Facebook Is More Trustworthy than the President” and “Twitter Is Making the Coronavirus World a Better Place.”

Philanthropists like Bill Gates were also funding their own solutions. The former Microsoft founder and CEO pointed out that, in an effort to find testing solutions and vaccines, private groups like his Gates Foundation could likely mobilize faster than governments. Gates likely had grown frustrated with government responses after a Seattle‐​based lab that the Gates Foundation funded figured out an effective way to test for coronavirus, only to be blocked from expanding it by over‐​cautious federal bureaucrats. Frustrated by federal intransigence, that Seattle lab started testing for COVID-19 anyway to prove they indeed had an effective test. Commenting on the case study, the New York Times  expressed exasperation about “how existing regulations and red tape—sometimes designed to protect privacy and health—have impeded the rapid rollout of testing nationally.”

Wait, Isn’t All This Illegal?

What is interesting about all these examples of bottom‐​up innovation and evasive entrepreneurialism is that they are remarkably inspiring, but also mostly illegal. Almost all these activities butted up against longstanding regulations governing medical devices, practices, or therapies. Some of those rules are enforced by large and powerful federal bureaucracies like the FDA and Centers for Disease Control and Prevention (CDC).

Others take the form of state‐​based occupational licensing limitations or certificate‐​of‐​need laws, which require healthcare providers to first obtain permission before they open or expand their facilities or services. This crazy quilt of medical laws and regulations accumulated steadily over time, creating what constitutional scholar Timothy Sandefur calls a “permission society,” which values proceduralism and conformity over practicality and common sense.

Eventually, however, the mountains of red tape that the permission society is built upon start to collapse under their own weight. Laws and agencies that previously commanded obedience are now viewed as an opaque, ossified, and confusing morass of one‐​size‐​fits‐​all mandates, prohibitions, and penalties that actually undermine the very health goals they were put in place to achieve. Suddenly, headlines in every major newspaper screamed of how, as it pertained to virus testing procedures, “The Government Failed” (Wall Street Journal) because of “Flawed Tests, Red Tape and Resistance” (Washington Post) and this resulted in “The Lost Month” (New York Times) in the United States.

Eventually, people take notice of how regulators and their rules encumber entrepreneurial activities, and they act to evade them when public welfare is undermined. Working around the system becomes inevitable when the permission society becomes so completely dysfunctional and counterproductive.

Technological Empowerment vs. the Status Quo

What’s going on here, and what lessons can we derive from it?

In a new Cato Institute book, Evasive Entrepreneurs and the Future of Governance, I document how the sort of behavior we have recently witnessed was growing rapidly even before the COVID-19 crisis. In many different contexts, evasive entrepreneurs—innovators who don’t always conform to social or legal norms—are using new technological capabilities to circumvent traditional regulatory systems. They at least want to put pressure on public policymakers to reform or selectively enforce laws and regulations that are outmoded, inefficient, or counterproductive.

Evasive entrepreneurs rely on a strategy of permissionless innovation in both the business world and the political arena. They push back against the permission society by creating exciting new products and services without always receiving the blessing of public officials before doing so. While evasive entrepreneurialism has always been with us to some extent, many of the responses to the pandemic would not have been possible even just a few decades ago. Recent advancements have supercharged in a more technologically empowered world of information abundance and decentralized, inexpensive tools.

As I show in the book, evasive entrepreneurs are taking advantage of the growth of what we might think of as technologies of freedom or resistance. These are devices and platforms that let citizens circumvent (or perhaps just ignore) public policies that limit their liberty or freedom to innovate or to enjoy the fruits of innovation. These can include common tools like smartphones, computers, and various new interactive platforms, as well as more specialized technologies like cryptocurrencies, private drones, immersive technologies (like virtual reality), 3D printers, the “Internet of Things,” and sharing economy platforms and services. But that list just scratches the surface. When the public uses tools such as these to explicitly evade public policies on moral grounds because they find then offensive, illogical, or perhaps just annoying, we can think of that as technological civil disobedience.

Common Sense Prevails

Evasive entrepreneurialism and technological civil disobedience accelerated during the pandemic because both the practicality and morality of government policies came into question in stark fashion. The first month of the crisis witnessed “a torrent of governmental incompetence that is breathtaking in scale,” my Mercatus colleague Scott Sumner argues. “There are regulations so bizarre that if put in a novel no one would believe them,” he notes. “In contrast, the private sector has reacted fairly well, and has been far ahead of the government in most areas.”

Indeed, the pandemic has been a stress test for our institutions, and many of them have failed it. Confusing rules and inflexible agencies that should have been reformed years ago were suddenly exposed and judged harshly. Philip K. Howard, founder of Common Good, says that “Covid‐​19 is the canary in the bureaucratic mine.” Bloated bureaucracies and overbearing regulatory systems, he argues, have created a “toxic atmosphere that silenced common sense” and managed to “institutionalize failure.” Cato’s Paul Matzko has documented how the FDA has been particularly guilty of blocking sensible forms of progress on simple things like face mask production or distribution.

While countless others lambasted the practical failures of our institutions, the morality of government policies was also coming into focus. Why should citizens have their innovative efforts to help others stifled at seemingly every juncture? Must we really follow the law when it undercuts the basic human need to care for others and ourselves?

These are the issues addressed in my new book, which explains the practical reasons why evasive entrepreneurialism is on the rise and then provides a moral defense of it. When innovators and average citizens use tools and technological capabilities to pursue a living, enjoy new experiences, or improve the human condition, they often disrupt legal or social norms in the process. That is not necessarily a bad thing. In fact, evasive entrepreneurialism can transform our society for the better because it can help expand the range of life‐​enriching (and often life‐​saving) innovations. Evasive entrepreneurialism can help citizens pursue lives of their own choosing—both as creators looking for the freedom to earn a living and as individuals looking to discover and enjoy important new goods and services.

Defending evasive entrepreneurialism is easy  after it occurs, but few defend it before or as it is happening. I argue in the book that the freedom to innovate is essential to human betterment—for each of us individually and for civilization as a whole—and that freedom deserves to be taken more seriously today. The COVID-19 pandemic has made this more apparent than ever before.

There are few things more human than acts of invention. At its root, innovation involves efforts to discover new and better ways of solving practical human needs and wants. People have a right to innovate and create technologies because they possess a more general right to take steps to improve their lot in life and the lives of others around them. When misguided or archaic government programs and policies blocked that potential during the pandemic, people began ignoring or evading them. That was both practically sensible and morally justifiable.

Innovation as the New Checks and Balances

By extension, the response to the pandemic has proven the second thesis set forth in my book: Evasive entrepreneurialism and technologically enabled civil disobedience can actually help us improve government by keeping public policies fresh, sensible, and in line with common sense and the consent of the governed. Evasiveness and technological disruption can act as a sort of relief valve or circuit breaker to counteract negative pressures in the system before things break down completely. By challenging legislators and regulators to reevaluate the wisdom of their policies, evasive entrepreneurs can help us break political logjams and force governments to become more adaptive and accountable.

The proof is in the pudding. As the crisis unfolded, agencies at the federal, state, and local levels were forced to suspend hundreds of regulations that were clearly undermining helpful responses. These “rule departures” would not have been necessary if governments had engaged in periodic spring cleanings earlier. When COVID-19 hit, it became essential to suspend or repeal hundreds of misguided old rules that clearly undermined public health. The only question now is whether those inefficient, counterproductive policies will be put back on the books to do harm again in the next crisis.

But even before the current crisis, rule departures by government actors were becoming more common because  even government officials could no longer understand their own rules. Just as private citizens have increasingly resorted to evasive techniques to get things done, many regulatory agencies have given up trying to “go by the book” themselves because endless regulatory accumulation has made it impossible to understand what the law means.

My book documents many cases of public officials essentially ignoring their own policies and making up governance solutions as they go along. This is another sign of profound institutional failure, yet it should also give us some hope that even policymakers themselves now realize that government cannot just grow forever without breaking down at some point. The need for comprehensive reform is now abundantly clear, and the pandemic has moved the so‐​called “Overton Window” (i.e., the acceptable range of possible policy reforms) on many fronts.

A New Approach to Governance

Policymakers need a new approach for technological governance that is more in line with modern realities. Flexibility and humility will be essential. Regulators do not need to throw out the old rulebooks altogether, though. Some precautionary rules still make sense, particularly in cases involving extreme risk. But why not embrace the entrepreneurial spirit of the citizenry and allow more experimental trials, flexible testing procedures, and perhaps even prizes for particularly innovative ideas?

When enforcing the rules that remain on the books, policymakers should also consider targeted waivers and ex post regulatory reviews as opposed to ex ante regulatory prohibitions on any and all evasive innovations. Liability rules can also be tweaked so innovators do not have to live in constant fear of getting sued for trying to make the world a better place. Finally, post‐​market monitoring and recall notices can also be used to ensure flexible experiments have some regulatory guardrails.

But shutting down creative solutions and unique thinking simply because they run counter to some crusty old rulebook is never the right response. We should view evasive entrepreneurialism as an important part of a broader discovery process that incorporates the profound importance of ongoing, decentralized, trial‐​and‐​error experimentation to the process of societal learning and improvement. Lawmakers should find a way to accommodate a little more outside‐​the‐​box thinking and innovating—and not just when our lives are on the line.

Additional Reading 

• read the opening chapter of the book
• watch the event launch video
• 10 Highlights from the Book
• 13 Key Terms from the Book
• 5 innovation policy scholars who inspired this book
• “Innovation & the Precautionary Principle” (AIER essay)
• “Congress as a Non-Actor in Tech Policy” (Medium essay)

by Andrea O’Sullivan & Adam Thierer

This essay originally appeared on The Bridge on September 25, 2019.

It is quickly becoming one of the iron laws of technology policy that by attempting to address one problem (like privacy, security, safety, or competition), policymakers often open up a different problem on another front. Trying to regulate to protect online safety, for example, might give rise to privacy concerns, or vice versa. Or taking steps to address online privacy through new regulations might create barriers to new entry, thus hurting online competition.

In a sense, this is simply a restatement of the law of unintended consequences. But it seems to be occurring with greater regularity in the technology policy today, and it serves as another good reminder why humility is essential when considering new regulations for fast-moving sectors.

Consider a few examples.

Privacy vs security & competition 

Many US states and the federal government are considering data privacy regulations in the vein of the European Union’s wide-reaching General Data Privacy Regulation (GDPR). But as early experiences with the GDPR and various state efforts can attest, regulations aimed at boosting consumer privacy can often butt against other security and competition concerns.

Consider how the GDPR can be abused to undermine user security—and ultimately (and ironically) privacy itself. At this year’s Black Hat computer security conference, one researcher recently explained how the GDPR’s “right of access” provision—which mandates that companies give users their personal data—can be exploited by malicious actors to steal personally identifiable information. If a hacker is convincing enough, he or she can use “social engineering” to pose as the target and coax companies to divulge the information. Without GDPR’s mandated reporting infrastructure, such an attack would be much harder.

Nor are malicious actors even necessary for the GDPR to undermine security. In 2018, a customer requested their Alexa voice recordings from Amazon. The company sent the data to the wrong person in an apparent case of human error. If mighty Amazon cannot rise to the challenge of error-free GDPR compliance, what hope do smaller outfits have?

Perhaps the biggest story about the GDPR, however, has been its malign effects on competition. After all, the law earned its nickname—the “Google Data Protection Regulation”—for a reason. Titans like Google and Facebook have dominated European ad tech market since the advent of the GDPR because they can shoulder compliance risks in a way that smaller vendors cannot. More ad money has flowed to Google’s coffers as a result.

But the GDPR applies to far more than just ad tech. Ventures as varied as publishing and virtual tabletop dice rollers have been forced to shutter their digital doors rather than risk the wrath of European data authorities.

Similar stories emanate from the US. Illinois’ biometric privacy law, which governs the use of technologies like facial recognition and fingerprint scanning, led to the prohibition of Google’s Arts and Culture app which matched user-submitted photos with a classical work of art. If Google can’t hack it in the Land of Lincoln, how could a potential Google-slayer be expected to do so?

These are just the stories we hear about. A prematurely thwarted venture is unlikely to have a platform to voice their compliance problems. What is clear is that the data privacy laws enacted so far have had predictable negative impacts on security and competition, and that ill-defined “privacy fundamentalism” too often drives ill-fitting policies.

Safety vs. free speech & competition

Content moderation at scale is extremely challenging, especially as it relates to efforts to address “hate speech” and extremist viewpoints. On the one hand, free speech activists argue that onerous private content moderation policies can limit debate and punish certain viewpoints, particularly if a platform is a public default for expression. On the other hand, social justice activists contend that lax private standards can fuel the proliferation of conspiracy theories, radicalization, and violent rhetoric.

Recently, President Trump and some conservative lawmakers have been clamoring for greater regulatory controls of social media platforms in the name of “fairness” and countering supposed anti-conservative bias. Sens. Josh Hawley (R-MO) and Ted Cruz (R-TX), for example, have introduced a bill that would require platforms to submit their content moderation policies to regular regulatory audits. If a platform is deemed to be not “politically neutral,” it will lose its liability protections under Section 230 of the Communications Decency Act.

This is reminiscent of the “fairness doctrine,” a long-standing Federal Communications Commission (FCC) policy that was a thinly-veiled attempt to influence the political content of broadcast programs. Conservatives rightly opposed such government involvement in content decisions in decades past, but with this new effort against technology platforms, many of them are repeating the mistakes of the past.

The history of the actual fairness doctrine serves as a cautionary tale here. Today the fairness doctrine is mostly remembered as an anti-conservative effort because of the attention paid to right-leaning talk radio. Former Kennedy administration official Bill Ruder admitted that their “massive strategy was to use the [fairness doctrine] to challenge and harass right-wing broadcasters, and hope that the challenges would be so costly to them that they would be inhibited and decide it was too costly to continue.”

But as testaments from previous broadcast leaders point out, the fairness doctrine was wielded against both “conservatives” and “liberals” depending on who was in power and what their objectives were. When the Nixon administration took office, they wielded the rule to muzzle broadcasters who criticized the White House. And the FCC also applied the doctrine against The Kingmen’s song “Louie Louie” for its suspiciously unintelligible lyrics.

The tension between policies to promote “safety” and government-protected rights to free speech can be literal, as well. Consider efforts to ban so-called “3-D printed guns.” Defense Distributed and other activists do not 3-D print and sell guns. Rather, they publish the schematics for others to print their own arms online. As with the encryption technologies we will discuss below, such code is probably First Amendment-protected speech, although the applications of the schematics may be considered “dual-use” (meaning with both civilian and military applications.) An outright ban on 3-D printed gun blueprints very clearly antagonizes the right to free speech in the US and could threaten innovation in other open source, peer-to-peer 3D-printed applications.

Safety vs. privacy & security

Efforts to promote “safety” can also too often backfire at the expense of privacy and security.

Perhaps the most dramatic and high-stakes illustration of this principle was the years-long legal drama that pitted law enforcement authorities against computer scientists in the so-called “Crypto Wars.” Although cryptographic technologies that conceal data for privacy or security have been around since the days of ancient Egypt—our own Founding Fathers are known to have communicated using ciphers—in the 20th century, they had mostly been limited to military and academic institutions.

The advent of public-key cryptography made these security techniques more accessible to the public for the first time. This was great news for information security: communications and devices could be made hardened to attacks, and people were given more privacy options. But law enforcement feared that criminals would use cryptography to cover their tracks. Thus, in the name of safety, law enforcement first tried banning cryptography as a dual use technology through munitions export controls. When that failed on First Amendment grounds, policymakers attempted to legislate “backdoors” into encryption protocols that would allow government access.

It is easy to see how outright bans or backdoors for encryption technologies could hurt privacy and security. Obviously, prohibiting the civilian use of a privacy and security technology limits privacy and security. But granting government access into encryption standards would ironically ultimately undermine safety as well. After all, if a government can get into an encryption standard, so might a malicious hacker. Although the “Crypto Wars” seemed settled in the 1990’s, these same debates have been cropping up again as more and more devices have default encryption technologies.

We can also think about mandated reporting requirements intended to promote public safety. Consider the “know your customer” rules imposed on financial institutions. To prevent ills like money laundering and financial fraud, banks and exchanges must keep detailed customer information on file. Yet this ostensibly “pro-safety” rule generates its own security and privacy risks. Banks must manage to responsibly store and protect this valuable customer data, lest their customers’ information get hacked and their identities stolen. This has sadly too often proven too tall an order, and third-party-managed personally identifiable information is exposed to outside parties all the time.

A similar problem arises with efforts to promote child safety online. Consider the debate over MySpace’s age verification efforts in the mid-2000s. Child safety advocates grew concerned over the risks facing children on new social media platforms. Young children lacking awareness of the dangers that could lurk online could unwittingly make friendships with predators posing as other children. So a movement grew to require these new platforms to verify age and identity with a government-provided identification card.

There were obvious technical problems. For starters, children that were young enough to fall under the age verification limit were unlikely to have a government-provided photo identification card. But beyond these simple administrative issues, there was the question of privacy and security. Could Myspace adequately protect the reams of sensitive data from outside breach? Might children actually be put more at danger should those items—which would likely include the children’s address—fall into the wrong hands? And should the government and social media platforms really be in the business of parenting to begin with? Might this actually create a “moral hazard” which leaves parents thinking that online spaces are safer than they actually are?

Tying it all together

In each of these instances, it probably seemed like there was no downside to newly proposed regulations. With time, however, the dynamic effects associated with those policies become evident, and often result in the opposite of what was intended, or the policies led to other problems that supporters did not originally envision.

The nineteenth-century French economic philosopher Frédéric Bastiat famously explained the importance of considering the many unforeseen, second-order effects of economic change and policy. Many pundits and policy analysts pay attention to only the first-order effects—what Bastiat called “the seen”—and ignore the subsequent and often “unseen” effects. Those unseen effects can have profound real-world consequences in the form of less technological innovation, diminished growth, fewer job opportunities, higher prices, diminished choices, and other costs.

Even when defenders of the failed interventions are forced to admit that their well-intentioned plans did not work out as planned, their response is typically of the  we-can-do-better variety. The result is usually just more regulation as one intervention begs another and another. As the Austrian economist Ludwig von Mises taught us 70 years ago in his masterwork, Human Action:

“All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther…”

The lesson is clear: paternalistic public policies may sound sensible on the surface, but as Milton Friedman taught us long ago, “One of the great mistakes is to judge policies and programs by their intentions rather than their results. We all know a famous road that is paved with good intentions.”

When it comes to the threat of automation, I agree with Ryan Khurana: “From self-driving car crashes to failed workplace algorithms, many AI tools fail to perform simple tasks humans excel at, let alone far surpass us in every way.” Like myself, he is skeptical that automation will unravel the labor market, pointing out that “[The] conflation of what AI ‘may one day do’ with the much more mundane ‘what software can do today’ creates a powerful narrative around automation that accepts no refutation.”

Khurana marshals a number of examples to make this point:

Google needs to use human callers to impersonate its Duplex system on up to a quarter of calls, and Uber needs crowd-sourced labor to ensure its automated identification system remains fast, but admitting this makes them look less automated…

London-based investment firm MMC Ventures found that out of the 2,830 startups they identified as being “AI-focused” in Europe, 40% used no machine learning tools, whatsoever.

I’ve been collecting examples of the AI hype machine as well. Here are some of my favorites.

From Rodney Brooks comes this corrective:

Chris Urmson, the former leader of Google’s self-driving car project, once hoped that his son wouldn’t need a driver’s license because driverless cars would be so plentiful by 2020. Now the CEO of the self-driving startup Aurora, Urmson says that driverless cars will be slowly integrated onto our roads “over the next 30 to 50 years.”

Judea Pearl, a pioneer in statistics, said last year that “All the impressive achievements of deep learning amount to just curve fitting,” a technique that was developed decades ago.

Earlier this year, IBM shut down its Watson AI tool for drug discovery.

Mike Mallazzo said it this way: “The investors know it’s bullshit. When venture capitalists say they are looking to add ‘A.I. companies’ to their portfolio, what they really want is a technological moat built around access to uniquely valuable data. If it’s beneficial for companies to sprinkle in a little sex appeal and brand this as ‘A.I.,’ there’s no incentive to stop them from doing so.”

And there is the problem of cost:

• Google’s DeepMind lost roughly $162 million in 2016.
• Facebook might have access to vast engineering resources and data about language, but still their chatbot project, M, fell short. According to one source familiar with the program, M never surpassed 30 percent automation.^[21]
• Ocado, the UK-based online supermarket, explained in late 2017 that the company would need to spend “an extra couple of million pounds” to hire software engineers to work on automating its warehouses.
• Facebook tried to largely automate their content moderation process, but had to pull back on the project and has instead upped the number of content moderators.
• After years of development, T-Mobile got rid of its robotic customer service lines.
• BMW and Daimler, long time competitors, have been pooling resources to create autonomous vehicles because of the astronomical costs involved. 
• Uber recently raised a $1 billion for its autonomous vehicles unit.
• McDonald’s purchased Silicon Valley VC-backed AI company Dynamic Yield, which was reportedly for over $300 million, making it the fast-food giant’s largest acquisition since it bought Boston Market in 1999. 
• Ford invested nearly a $1 billion in Argo for its work in autonomous vehicles.
• Johnson & Johnson paid $3.4 billion to pick up surgical robotics pioneer Auris Health, and its FDA-cleared Monarch platform in March. 
• Total private investment into AI businesses in the United Kingdom exceeded £3.8 billion in 2018.
• SAS intends to spend $1 billion on AI research in the coming three years.
• According to data from CB Insights, a record $9.3 billion went to U.S.-based AI startups in 2018, an $8.2 billion increase from the $1.1 billion raised in 2013.

As I explained before, the large pecuniary costs in big data technologies don’t speak to the equally expensive task of overhauling management techniques to make the new systems work. New technologies can’t be seamlessly adopted within firms, they need management and process innovations to make the new data-driven methods profitable. And to be honest, we just aren’t there yet.

Slate recently published an astonishing piece of revisionist history under the title, “Bring Back the Golden Age of Broadcast Regulation,” which suggested that the old media regulatory model of the past would be appropriate for modern digital media providers and platforms. In the essay, April Glaser suggests that policymakers should resurrect the Fairness Doctrine and a host of old Analog Era content controls to let regulatory bureaucrats address Digital Age content moderation concerns.

In a tweetstorm, I highlighted a few examples of why the so-called Golden Era wasn’t so golden in practice. I began by noting that the piece ignores the troubling history of FCC speech controls and unintended consequences of regulation. That regime gave us limited, bland choices–and a whole host of First Amendment violations. We moved away from that regulatory model for very good reasons.

For those glorifying the Fairness Doctrine, I encourage them to read the great Nat Hentoff’s excellent essay, “The History & Possible Revival of the Fairness Doctrine,” about the real-world experience of life under the FCC’s threatening eye. Hentoff notes:

Others were harassed in ways that were both humorous and horrifying. For example, go back and review the amazing FCC (and FBI!) investigation of The Kingsmen’s song “Louie Louie,” due to fears about its unintelligible lyrics:

Or go back and read former CBS president Fred Friendly’s 1975 book (The Good Guys, the Bad Guys & the First Amendment) about abuses of the Fairness Doctrine during both Republican and Democratic administrations. This stuff from Kennedy years, which I summarized in old book, is quite shocking:

And then there was the “golden era” of broadcast regulation under Nixon, where regulatory harassment intensified to counter what had happened during Democratic administrations. Here’s Jesse Walker summarizing those dark days:

Also read Tom Hazlett on the Nixon years and all the broadcast meddling that happened on a ongoing basis. “License harassment of stations considered unfriendly to the Administration became a regular item on the agenda at White House policy meetings,” he notes. And then even the Smothers Brothers became victims!

This is how Tom Hazlett perfectly summarized the choice before us regarding whether to let regulatory bureaucracies decide what is “fair” in media. This is exactly the same question we should be asking today when people suggest reviving the old “golden era” media control regime.

Keep in mind, the examples of content meddling cited here most involve the Fairness Doctrine. Indecency rules, the Financial Interest and Syndication Rules, and other FCC policies gave politicians others levers of exerting influence and control over speech. The meddling was endless.

This was no “Golden Era” or broadcast regulation–unless, that is, you prefer bland, boring, limited choices and endless bureaucratic harassment of media. No amount of wishful thinking or revisionist history can counter the hard realities of that dismal era in our nation’s history. We should wholeheartedly and vociferously reject calls to resurrect it.

[This essay originally appeared on the AIER blog on May 28, 2019. The USA TODAY also ran a shorter version of this essay as a letter to the editor on June 2, 2019.]

In a hotly-worded USA Today op-ed last week, Senator Josh Hawley (R-Missouri) railed against social media sites Facebook, Instagram, and Twitter. He argued that, “social media wastes our time and resources,” and is “a field of little productive value” that have only “given us an addiction economy.” Sen. Hawley refers to these sites as “parasites” and blames them for a litany of social problems (including an unproven link to increased suicide), leading him to declare that, “we’d be better off if Facebook disappeared.”

As far as moral panics go, Sen. Hawley’s will go down as one for the ages. Politicians have always castigated new technologies, media platforms, and content for supposedly corrupting the youth of their generation. But Sen. Hawley’s inflammatory rhetoric and proposals are something we haven’t seen in quite some time.

He sounds like those fire-breathing politicians and pundits of the past century who vociferously protested everything from comic books to cable television, the waltz to the Walkman, and rock-and-roll to rap music. In order to save the youth of America, many past critics said, we must destroy the media or media platforms they are supposedly addicted to. That is exactly what Sen. Hawley would have us do to today’s leading media platforms because, in his opinion, they “do our country more harm than good.”

We have to hope that Sen. Hawley is no more successful than past critics and politicians who wanted to take these choices away from the public. Paternalistic politicians should not be dictating content choices for the rest of us or destroying technologies and platforms that millions of people benefit from.

Addiction Panics: We’ve Been Here Before

Ironically, Sen. Hawley isn’t even right about what the youth of America are apparently obsessed with. Most kids view Facebook and Twitter as places where old people hang out. My teenage kids laugh when I ask them about those sites. Pew Research polling finds that many younger users are increasingly deleting Facebook (if they used it at all) or flocking to other platforms, such as Snapchat or YouTube.

But shouldn’t we be concerned with kids overusing social media more generally? Yes, of course we should—but that’s no reason to call for their outright elimination, as Sen. Hawley recommends. Such rhetoric is particularly concerning at a time when critics are proposing a “break up” of tech companies. Sen. Hawley sits on the U.S. Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights. It is likely he and others will employ these arguments to fan the flames of regulatory intervention or antitrust action against at least Facebook.

Forcing social media sites to “disappear” or be broken up is one of the worst ways to deal with these concerns. It is always wise to mentor our youth and teach them how to achieve a balanced media diet. Many youths—and many adults—are probably overusing certain technologies (smartphones, in particular) and over-consuming some types of media. For those truly suffering from addiction, it is worth considering targeted strategies to address that problem. However, that is not what antitrust law is meant to address.

Moreover, concerns about addiction and distraction have popped up repeatedly during past moral panics and we should take such claims with a big grain of salt. Sociologist Frank Furedi has documented how, “inattention has served as a sublimated focus for apprehensions about moral authority” going back to at least the early 1700s. With each new form of media or means of communication, the older generation taps into the same “kids-these-days!” fears about how the younger generation has apparently lost the ability to concentrate or reason effectively.

For example, in the past century, critics said the same thing about radio and television broadcasting, comparing them to tobacco in terms of addiction and suggesting that media companies were “manipulating” us into listening or watching. Rock-and-roll and rap music got the same treatment, and similar panics about video games are still with us today.

Strangely, many elites, politicians, and parents forget that they, too, were once kids and that their generation was probably also considered hopelessly lost in the “vast wasteland” of whatever the popular technology or content of the day was. The Pessimists Archive podcast has documented dozens of examples of this reoccurring phenomenon. Each generation makes it through the panic du jour, only to turn around and start lambasting newer media or technologies that they worry might be rotting their kids to the core. While these panics come and go, the real danger is that they sometimes result in concrete policy actions that censor content or eliminate choices that the public enjoys. Such regulatory actions can also discourage the emergence of new choices.

Missed Opportunity, or Marvelous Achievement?

Sen. Hawley makes another audacious assertion in his essay when he suggests that social media has not provided any real benefit to American workers or consumers. He says the rise of the Digital Economy has “encouraged a generation of our brightest engineers to enter a field of little productive value,” which he regards as “an opportunity missed for the nation.”

This is an astonishing statement, made more troubling by Hawley’s claim that all these digital innovators could have done far more good by choosing other professions. “What marvels might these bright minds have produced,” Hawley asks, “had they been oriented toward the common good?”

Why is it that Sen. Hawley gets to decide which professions are in “the common good”? This logic is insulting to all those who make a living in these sectors, but there is a deeper hubris in Sen. Hawley’s argument that social media does not serve “the common good.” Had some benevolent philosopher kings in Washington stopped the digital economy from developing over the past quarter century, would all those tech workers really have chosen more noble-minded and worthwhile professions? Could he or others in Congress really have had the foresight to steer us in a better direction?

In reality, U.S. tech companies produce high-quality jobs and affordable, collaborative communications platforms that are popular across the globe. In response to Sen. Hawley’s screed, the Internet Association, which represents America’s leading digital technology companies, noted that, in Sen. Hawley’s home state of Missouri alone, the Internet supports 63,000 jobs at 3,400 companies and contributed $17 billion in GDP to the state’s economy. Presumably, Sen. Hawley would not want to see those benefits “disappear” along with the social media sites that helped give rise to them.

But the Internet and social media have an equally profound impact on the entire U.S. economy, adding over 9,000 jobs and nearly 570 businesses to each metropolitan statistical area. The Digital Economy is a great American success story that is the envy of the world, not something to be lamented and disparaged as Sen. Hawley has.

For someone who believes that Facebook is a “drug” and a “parasite,” it is curious how active Sen. Hawley is on Facebook, as well as on Twitter. If he really believes that “we’d be better off if Facebook disappeared,” then he should lead by example and get off the sites. But that is a decision he will have to make for himself. He should not, however, make it for the rest of us.

Recently, Noah Smith explored an emerging question in tech. Is there a kill zone where new and innovative upstarts are being throttled by the biggest players? He explains ,

Facebook commissioned a study by consultant Oliver Wyman that concluded that venture investment in the technology sector wasn’t lower than in other sectors, which led Wyman to conclude that there was no kill zone.

But economist Ian Hathaway noted that looking at the overall technology industry was too broad. Examining three specific industry categories — internet retail, internet software and social/platform software, corresponding to the industries dominated by Amazon, Google and Facebook, respectively — Hathaway found that initial venture-capital financings have declined by much more in the past few years than in comparable industries. That suggests the kill zone is real.

A recent paper by economists Wen Wen and Feng Zhu reaches a similar conclusion. Observing that Google has tended to follow Apple in deciding which mobile-app markets to enter, they assessed whether the threat of potential entry by Google (as measured by Apple’s actions) deters innovation by startups making apps for Google’s Android platform. They conclude that when the threat of the platform owner’s entry is higher, fewer app makers will be interested in offering a product for that particular niche. A 2014 paper by the same authors found similar results for Amazon and third-party merchants using its platform.

So, are American tech companies making it difficult for startups? Perhaps, but there are some other reasons to be skeptical.

First off, the nature of the venture capital market has changed due to the declining costs of computing. Not too long ago, much of a tech company’s Series A and B would be dedicated to buying  server racks and computing power. But with the advent of Amazon Web Services (AWS) and other cloud computing technologies, this need has dried up.

What does this mean for the ecosystem? Ben Thompson explained the impact back in 2015 :

In fact, angels have nearly completely replaced venture capital at the seed stage, which means they are the first to form critical relationships with founders. True, this has led to an explosion in new companies far beyond the levels seen previously, which is entirely expected — lower barriers to entry to any market means more total entries — but this has actually made it even more difficult for venture capitalists to invest in seed rounds: most aren’t capable of writing massive numbers of seed checks; the amounts are just too small to justify the effort.

Instead, venture capitalists have gone up-market: firms may claim they invest in Series’ A and B, but those come well after one or possibly two rounds of seed investment; in other words, today’s Series A is yesteryear’s Series C. This, by the way, is the key to understanding the so-called “Series A crunch”: it used to be that Series C was the make-or-break funding round, and in fact it still is — it just has a different name now. Moreover, the fact more companies can get started doesn’t mean that more companies will succeed; venture capitalists just have more companies to choose from.

Research is only now catching up with Thompson’s hunch. In a newly released NBER working paper , economists David Byrne, Carol Corrado, Daniel E. Sichel find that prices for computing, database, and storage services offered by AWS dropped dramatically from 2009 to 2016. As they concluded, “cloud service providers are undertaking large amounts of own-account investment in IT equipment and that some of this investment may not be captured in GDP.”

Second, a decline in startups was predicted by Nobel winning economist Robert Lucas back in 1978 . Over time, Lucas surmised, productivity increases will yield wage increases, which in turn will incentivize marginal entrepreneurs to become employees. This will increase productivity at the company, but also increases the size of the firm. Over time, as productivity and wages inch upwards, working at a firm gets incentivized over starting a company. Entrepreneurs as a portion of the economy will thus decline and industries with higher productivity rates will see bigger firms.

Recent analysis of 50 separate national economies confirmed the inverse relationship between entrepreneurship rates and Gross Domestic Product (GDP), which has also been confirmed by the World Bank Group Entrepreneurship Survey as well. Time series analysis also hints at this relationship. Employment within large firms tends to grow over time as a country gets wealthier. Analysis of the Census Business Dynamics Statistics (BDS) illustrates this, as does groundwork conducted in American manufacturing from 1850 to 1880. But the United States isn’t the only country where this relationship can be found. The same trend exists for Canada , Germany , Indonesia , Japan , South Korea , and Thailand .

Moreover, the distribution of firms tends to change as a country becomes wealthier. As economist Markus Poschke noted, “richer countries thus feature fewer, larger firms, with a firm size distribution that is more dispersed and more skewed.” So, it not just the United States that has large firms. Sweden, the Netherlands and Ireland all have large firms, but they too are relatively wealthy by international standards. Productivity goes a long way to explain the distributional changes.

Nicholas Kozeniauskas, a recent minted economist from NYU, also has been working on research showing the skewed nature of entrepreneurism, which adds some depth to this conversation. As he found , the decline in entrepreneurship has been more pronounced for higher education levels. Overall, “an increase in fixed costs explains most of the decline in the aggregate entrepreneurship rate.”  

As of right now, I think we should be unsatisfied with the evidence of a kill zone. The research doesn’t point in the same direction. But as new insight comes in, we will need to update, as always.  

There has been an increasing outcry recently from conservatives that social media is conspiring to silence their voices.  Leading voices including President Donald Trump and Senator Ted Cruz have started calling for legislative or regulatory actions to correct this perceived “bias”. But these calls for fairness miss the importance of allowing such services to develop their own terms and for users to determine what services to use and the benefit that such services have been to conservatives.

Social media is becoming a part of our everyday lives and recent events have only increased our general awareness of this fact. More than half of American adults login to Facebook on a daily basis. As a result, some policymakers have argued that such sites are the new public square. In general, the First Amendment strictly limits what the government can do to limit speakers in public spaces and requires that such limits be applied equally to different points of view. At the same time, private entities are generally allowed to set terms regarding what speech may or may not be allowed on their own platforms.

The argument that modern day websites are the new public square and must maintain a neutral view point was recently rejected in a lawsuit between PraegerU and YouTube. Praeger believed that its conservative viewpoint was being silenced by YouTube decision to place many of its videos in “restricted mode.” In this case, the court found that YouTube was still acting as a private service rather than one filling a typical government role. Other cases have similarly asserted that Internet intermediaries have First Amendment rights to reject or limit ads or content as part of their own rights to speak or not speak. Conservatives have long been proponents of property rights, freedom of association, and free markets. But now, faced with platforms choosing to exercise their rights, rather than defend those values and compete in the market some “conservatives” are arguing for legislation or utilizing litigation to bully the marketplace of ideas into giving them a louder microphone. In fact, part of the purpose behind creating the liability immunity (known as Section 230) for such services was the principle that a variety of platforms would emerge with different standards and new and diverse communities could be created and evolve to serve different audiences.

A similar idea of a need for equal content was previously used by the Federal Communications Commission (FCC) and known as “the fairness doctrine”. This doctrine required equal access for groups or individuals wanting to express opposing views on public issues. In the 1980s Reagan era Republicans led the charge against this doctrine arguing that it violated broadcasters’ First Amendment rights and actually went against the public interest. In fact, many have pointed out that the removal of the fairness doctrine is what allowed conservative talk radio hosts like Rush Limbaugh to become major political forces.  In the 2000s, when liberals suggested bringing back the fairness doctrine, conservatives were aghast and viewed it was an attack on conservative talk radio.  Even now, President Trump has used social media as a way to deliver messaging and set his political agenda in a way that has never been done before. If anything, there are lower barriers to creating a new medium on the Internet than there are on the TV or radio airwaves. As a 2016 National Review article states if conservatives are concerned with how they are being treated by existing platforms, “The goal should not be to create neutral spaces; it should be to create non-neutral spaces more attractive than existing non-neutral spaces.” In other words rather than complaining that the odds are against them and demanding “equal time”, conservatives should try to compete by building more attractive platforms that promote the content moderation ideals they believe are best. But perhaps, the problem is they realize that ultimately difficult or unpopular content moderation decisions must be faced by any platform.

Content moderation is no easy task. Even for small groups differing beliefs can quickly result in grey areas that require difficult calls by an intermediary. For social media and other Internet intermediaries, when dealing with such issue on a scale of millions and a global diversity of what is and isn’t acceptable, content moderation becomes exponentially complicated. It is unsurprising that a rate of human and machine learning errors exist in making such decisions. AI might seem like a simple solution but such filters aren’t aware of the context in many cases. For example, a Motherboard article recently pointed out the difficulty that those with last names like Weiner and Butts face when trying to register for accounts on websites with AI filters to prevent offensive language. Leaving the task of content moderation to humans is both incredibly difficult on the moderators and may result in inconsistent results due to the large volume of content that must be moderated and differing interpretations of community standards. As Jason Koebler and Joseph Cox point out in their Motherboard article on the challenge of content moderation on a global scale that Facebook is dealing with, “If you take a single case, and then think of how many more like it exist across the globe in countries that Facebook has even less historical context for, simple rules have higher and higher chances of unwanted outcomes.” It is quite clear that if we as a society can’t decide on our own definitions of things like hate speech or bullying in many cases, how we can expect a third party public or private to make such decision in a way that satisfies every perspective?

The Internet has helped the world truly create a marketplace of ideas. The barriers to entry are rather low and the medium is constantly evolving. Because of social media and the Internet more generally conservative voices are able to reach a wider audience than before. Conservatives should be careful what they wish for with calls for “fairness,” because such power could actually prevent future innovation or new platforms and extend the status quo instead.

In recent essays and papers, I have discussed the growth of “innovation arbitrage,” which I defined as, “The movement of ideas, innovations, or operations to those jurisdictions that provide a legal and regulatory environment more hospitable to entrepreneurial activity.” A new Economist article about “Why startups are leaving Silicon Valley,” discusses innovation arbitrage without calling it such. The article notes that, for a variety of reasons, Valley innovators and investors are looking elsewhere to set up shop or put money into new ventures. The article continues:

Other cities are rising in relative importance as a result. The Kauffman Foundation, a non-profit group that tracks entrepreneurship, now ranks the Miami-Fort Lauderdale area first for startup activity in America, based on the density of startups and new entrepreneurs. Mr Thiel is moving to Los Angeles, which has a vibrant tech scene. Phoenix and Pittsburgh have become hubs for autonomous vehicles; New York for media startups; London for fintech; Shenzhen for hardware. None of these places can match the Valley on its own; between them, they point to a world in which innovation is more distributed. If great ideas can bubble up in more places, that has to be welcome. There are some reasons to think the playing-field for innovation is indeed being levelled up. Capital is becoming more widely available to bright sparks everywhere: tech investors increasingly trawl the world, not just California, for hot ideas. There is less reason than ever for a single region to be the epicentre of technology. Thanks to the tools that the Valley’s own firms have produced, from smartphones to video calls to messaging apps, teams can work effectively from different offices and places.

That’s the power of innovation arbitrage at work. Alas, the Economist article ends on a sour note, arguing that “innovation everywhere is becoming harder” because tech firms are becoming too big and anti-immigrant policies (especially in the US) are turning away some of the best and brightest minds. The latter is a real problem and one that is of the Trump Administration’s own making. By turning away the next generation of exciting innovators and limiting exciting start-up opportunities, America is shooting itself in the foot by undermining competitiveness and our competitive advantage among nations more generally. Which speaks to the first point made in the Economist article: If we want more competition to the big dogs, we need a lot more puppies. We’re not going to get them with backwards immigration policies. But nor will we get them by hobbling the biggest tech innovators. We shouldn’t be punishing success; we should be praising it.

We should recall Joseph Schumpeter’s essential insights in this regard. First, never underestimate how, in his words, “an untried technological possibility” can usher in one wave of “creative destruction” after another. Many critics talk about today’s “tech titans” (like Google, Facebook, Apple, and Amazon) as if they have always stalked the land. In reality, if you jump back in time just 15 years, it was Microsoft, MySpace, AOL Time Warner, Blackberry, and Motorola which allegedly possessed unassailable market power. And then creative destruction rolled into town. It happened before and it can happen again.

Schumpeter’s second insight was even more crucial and closely linked to his first. As I described it in a previous essay:

[Schumpeter] explained that uneven entrepreneurial gains — even supranormal short-term profits — must be tolerated if innovation is to occur. Innovators will only take risks if they can expect the potential for big gains from it. Attempts to curtail those potential benefits through hasty regulatory interventions or antitrust threats will sap the entrepreneurial spirit from the marketplace, limit technological innovation, and diminish the possibility of greater market dynamism and consumer choice over the long-haul. “In this respect,” Schumpeter concluded, “perfect competition is not only impossible but inferior,” precisely because it would sabotage “the most powerful engine of that progress … those entrepreneurial profits which are the prizes offered by capitalist society to the successful innovator.”

Thus, if you want still more disruptive innovation and creative destruction, you absolutely cannot sabotage entrepreneurs by eliminating the quest for the prize of profitability. Innovators need to know that when they take big risks, big rewards are possible. If they see innovative acts punished, they will look elsewhere. Indeed, that’s one reason that innovation arbitrage happens with increasing regularity today.

That doesn’t mean we throw out antitrust law entirely. There can still be circumstances where market power is abused and needs to be addressed, but simply making big profits does not automatically qualify as an abuse of consumer welfare.

A curious thing happened last week. Facebook’s stock, which had seem to have weathered the 2018 controversies, took a beating.

In the Washington Post, Craig Timberg and Elizabeth Dwoskin explained that the stock market drop was representative of a larger wave:

The cost of years of privacy missteps finally caught up with Facebook this week, sending its market value down more than $100 billion Thursday in the largest single-day drop in value in Wall Street history.

Jeff Chester of the Center for Digital Democracy piled on, describing the drop as “a privacy wake-up call that the markets are delivering to Mark Zuckerberg.”

But the downward pressure was driven by more fundamental changes. Simply put, Facebook missed its earnings target. But it is important to peer into why the company didn’t meet those targets.

As Zuckerberg noted in the earning call ,

Now, perhaps one of the most important things we’ve done this year to bring people closer together is to shift News Feed to encourage connection with friends and family over passive consumption of content. We’ve launched multiple changes over the last half to News Feed that encourage more interaction and engagement between people, and we plan to keep launching more like this.

Later in the call, Facebook CFO David Wehner signaled total revenue growth rate would decelerate due to the choices made by Zuckerberg,  

We plan to grow and promote certain engaging experiences like Stories that currently have lower levels of monetization, and we are also giving people who use our services more choices around data privacy, which may have an impact on our revenue growth.

Moreover, the costs would continue to rise as they also embedded more privacy and security features into the platform:

Turning now to expenses; we continue to expect that full-year 2018 total expenses will grow in the range of 50% to 60% compared to last year. In addition to increases in core product development and infrastructure, this growth is driven by increasing investment in areas like safety and security, AR/VR, marketing, and content acquisition. Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019.

So, Facebook got hammered because it invested more in privacy and security, while also transitioning to less revenue generating source of content. At first glance, this might seem to signal from the market to not invest in these sort of changes. Indeed, as Blake Reid noted ,

They got punished by the market for investing in less-monetized content and spending more on privacy and security. Doesn’t that send a signal to not do that?

Yes and no.

It has been widely accepted that corporations often adopt short term strategies that attempt to maximize earnings. As one well cited survey of financial executive explained, “Because of the severe market reaction to missing an earnings target, we find that firms are willing to sacrifice economic value in order to meet a short-run earnings target.”

This preference for the near term, especially for payoffs in the near term, seems to be a common feature among humans . People tend to prefer small rewards that occur now over much larger rewards that come later. This is known as hyperbolic discounting and it helps to explain why households under-save , why smokers find it tough to quit , and why firms prefer near term earnings.

Pulling together the insights from finance and behavioral psychology, two economists pointed out “that a firm exhibiting hyperbolic discounting preferences faces an underinvestment problem, i.e. there exists another feasible investment plan that improves all periods’ present values.” Conversely, a firm exhibiting time invariant preferences would invest, even if it meant a short term hit.   

Facebook is probably playing the long game. Zuckerberg has an overwhelming controlling stake in the company and wants to build value in the long term . And if these changes lead to more durability, that is, if users stay on the site longer in the next 5 or 10 years, then it makes sense to take the short term hit. It would be better to do this than have a massive exodus at some point down the road.

In the same kind of way, Amazon has been criticized for years for spending too much money on company investments to the detriment of returns. But, Amazon’s Q2 2018 numbers came in this week and they were double expectations . Bezos’ 1997 shareholder letter laid out the strategy, “We believe that a fundamental measure of our success will be the shareholder value we create over the long term.” Bezos is also more concerned with building for the long term.

I’m working on a more formal model of this, but I think there are reasons to believe that Facebook would be especially sensitive to privacy concerns. And Facebook’s missing earnings also point to a real concern about the long term viability of the platform.

In cleaning up my desk this weekend, I chanced upon an old notebook and like many times before I began to transcribe the notes. It was short, so I got to the end within a couple of minutes. The last page was scribbled with the German term Öffentlichkeit (public sphere), a couple sentences on Hannah Arendt, and a paragraph about Norberto Bobbio’s view of public and private.

Then I remembered. Yep. This is the missing notebook from a class on democracy in the digital age .   

Serendipitously, a couple of hours later, William Freeland alerted me to Franklin Foer’s newest piece in The Atlantic titled “ The Death of the Public Square .” Foer is the author of “World Without Mind: The Existential Threat of Big Tech,” and if you want a good take on that book, check out Adam Thierer’s review in Reason .

Much like the book, this Atlantic piece wades into techno ruin porn but focuses instead on the public sphere:

Nobody designed the public sphere from a dorm room or a Silicon Valley garage. It just started to organically accrete, as printed volumes began to pile up, as liberal ideas gained currency and made space for even more liberal ideas. Institutions grew, and then over the centuries acquired prestige and authority. Newspapers and journals evolved into what we call media. Book publishing emerged from the printing guilds, and eventually became taste-making, discourse-shaping enterprises.

In recent years, this has been eviscerated by Facebook and Google, Foer continues,  

It took centuries for the public sphere to develop—and the technology companies have eviscerated it in a flash. By radically remaking the advertising business and commandeering news distribution, Google and Facebook have damaged the economics of journalism. Amazon has thrashed the bookselling business in the U.S. They have shredded old ideas about intellectual property—which had provided the economic and philosophical basis for authorship.

Philosopher Jurgen Habermas, who is cited throughout the piece, coined the term Öffentlichkeit, which has been translated into English as public sphere. However, Habermas used the term to describe not only the “process by which people articulate the needs of society with the state” but also the “public opinion needed to legitimate authority in any functioning democracy.” So, the public bridges the practices of democracy with mass communication methods like broadcast television, newspapers, and magazines.   

While Foer doesn’t explore it fully, the public sphere forms a basis for legitimate authority, which in turn implicates political power.

Nancy Fraser provided the classic critique of public sphere because even in Habermas’ own conception of the term, countless voices were excluded from the public sphere. “This network of clubs and associations – philanthropic, civic, professional, and cultural – was anything but accessible to everyone,” Fraser explained. “On the contrary, it was the arena, the training ground and eventually the power base of a stratum of bourgeois men who were coming to see themselves as a ‘universal class’ and preparing to assert their fitness to govern.”

In parallel to the public sphere, Fraser observed that numerous counterpublics formed “where members of subordinated social groups invent and circulate counter discourses to formulate oppositional interpretations of their identities, interests, and needs.” And it is through these oppositional interpretations that the public conversation around politics changed. Think about civil rights and the environmental movement, and even deregulation as examples.

Foer might be right to focus on the public sphere, but I’m not sure his analysis goes far enough. He explains:

This assault on the public sphere is an assault on free expression. In the West, free expression is a transcendent right only in theory—in practice its survival is contingent and tenuous. We’re witnessing the way in which public conversation is subverted by name-calling and harassment. We can convince ourselves that these are fringe characteristics of social media, but social media has implanted such tendencies at the core of the culture. They are in fact practiced by mainstream journalists, mobs of the well meaning, and the president of the United States. The toxicity of the environment shreds the quality of conversation and deters meaningful participation in it. In such an environment, it becomes harder and harder to cling to the idea of the rational individual, formulating opinions on the basis of conscience. And as we lose faith in that principle, the public will lose faith in the necessity of preserving the protections of free speech.

But Foer’s lament, if it is about the public sphere, is ultimately about the old friction, between the public sphere and counterpublics, in new form. Foer’s worries about theological zealots, demagogic populists, avowed racists, trollish misogynists, filter bubbles, the false prophets of disruption, and invisible manipulation, just to name a couple techno-golems, echoes the “counter discourses [that] formulate oppositional interpretations” of Fraser.

It is all quite inhumane, yes.

But let’s also remember that Facebook and Google and Reddit and Twitter also support humane counterpublics. Like when chronic pain sufferers find solace on Facebook . Or when widows vent, rage, laugh and cry without judgement through the Hot Young Widows Club . Let’s also not forgot that Reddit, while sometimes being a place of rage and spite, is also where a weight lifter with cerebral palsy became a hero and where those with addiction can find healing . 

Let’s also not forget that most Americans think  these companies have on the whole been beneficial in their lives. And that most of us don’t post political content on either Facebook or Twitter. And that people are the least likely to get their news from social networking sites compared to every other source.

Focusing on democracy and on politics tightens the critical vision, causing us to miss the multiplicities of experiences online. Yet those experiences, those counterpublics are just as representative. They constitute a reality far more real than those constructed by critics.

In preparation for a Federalist Society teleforum call that I participated in today about the compliance costs of the EU’s General Data Protection Regulation (GDPR), I gathered together some helpful recent articles on the topic and put together some talking points. I thought I would post them here and try to update this list in coming months as I find new material. (My thanks to Andrea O’Sullivan for a major assist on coming up with all this.)

Key Points :

• GDPR is no free lunch; compliance is very costly

• • • All regulation entails trade-offs, no matter how well-intentioned rules are
    • $7.8 billion estimated compliance cost for U.S. firms already
    • Punitive fees can range from €20 million to 4 percent of global firm revenue
    • Vagueness of language leads to considerable regulatory uncertainty — no one knows what “compliance” looks like
    • Even EU member states do not know what compliance looks like: 17 of 24 regulatory bodies polled by Reuters said they were unprepared for GDPR

• GDPR will hurt competition & innovation; favors big players over small

• • • Google, Facebook & others beefing up compliance departments. (“ EU official, Vera Jourova: “They have the money, an army of lawyers, an army of technicians and so on.”)
    • Smaller firms exiting or dumping data that could be used to provide better, more tailored services
    • PwC survey found that 88% of companies surveyed spent more than $1 million on GDPR preparations, and 40% more than $10 million.
    • Before GDPR, half of all EU ad spend went to Google. The first day after it took effect, an astounding 95 percent went to Google.
    • In essence, with the GDPR, the EU is surrendering on the idea of competition being possible going forward
    • The law will actually benefit the same big companies that the EU has been going after on antitrust grounds. Meanwhile, the smaller innovators and innovations will suffer.

• GDPR likely to raise costs to consumers, or diminish choice/quality

• • • Consumers care about privacy, but they also care about choice, convenience, and low-cost services
    • The modern data-driven economy has given consumers access to an unparalleled cornucopia of information and services and it is remarkable how much of that content and how many of those services are offered to the public at no charge to them. That’s a real benefit.  
    • But if you take all the data out of the Data Economy, you won’t have much of an economy left
    • “Many organizations will pass these costs on to consumers either by erecting paywalls or forcing users to view more ads.”
    • Websites blacked out post GDPR: Instapaper, Los Angeles Times , Chicago Tribune (all Tronc- and Lee Enterprises-owned media platforms), A&E Networks websites.
    • “EU-only” web experience: stripped down websites without illustration or images. NPR and USA Today .
    • Washington Post is charging for a more expensive GDPR compliant subscription.

• GDPR hurts global flow of information; worsens problem of data localization

• • Rules only allow data to move to jurisdictions that offer an adequate level of protection
  • Cloud computing? Cloud architects are building costly new infrastructure that can isolate and inspect EU data to ensure it is not “sent” to the wrong jurisdiction.
  • Another step toward a more “bordered” Internet
  • Likely to just create more walled gardens
  • Max Schrems: “Unfortunately data localization is probably the best solution right now. It’s not really a solution that appeals to me a lot, but I think we need data localization for other reasons anyways, like load times and so on.”
  • Roundabout way to impose tariffs? Data-based firms are largely external to EU.

• GDPR doesn’t solve bigger problem of government access to data

• • EU Data Retention Directive: third parties must keep data for law enforcement for two years (passed after terrorist attacks).
  • EU member states often have no FISA-like body overseeing government wiretap requests. France and the UK have no court apparatus governing surveillance — instead issued directly by administrative bodies. In Germany, their FBI equivalent can install a “Federal Trojan” virus directly into third party platforms without their knowledge.

• GDPR doesn’t really move the needle much in terms of real privacy protection

• • heavy-handed, top-down regulatory regimes don’t always accomplish their goals when it comes to privacy
  • what consumers need is new competitive options and privacy innovations
  • Unfortunately, the world won’t get the new choices we need if regulations like the GDPR essentially punish them with regulatory compliance costs that only the largest current incumbents can possibly absorb

Related Research & Articles :

• Oliver Smith, “The GDPR Racket: Who’s Making Money From This $9bn Business Shakedown,” Forbes , May 2, 2018, https://www.forbes.com/sites/oliversmith/2018/05/02/the-gdpr-racket-whos-making-money-from-this-9bn-business-shakedown/#44d6f57b34a2  
• John Battelle, “How GDPR Kills The Innovation Economy,” NewCoShift , May 25, 2018, https://shift.newco.co/amp/p/844570b70a7a .
• Daniel Lyons, “GDPR: Privacy as Europe’s tariff by other means?” AEIdeas , July 3, 2018, https://www.aei.org/publication/gdpr-privacy-as-europes-tariff-by-other-means/
• Will Rinehart, “The Law & Economics of ‘Owning Your Data,’” American Action Forum, Insight , April 10, 2018, https://www.americanactionforum.org/insight/law-economics-owning-data/#ixzz5Klci9G
• Adam Thierer, “How Well-Intentioned Privacy Regulation Could Boost Market Power of Facebook & Google,” Technology Liberation Front , April 25, 2018, https://techliberation.com/2018/04/25/how-well-intentioned-privacy-regulation-could-boost-market-power-of-facebook-google/
• Andrea O’ Sullivan, “The EU’s New Privacy Rules Are Already Causing International Headaches,” Reason, June 12, 2018, https://reason.com/archives/2018/06/12/the-eus-new-privacy-rules-are-already-ca
• Alice Calder & Anne Hobson, “Data Privacy at a Price,” Medium , May 25, 2018, https://readplaintext.com/data-privacy-at-a-price-398634622f8b
• Daisuke Wakabayashi and Adam Satariano, “ How Looming Privacy Regulations May Strengthen Facebook and Google ,” New York Times , April 23, 2018,
• Sam Schechner and Nick Kostov, “ Google and Facebook Likely to Benefit From Europe’s Privacy Crackdown ,” Wall Street Journal , April 23, 2018, https://www.wsj.com/articles/how-europes-new-privacy-rules-favor-google-and-facebook-1524536324
• Nick Kostov and Sam Schechner, “Google Emerges as Early Winner From Europe’s New Data Privacy Law,” Wall Street Journal , May 31, 2018, https://www.wsj.com/articles/eus-strict-new-privacy-law-is-sending-more-ad-money-to-google-1527759001   https://www.wsj.com/articles/eus-strict-new-privacy-law-is-sending-more-ad-money-to-google-1527759001  
• Daniel Castro & Michael McLaughlin, “Why the GDPR Will Make Your Online Experience Worse,” Fortune , May 23, 2018, http://fortune.com/2018/05/23/gdpr-compliant-privacy-facebook-google-analytics-policy-deadline/
• Brent Skorup & Jennifer Huddleston Skees, “It’s Not About Facebook; It’s about the Next Facebook,” Real Clear Policy , June 01, 2018, https://www.realclearpolicy.com/articles/2018/06/01/its_not_about_facebook_its_about_the_next_facebook_110654.html
• Jennifer Skees & Jordan Reimschisel, “GDPR and Me: how the EU data rules could impact genetic testing,” Medium , May 18, 2018, https://readplaintext.com/gdpr-and-me-how-the-eu-data-rules-could-impact-genetic-testing-851494e55dd3 

The Supreme Court is winding down for the year and last week put out a much awaited decision in Ohio v. American Express . Some have rung the alarm with this case, but I think caution is worthwhile. In short, the Court’s analysis wasn’t expansive like some have claimed, but incomplete. There are a lot of important details to this case and the guideposts it has provided will likely be fought over in future litigation over platform regulation. To narrow the scope of this post, I am going to focus on the market definition question and the issue of two-sided platforms in light of the developments in the industrial organization (IO) literature in the past two decades.

Just to review, Amex centers on what is known as anti-steering provisions. These provisions limit merchants who take the credit card payment from implying a preference for non-Amex cards; dissuading customers from using Amex cards; persuading customers to use other cards; imposing any special restrictions, conditions, disadvantages, or fees on Amex cards; or promoting other cards more than Amex. Importantly, these provisions never limited merchants from steering customers toward debit cards, checks, or cash.

In October 2010, the Department of Justice (DoJ) and several states sued Amex, Visa, and Mastercard for these contract provisions, and Amex was the only one among the three to take it to court. Initially, the District Court ruled in favor of the DoJ and states, explaining that the credit card platforms should be treated as two separate markets, one for merchants and one for cardholders. In that analysis, the court cleaved off the merchant side and declared the anti-steering provisions as being anticompetitive under Section 1 of the Sherman Act.

On appeal, the Court of Appeals for the Second Circuit reversed that decision because “without evidence of the [anti-steering provisions’] net effect on both merchants and cardholders, the District Court could not have properly concluded that the [provisions] unreasonably restrain trade in violation” of Section 1 of the Sherman Act. The Department of Justice petitioned the Appeals Court to reconsider the case en banc , but that was rejected and then headed to the Supreme Court.

The Supreme Court agreed with this two-sided theory as “credit-card networks are best understood as supplying only one product—the transaction—that is jointly consumed by a cardholder and a merchant.” Even though the DoJ was able to show that the provisions did increase merchant fees, “evidence of a price increase on one side of a two-sided transaction platform cannot, by itself, demonstrate an anticompetitive exercise of market power.” To prove this, the DoJ would have to prove that Amex increased of the cost of credit-card transactions above a competitive level, reduced the number of credit-card transactions, or otherwise stifled competition in the two-sided credit-card market.

The decision only briefly mentions why this is important, so consider a platform with two sides, users and advertisers. If users experience an increase in price or a reduction in quality, then they are likely to exit or use the platform less. Yet, advertisers are on the other side because they can reach users. So in response to the decline in user quality, advertiser demand will drop even if the ad prices stay constant. The result echoes back.  When advertisers drop out, the total amount of content also recedes and user demand falls because the platform is less valuable to them. Demand is tightly integrated between the two side of the platform. Changes in user and advertiser preferences have far outsized effects on the platforms because each side responds to the other. In other words, small changes in price or quality tends to be far more impactful in chasing off both groups from the platforms as compared to one-sided goods. In the economic parlance, these are called demand interdependencies. The demand on one side of the market is interdependent with demand on the other. Research on magazine price changes confirms this theory.   

In the last two decades, economics has been adapting to the insights and the challenges of two-sided markets. In the case of a one-sided business, like a laundromat or a mining company, there is one downstream or upstream consumer, so demand is fairly straightforward. But platforms are more complex since value must be balanced across the different participants in a platform, which leads to demand interdependencies.

In an article cited in the decision, economists David Evans and Richard Schmalensee explained the importance of their integration into competition analysis, “The key point is that it is wrong as a matter of economics to ignore significant demand interdependencies among the multiple platform sides” when defining markets. If they are ignored, then the typical analytical tools will yield incorrect assessments.

While it didn’t employ the language of demand interdependencies, the Court did agree with that general assessment:

To be sure, it is not always necessary to consider both sides of a two-sided platform. A market should be treated as one sided when the impacts of indirect network effects and relative pricing in that market are minor. Newspapers that sell advertisements, for example, arguably operate a two-sided platform because the value of an advertisement increases as more people read the newspaper. But in the newspaper-advertisement market, the indirect networks effects operate in only one direction; newspaper readers are largely indifferent to the amount of advertising that a newspaper contains. Because of these weak indirect network effects, the market for newspaper advertising behaves much like a one-sided market and should be analyzed as such.

Why does this bit matter?

In a piece in the New York Times in April, Law scholar Lina Khan worried that this case would “effectively [shield] big tech platforms from serious antitrust scrutiny.” Law professor Tim Wu followed up with an op-ed just this past week in the Times expressing similar concern,

To reach this strained conclusion, the court deployed some advanced economics that it seemed not to fully understand, nor did it apply the economics in a manner consistent with the goals of the antitrust laws. Justice Stephen Breyer’s dissent mocks the majority’s economic reasoning, as will most economists, including the creators of the “two-sided markets” theory on which the court relied. The court used academic citations in the worst way possible — to take a pass on reality.

Respectfully, I have to disagree with Wu’s assessment and Khan’s worries. Both Google and Facebook more evidently fall into the newspaper category than the payments category under the majority’s opinion. Moreover, the opinion didn’t define what “weak indirect network effects” actually means in practice, so this case doesn’t leave Google and Facebook off the hook by any means.

How the Court reached that conclusion is worth exploring, however.

In contrast to newspapers, credit card payment platforms “cannot make a sale unless both sides of the platform simultaneously agree to use their services,” so, “two-sided transaction platforms exhibit more pronounced indirect network effects and interconnected pricing and demand.” The Court seems to connect two-sidedness with the simultaneity requirement. On this front, Wu is correct. They didn’t seem to fully understand the economic reasoning. It isn’t the simultaneous nature of credit cards that makes them two-sided markets, but their demand interdependencies. Newspapers also have strong demand interdependencies even though they may not feature the simultaneity of credit cards. Yet, the Court was correct in defining the market as a transactional one, where cardholders and merchants are intimately connected.  

That being said, Breyer’s economic reasoning isn’t any sharper than the majority’s:

But while the market includes substitutes, it does not include what economists call complements: goods or services that are used together with the restrained product, but that cannot be substituted for that product. See id., ¶565a, at 429; Eastman Kodak Co. v. Image Technical Services, Inc., 504 U. S. 451, 463 (1992). An example of complements is gasoline and tires. A driver needs both gasoline and tires to drive, but they are not substitutes for each other, and so the sale price of tires does not check the ability of a gasoline firm (say a gasoline monopolist) to raise the price of gasoline above competitive levels. As a treatise on the subject states: “Grouping complementary goods into the same market” is “economic nonsense,” and would “undermin[e] the rationale for the policy against monopolization or collusion in the first place.” 2B Areeda & Hovenkamp ¶565a, at 431.

Here, the relationship between merchant-related card services and shopper-related card services is primarily that of complements, not substitutes. Like gasoline and tires, both must be purchased for either to have value. Merchants upset about a price increase for merchant related services cannot avoid that price increase by becoming cardholders, in the way that, say, a buyer of newspaper advertising can switch to television advertising or direct mail in response to a newspaper’s advertising price increase.

Breyer makes a bit of a mess when it comes to the idea of demand complementarity. It isn’t the case that “both must be purchased for either to have value.” That is perfect complementarity, which is rare. Rather, when the price of gasoline increases, then the demand for tires is likely to decrease as well. However, it doesn’t need to run the other way. When the price of tires decreases, the demand for gasoline doesn’t typically inch up. This kind of asymmetric demand relationship is counter to the kind of relationship on platforms where demand in linked on both sides.

Still, Breyer buries the lede. Attributing a price increase to firms in the tire market might be wrong if demand fluctuations in the adjacent gasoline market partially caused those prices changes. In other words, the reason why complementary demand matters in the first place is to ensure that the court’s analysis is correct. Going back to Evans and Schmalensee, “The key point is that it is wrong as a matter of economics to ignore significant demand interdependencies among the multiple platform sides” when defining markets. You get the assessments wrong.        

To his credit, Breyer does rightly point out the thin definition offered by the majority:

I take from that definition that there are four relevant features of such businesses on the majority’s account: they (1) offer different products or services, (2) to different groups of customers, (3) whom the “platform” connects, (4) in simultaneous transactions.

Having simultaneous transactions isn’t the defining feature of two-sidedness and if the lower courts come to rely on this feature to define platforms, then some assessments of competitive effects are likely to be wrong.

Amex offers up a lot for the antitrust community to consider, but in key ways, the decision is incomplete. Importantly, the Court didn’t address the validity of many new analytical tools that have popped up in the past decade to understand platform market power. Take a quick glance at the papers cited in the majority opinion and you will notice how many of references dates from after 2010 when this case was first brought. In other words, Amex hardly shuts the door for future litigation.     

On March 19th, I had the chance to debate Franklin Foer at a Patrick Henry College event focused on the question, “Is Big Tech Big Brother?” It was billed as a debate over the role of technology in American society and whether government should be regulating media and technology platforms more generally.  [The full event video is here.] Foer is the author of the new book, World Without Mind: The Existential Threat of Big Tech, in which he advocates a fairly expansive regulatory regime for modern information technology platforms. He is open to building on regulatory ideas from the past, including broadcast-esque licensing regimes, “Fairness Doctrine”-like mandates for digital intermediaries, “fiduciary” responsibilities, beefed-up antitrust intervention, and other types of controls. In a review of the book for Reason, and then again during the debate at Patrick Henry University, I offered some reflections on what we can learn from history about how well ideas like those worked out in practice.

My closing statement of the debate, which lasted just a little over three minutes, offers a concise summation of what that history teaches us and why it would be so dangerous to repeat the mistakes of the past by wandering down that disastrous path again. That 3-minute clip is posted below. (The audience was polled before and after the event and asked the same question each time: “Do large tech companies wield too much power in our economy, media and personal lives and if so, should government(s) intervene?” Apparently at the beginning, the poll was roughly Yes – 70% and No – 30%, but after the debated ended it has reversed, with only 30% in favor of intervention and 70% against. Glad to turn around some minds on this one!)

via ytCropper

Two weeks ago, as Facebook CEO Mark Zuckerberg was getting grilled by Congress during a two-day media circus set of hearings, I wrote a counterintuitive essay about how it could end up being Facebook’s greatest moment. How could that be? As I argued in the piece, with an avalanche of new rules looming, “Facebook is potentially poised to score its greatest victory ever as it begins the transition to regulated monopoly status, solidifying its market power, and limiting threats from new rivals.”

With the exception of probably only Google, no firm other than Facebook likely has enough lawyers, lobbyists, and money to deal with layers of red tape and corresponding regulatory compliance headaches that lie ahead. That’s true both here and especially abroad in Europe, which continues to pile on new privacy and “data protection” regulations. While such rules come wrapped in the very best of intentions, there’s just no getting around the fact that  regulation has costs. In this case, the unintended consequence of well-intentioned data privacy rules is that the emerging regulatory regime will likely discourage (or potentially even destroy) the chances of getting the new types of innovation and competition that we so desperately need right now.

Others now appear to be coming around to this view. On April 23, both the  New York Times and The Wall Street Journal ran feature articles with remarkably similar titles and themes. The New York Times article by Daisuke Wakabayashi and Adam Satariano was titled, “How Looming Privacy Regulations May Strengthen Facebook and Google,” and The Wall Street Journal’s piece, “Google and Facebook Likely to Benefit From Europe’s Privacy Crackdown,” was penned by Sam Schechner and Nick Kostov. “In Europe and the United States, the conventional wisdom is that regulation is needed to force Silicon Valley’s digital giants to respect people’s online privacy. But new rules may instead serve to strengthen Facebook’s and Google’s hegemony and extend their lead on the internet,” note Wakabayashi and Satariano in the  NYT essay. They continue on to note how “past attempts at privacy regulation have done little to mitigate the power of tech firms.” This includes regulations like Europe’s “right to be forgotten” requirement, which has essentially put Google in a privileged position as the “chief arbiter of what information is kept online in Europe.” Meanwhile, the  WSJ article opens with this interesting story about the epiphany EU regulator Věra Jourová had upon visiting with the supposed victims of the EU’s new General Data Protection Regulation, or GDPR:

When the European Union’s justice commissioner traveled to California to meet with Google and Facebook last fall, she was expecting to get an earful from executives worried about the Continent’s sweeping new privacy law. Instead, she realized they already had the situation under control. “They were more relaxed, and I became more nervous,” said the EU official, Věra Jourová. “They have the money, an army of lawyers, an army of technicians and so on.”

Indeed they do. And that means that they are better positioned to absorb the significant costs of compliance that will be associated with the new GDPR rules, which are somewhat ambiguous and will require a great deal of ongoing interpretation and legal wrangling.  The Journal essay also cites an unnamed Brussels lobbyist for an media-measurement firm saying, “The politicians wanted to teach Google and Facebook a lesson. And yet they favor them.” Consider this paragraph from the WSJ essay about how the two firms worked diligently to come into compliance with the new GDPR regulations:

Once the law passed in spring 2016, Google and Facebook threw people at the problem. Google involved lawyers in the U.S., Ireland, Brussels and elsewhere to pore over contracts and procedures, said people close to the company. Facebook mobilized hundreds of people in what it describes as the largest interdepartmental team it has ever assembled. Facebook lawyers spent a year scrutinizing the law’s lengthy text. Designers and engineers then toiled over how to implement changes, according to Stephen Deadman, Facebook’s global deputy chief privacy officer. During the process, Facebook got frequent access to regulators across Europe. It met with Helen Dixon, the data protection commissioner in Ireland, where the company bases its European operations, and her staff to run through changes Facebook was planning. Ms. Dixon’s agency provided the firm with feedback on the wording of its consent requests, Facebook said.

Now ask yourself how many other smaller existing or new firms would be in a position to do the same thing. Answer: Not many. We’re already seeing the deleterious effects of the GDPR on market structure, the  Journal reports. “Some advertisers are planning to shift money away from smaller providers and toward Google and Facebook,” Schechner and Kostov note. And they end their essay with the telling thoughts of Bill Simmons, co-founder and chief technology officer of Dataxu, Boston-based company that helps buy targeted ads, who says, “It is paradoxical. The GDPR is actually consolidating the control of consumer data onto these tech giants.” The  NYT essay included a funny tidbit about how “Some privacy advocates also bristle at the idea that these new restrictions would help already powerful internet companies, noting that is a well-worn argument employed by tech giants to try to prevent future regulation.” That’s a highly unfortunate attitude. If privacy advocates really care about improving the situation on the ground, then the best way to do that is with more and better choices. Sadly, it seems that with each passing day the write off the idea of any new competition emerging to today’s tech giants. “Can Facebook be replaced?” asks Olivia Solon writing in The Guardian today. Some probably think not, but as Solon notes, “prominent Silicon Valley investor Jason Calacanis, who was an early investor in several high-profile tech companies including Uber certainly hopes so. He has launched a competition to find a ‘social network that is actually good for society,'” and his “Openbook Challenge will offer seven “purpose-driven teams” $100,000 in investment to build a billion-user social network that could replace the technology titan while protecting consumer privacy.” In a blog post announcing the Challenge, Calacanis wrote: “All community and social products on the internet have had their era, from AOL to MySpace, and typically they’re not shut down by the government — they’re slowly replaced by better products. So, let’s start the process of replacing Facebook.” I don’t have any idea whether this Openbook Challenge will succeed. It’s hard building big, scalable digital platforms that satisfy the diverse needs of a diverse world. But this is exactly the sort of innovation that we should be encouraging. Even the very threat of new competition will keep the big dogs on their toes. Alas, all the new regulations being consider will likely just leave us with fewer choices and regulations that probably won’t even do all that much to truly better protect our data or privacy. But hey, at least it was all well-intentioned!

Updates :

• Nick Kostov and Sam Schechner, “Google Emerges as Early Winner From Europe’s New Data Privacy Law,” Wall Street Journal, May 31, 2018, https://www.wsj.com/articles/eus-strict-new-privacy-law-is-sending-more-ad-money-to-google-1527759001

On Monday, April 16th, the Technology Policy Institute hosted an event on “Facebook & Cambridge Analytica: Regulatory & Policy Implications.” I was invited to deliver some remarks on a panel that included Howard Beales of George Washington University, Stuart Ingis of Venable LLP, Josephine Wolff of the Rochester Institute of Technology, and Thomas Lenard of TPI, who moderated. I offered some thoughts about the potential trade-offs associated with treating Facebook like a regulated public utility. I wrote an essay here last week on that topic. My remarks at the event begin at the 13:45 mark of the video.

With Facebook CEO Mark Zuckerberg in town this week for a political flogging, you might think that this is darkest hour for the social networking giant. Facebook stands at a regulatory crossroads, to be sure. But allow me to offer a cynical take, and one based on history: Facebook is potentially poised to score its greatest victory ever as it begins the transition to regulated monopoly status, solidifying its market power, and limiting threats from new rivals.

By slowly capitulating to critics (both here and abroad) who are thirsty for massive regulation of the data-driven economy, Facebook is setting itself up as a servant of the state. In the name of satisfying some amorphous political “public interest” standard and fulfilling a variety of corporate responsibility objectives, Facebook will gradually allow itself to be converted into a sort of digital public utility or electronic essential facility.

That sounds like trouble for the firm until you realize that Facebook is one of the few companies who will be able to sacrifice a pound of flesh like that and remain alive. As layers of new regulatory obligations are applied, barriers to new innovations will become formidable obstacles to the very competitors that the public so desperately needs right now to offer us better alternatives. Gradually, Facebook will recognize this and go along with the regulatory schemes. And then eventually they will become the biggest defender of all of it.

Welcome to Facebook’s broadcast industry moment. The firm is essentially in the same position the broadcast sector was about a century ago when it started cozying up to federal lawmakers. Over time, broadcasters would warmly embrace an expansive licensing regime that would allow all parties—regulatory advocates, academics, lawmakers, bureaucrats, and even the broadcasters themselves—to play out the fairy tale that broadcasters would be good “public stewards” of the “public airwaves” to serve the “public interest.”

Alas, the actual listening and viewing public got royally shafted in this deal. Broadcasters got billions of dollars’ worth of completely free beachfront spectrum along with protected geographic monopolies. Congressional lawmakers and the unelected bureaucrats at the FCC got power to tinker with broadcast content and received other special favors (like free airtime) from their cronies in the industry. People, money, and influence floated freely between the political and business realms until at some point there really wasn’t much distinction between them. Meanwhile, the public got stuck with bland fare and limited competition for their ears and eyes. The “public interest” ended up meaning many things during this time, but it rarely had much to do with what the public actually desired—namely, more and better options for a diverse citizenry.

Of course, much the same story played out in the U.S. telecommunications market a few decades prior to the broadcast industry making their deal with the devil. The early history of telecommunications in America was characterized by competition among a variety of local and regional rivals. But it was derailed by political shenanigans. Here are a few choice paragraphs about the cronyist origins of the Bell System monopoly from a law review article that Brent Skorup and I wrote back in 2013 [footnotes omitted]. As you read it, imagine how similar well-intentioned regulations might play out for Facebook:

… this intensely competitive, pro-consumer free-for-all would be derailed by AT&T’s brilliant strategy to use the government to accomplish what it could not in the free market: eliminate its rivals. In 1907, Theodore Newton Vail became AT&T’s president. He had a clear vision: achieving “universal service” (in the form of interconnected and fully integrated systems) by eliminating rivals and consolidating networks. Befriending lawmakers and regulators was a crucial component of this strategy. While many policymakers nominally supported the idea of competition, they were more preoccupied with achieving widespread, interconnected network coverage. Vail capitalized on that impulse. On December 19, 1913, the government and AT&T reached the “Kingsbury Commitment.” Named after AT&T vice president Nathan C. Kingsbury, who helped negotiate the terms, the agreement outlined a plan whereby AT&T agreed not to acquire any other independent companies while also allowing other competitors to interconnect with the Bell System. The Kingsbury Commitment was thought to be pro-competitive, yet it was hardly an altruistic agreement on AT&T’s part. Regulators did not interpret the agreement so as to restrict AT&T from acquiring any new telephone systems, but only to require that an equal number be sold to an independent buyer for each system AT&T purchased. Hence, the Kingsbury Commitment contained a built-in incentive for network swapping (trading systems and solidifying territorial monopolies) rather than continued competition.  “The government solution, in short, was not the steamy, unsettling cohabitation that marks competition but rather a sort of competitive apartheid, characterized by segregation and quarantine,” observe telecom legal experts Michael Kellogg, John Thorne, and Peter Huber.  Thus, the move toward interconnection, while appearing to assist independent operators, actually allowed AT&T to gain greater control over the industry. “Vail chose at this time to put AT&T squarely behind government regulation, as the quid pro quo for avoiding competition,” explains [Richard] Vietor.  “This was the only politically acceptable way for AT&T to monopolize telephony,” he notes.  AT&T’s 1917 annual report confirms this fact, stating, “[with a] combination of like activities under proper control and regulation, the service to the public would be better, more progressive, efficient, and economical than competitive systems.”

So much for “the public interest”! If the last century’s worth of communications and media regulation teaches us anything, it’s that good intentions only get you so far in this world. Many of the lawmakers and regulators who allowed themselves to be duped by big corporations asking for protection from competition probably thought they were doing the right thing. Those policymakers may even have believed that they were actually encouraging innovation and competition through some of their regulatory actions. Alas, things did not turn out that way. We the public were denied real, meaningful choices and innovations because of these misguided policies.

And so now it’s Facebook’s turn to become part of this sordid tale. Zuckerberg has already made it clear that he is open to regulation and that his firm would also start enforcing new European data rules globally. And after this week’s political circus in Congress, the floodgates will be wide open and everyone’s regulatory pet peeve will be up for political consideration, which is exactly what happened for broadcasters and communications in past decades.

Every crackpot idea under the sun will be on the table but the most extreme versions of those proposals will be beaten back just enough to ensure that Facebook can offer up its pound of sacrificial flesh each time without running the risk of killing the patient entirely. Again, this was always part of the broadcast and communications regulatory playbook as well. So long as they were guaranteed a fairly stable market return and protection from pesky new innovators, the firms were willing to go along with the deal.

The “deal” in this case between Facebook and regulators won’t be so explicitly cronyist as it was for broadcasters and communications companies, however. The days of price controls, rate-of-return regulation, and formal line of business restrictions are likely over. Everyone now recognizes that regulations creating formal barriers to innovation and entry are a bad idea and, as a result, they are usually rejected.

But laws and regulations can sometimes create informal or hidden barriers to innovation and entry, even when they are well-intentioned. And that’s what could happen here as this latest Facebook fiasco leads to calls for seeming innocuous things like transparency and disclosures requirements, restrictions on “bad speech,” advertising and data collection regulations, “fiduciary” responsibilities, “algorithmic accountability” efforts, and so on. Facebook hasn’t wanted to adopt some of these things in the past, but now they’ll be pushed aggressively to do so by policymakers and regulatory activists. As Zuckerberg and Facebook cozy up with policymakers and regulatory activists and begin talking about a “broader view of responsibility,” the transition to the firm’s next phase as a quasi-public utility will get underway.

The rich irony of all this is that the same regulatory advocates who are cheering on this week’s developments as well as the coming regulatory avalanche will be the ones howling the loudest if and when only Facebook is left standing in the social media universe. In fact, that’s already happened in Europe where policymakers and their burdensome top-down data protection regulations have driven most digital innovators and investors to other continents, leaving only Facebook, Google, and handful of other (mostly U.S.-based) companies left to regulate. And then European policymakers have the audacity to cry foul about the market power of these firms! It boggles the mind how European policymakers and regulatory advocates see zero connection between their heavy-handed approach to the Digital Economy and the corresponding lack of enough competitors in those sectors.

But none of that will make any difference to the regulatory advocates. They want that pound of flesh, and they are going to get it. And then in Facebook they will have a regulatory plaything to toy with for years to come.

What about the public? Will we really be any better off because of any of this? How many people will want to stick with Facebook if it becomes a digital public utility or a social media version of the Post Office? That sure doesn’t sound like much fun for us. But if the new regulations imposed on Facebook do end up hurting smaller rivals more and create barriers to new entry and innovation going forward, then it’s unclear whether it makes any difference what we want because the options just won’t be there for us.

With time, Facebook will not only become more comfortable with its new regulatory status for that reason but then in the name of ensuring a “level playing field,” the firm will simultaneously advocate that each and every new rule be applied to all its rivals. Again, this is how well-intentioned regulation ends up indirectly discouraging the very innovation and competitive options that we need. Broadcasters and communications companies played the “level playing field” card at every juncture to beat down new technologies and rivals.

Finally, at some point, don’t be surprised if all roads lead back to prices for digital services. Right now, social networking services like Facebook are free-of-charge to consumers and digital companies use advertising to support their services. Many regulatory advocates have suggested that this sort of business model is fundamentally incompatible with privacy and have wanted it strictly curtail if not ended altogether. Of course, if you ask the public how many of them would be willing to pay $19.95 a month for Facebook, you won’t get many takers.

I wrote a couple of law review articles talking about the “privacy paradox” and consumer “willingness to pay” for privacy more generally. All the evidence suggests that consumer willingness to pay for privacy is significantly lower than privacy advocates would prefer. But if in the name protecting privacy, prices get pushed or imposed as a matter of public policy, then we will have entered a truly surreal moment in the history of regulatory policy because we will have inverted the presumption that consumer welfare is better served by lower prices. Over the past century, the purpose of most public utility regulation was lower prices, higher quality, and more choice. The modern Digital Economy has largely achieved those goals without heavy-handed regulation. But now, with the emerging regulatory regime looming for Facebook and social media more generally, we might end up with a sort of bizarro policy world in which we make people pay more in the name of making them better off!

I hope I’m wrong about everything I’ve said here. It would be troubling if we enter an era of less competition, less innovation, and lower quality information services. But to borrow a quote from my favorite sci-fi show, “all of this has happened before, and all of this will happen again.” And regulatory history tends to repeat. We shouldn’t be surprised, therefore, when some forget the ugly history of public utility-style regulation or broadcast era “public interest” mandates and we find ourselves stuck right back in the hole that we’ve been trying to dig ourselves out of for so many decades.

The success of the Internet and the modern digital economy was due to its open, generative nature, driven by the ethos of “permissionless innovation.” A “light-touch” policy regime helped make this possible. Of particular legal importance was the immunization of online intermediaries from punishing forms of liability associated with the actions of third parties.

As “software eats the world” and the digital revolution extends its reach to the physical world, policymakers should extend similar legal protections to other “generative” tools and platforms, such as robotics, 3D printing, and virtual reality.

In other words, we need a Section 230 for the “maker” movement.

The Internet’s Most Important Law

Today’s vibrant Internet ecosystem likely would not exist without “Section 230” (47 U.S.C. § 230) of the Telecommunications Act of 1996. That law, which recently celebrated its 20^th anniversary, immunized online intermediaries from onerous civil liability for the content and communications that travelled over their electronic networks.

The immunities granted by Section 230 let online speech and commerce flow freely, without the constant threat of legal action or onerous liability looming overhead for digital platforms. Without the law, many of today’s most popular online sites and services might have been hit with huge lawsuits for the content and commerce that some didn’t approve of on their platforms. It is unlikely that as many of them would have survived if not for Section 230’s protections.

For example, sites such as eBay, Facebook, Wikipedia, Angie’s List, Yelp, and YouTube all depend on Section 230 immunities to shield them from potentially punishing liability for the content that average Americans post to those sites. But Section 230 protects countless small sites and services just as much as those larger platforms and it has been an extraordinary boon to online commerce and speech.

Extending Immunities to Other General-Purpose Technologies: 3 Models

To foster generativity and permissionless innovation for the next wave of tech entrepreneurs, it may be necessary to immunize some intermediaries (i.e., platform providers or device manufacturers) from punishing forms of liability, or at least to limit liability in some fashion to avoid the chilling effect that excessive litigation can have on life-enriching innovation. Specifically, they should be immunized from liability associated with the ways third-parties use their platforms or devices to speak, experiment, or innovate.

“The past ten years have been about discovering new ways to create, invent, and work together on the Web,” noted Chris Anderson in his book Makers: The New Industrial Revolution. “The next ten years will be about applying those lessons to the real world.” But that can only happen if we get public policy right.

Thus, the creators of newer general-purpose technologies may need to receive certain limited immunizations from liability for the ways third-parties use their devices. If troublemakers use general-purpose technologies to do harm—i.e., cybersecurity violations, privacy invasions, copyright infringement, etc.—it is almost always more sensible to hold those problematic users directly accountable for their actions.

The other approach—holding those intermediaries accountable for the actions of third parties—will discourage innovators from creating vibrant, open platforms and devices that could facilitate new types of speech and commerce. Therefore, an embrace of permissionless innovation requires a rejection of such middleman deputization schemes.

There are three different existing immunity models we might consider applying to emerging general-purpose technologies.

Model #1: Section 230 & online services

The first model, of course, is Section 230 itself.  Section 230 stipulated that it is the policy of the United States “to promote the continued development of the Internet and other interactive computer services and other interactive media,” and “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.” To accomplish that, the law made it clear that, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

Since implementation of Section 230 two decades ago, courts have generally read this immunity fairly broadly, so much so that some critics have argued that 230’s scope has been enlarged well beyond congressional intent. Even if that is true, I believe that has been a net positive (excuse the pun) and that it is not only wise to preserve that sweeping immunity but extend it to other technologies and sectors.

Model #2: Firearm manufacturing

Another immunization model can be found in the Protection of Lawful Commerce in Arms Act of 2005 (Pub. L. No. 109-92, 119 Stat. 2095). Although “lawsuits alleging negligent distribution plagued the firearm industry until 2005,” the Protection of Lawful Commerce in Arms Act “effectively ended the ‘gun tort’ era,” notes Peter Jensen-Haxel. The law did so by granting gun manufacturers immunities for such legal actions. (It would seem that, by extension, those who use 3D printers to create firearms will also be immunized from civil actions.)

Importantly, unlike Section 230, which provided broad immunity by default to all online platforms, the Protection of Lawful Commerce in Arms Act applied to manufactures/sellers that fit into the certain qualifications (i.e., they get immunity if they comply with certain licensing rules, record keeping requirements, etc.). This tension between broad versus targeted immunity will become the subject of debate for emerging general-purpose technologies as scholars and policymakers contemplate optimal default liability rules.

Model #3: Vaccines

A final legal immunization model comes, ironically, from the world of medical immunizations. As part of the National Childhood Vaccine Injury Act of 1986 (42 U.S.C. §§ 300aa-1 to 300aa-34), Congress created The National Vaccine Injury Compensation Program, “after lawsuits against vaccine companies and health care providers threatened to cause vaccine shortages and reduce U.S. vaccination rates, which could have caused a resurgence of vaccine preventable diseases.”

As described by the U.S. Department of Health and Human Services, the program, “is a no-fault alternative to the traditional legal system for resolving vaccine injury petitions.” Thus, those suffering injuries from vaccines are able to seek compensation from this program instead of having to sue vaccine companies.

As Avery Johnson of the Wall Street Journal noted in 2009 article about the program, “A spate of lawsuits against vaccine makers in the 1970s and 1980s had caused dozens of companies to get out of the low-profit business, creating a public-health scare. The strategy worked and the public health implications have been sizable. Vaccines have driven huge reductions — and in the case of smallpox, for instance, complete eradications — of major childhood diseases.”

This model is obviously very different than Section 230 and the Protection of Lawful Commerce in Arms Act in that it includes a government-created compensation fund provided as an alternative to civil lawsuit remedies. In all likelihood, such a compensation fund would not be necessary for new general-purpose “maker” technologies or sectors.

Nonetheless, this model could, perhaps, have some relevance for certain narrow classes of those technologies. For example, 3D-printed medical devices might be one area where it would make sense to exempt from liability the creators of 3D printers and the platforms over which 3D printer blueprints are distributed. But if there is significant resulting harm from some of those devices or plans, it remains unclear how compensation would work and who would be picking up the tab for it. The National Vaccine Injury Compensation Program offers one potential answer, although it may not be wise to craft such a consumer-funded or taxpayer-supported program for other reasons. Even if creating a government-run compensation fund was eventually seen as a good idea, we cannot determine how big the fund should be until some actual harms occur.

Three Sectors to Cover

Next, we should consider which sectors or technologies should be eligible for such immunities.

I wish it was possible to craft some sort of “General-Purpose Technology Immunization Act” that would shield such platforms and technologies from onerous liability associated with third-party uses. Realistically, however, it is not likely such a broad-based regime could achieve political traction. There would just be too many opposing forces. Moreover, there may be some unique distinctions between technologies and sectors which necessitate specialized legal regimes.

In any event, I believe a good case can be made for adopting some sort of legal immunity regime for three specific technologies: Robotics, 3D printing, and immersive technology (i.e., virtual reality and augmented reality).

Robotics

Ryan Calo, professor of law at the University of Washington School of Law, has done important work on the law of robotics and he has suggested that such legal immunities may need to be extended to this field. In his 2011 Maryland Law Review article on “Open Robotics,” Calo made his case as follows:

To preempt a clampdown on robot functionality, Congress should consider immunizing manufacturers of open robotic platforms from lawsuits for the repercussions of leaving robots open.  Specifically, consumers and other injured parties should not be able to sue roboticists, much less recover damages, where the injury resulted from one of the following: (1) the use to which the consumer decided to put the robot, no matter how tame or mundane; (2) the nonproprietary software the consumer decided to run on the robot; or (3) the consumer’s decision to alter the robot physically by adding or changing hardware. This immunity would include lawful and unlawful uses of the robot. (p. 134) . . . The immunity I propose is selective: Manufacturers of open robots would not escape liability altogether. For instance, if the consumer runs the manufacturer’s software and the hardware remains unmodified, or if it can be shown that the damage at issue was caused entirely by negligent platform design, then recovery should be possible. The immunity I propose only applies in those instances where it is clear that the robot was under the control of the consumer, a third party software, or otherwise the result of end-user modification. Because this issue will not always be easy to prove, we should expect litigation at the margins. I am thus arguing for a compromise position: A presumption against suit unless the plaintiff can show the problem was clearly related to the platform’s design. (p. 136)

I find this entirely convincing and I also believe Calo is wise to begin with robotics as the first target for such legal immunization because such technologies are already being widely manufactured and deployed today.

These liability questions are already being widely debated, for example, in the field of autonomous systems and driverless cars in particular. I’d like to believe that the common law would sort out these things fairly quickly and that an efficient liability regime would emerge from autonomous technologies in short order.

Alas, because America lacks a “loser pays” rule, a perverse incentive exists for overly-zealous trial lawyers to file an avalanche of lawsuits at the first sign of any problem. This could significantly hamper the development of autonomous technologies, which have the potential to immediately decrease the staggering death toll associated with human error behind the wheel. Therefore, it may be necessary for Congress to craft some sort of limited immunity regime for autonomous technology makers to ensure that the development of these potential life-saving technologies is not discouraged by the looming threat of perpetual litigation.

3D Printing

3D printing would be my second choice for a general-purpose technology that should be covered by some sort of intermediary immunity model.

In a forthcoming law review article for the Minnesota Journal of Law, Science & Technology, Adam Marcus and I argue that “the manufacturers of 3D printing devices and the website operators hosting blueprints for 3D-printed objects may need to be protected from liability to avoid chilling innovation. In this sense, a ‘Section 230 for 3D printing’ might be needed.”

We discuss three specific ways that 3D printers could be used by third-parties in such a way that existing laws or regulations are implicated and someone might seek to bring action against the manufacturers of 3D printers or 3D printing marketplaces, like Shapeways or Thingiverse. These cases involve things like 3D-printed prosthetics, which could raise policy concerns at the Food and Drug Administration, and 3D-printed toys or sculptures, which could present intellectual property issues.

But perhaps the most interesting case study for liability purposes will be 3D-printed firearms, which are already raising a great deal of controversy. Marcus and I argue, once again, that “the proper focus of regulation should remain on the user and uses of firearms, regardless of how they are manufactured.” And because, as already noted, the Protection of Lawful Commerce in Arms Act immunizes gun manufacturers from legal liability for third-party actions, it would seem logical that the law’s protections would extend to 3D-printed firearms. Moreover, Section 230 itself (and perhaps also the First Amendment) might also apply to 3D printing design schematics that appear on various websites or 3D printing marketplaces.

Generally speaking, Marcus and I argue, “imposing liability on third parties—sites hosting schematics, search engines, and manufacturers of devices—seems neither workable nor wise. There exists a broad spectrum of general-purpose technologies that can be used to facilitate criminal activity,” we note, such as cars, computers, or paper printers. But we don’t blame those intermediaries when those technologies are used by third parties in criminal acts. The same principle should apply to 3D printers.

Things get more complicated when intellectual property issues are brought into the debate. In an important 2014 article, “Patents, Meet Napster: 3D Printing and the Digitization of Things,” Deven R. Desai and Gerard N. Magliocca sketched out the potential case for some sort of limited immunity as it pertains to patent infringement and 3D printing. “An obstacle to the growth of 3D printing that Congress should consider addressing is that individuals who engage in that activity are strictly liable if they infringe a patent,” they note, but they continue on to add that:

Exempting personal 3D printing from patent infringement without undermining other aspects of the regulatory scheme will not be easy. It would not be a good idea for Congress to create a fair use exception for all patents or make infringement an intentional tort, as those changes would sweep too far. Targeting 3D printing itself is a possibility, but in that case the legislation would have to distinguish between personal and commercial activity, as there is no rationale for saying that all 3D printing leading to patent infringement, including what Fortune 500 firms do, should be permitted. Drawing that kind of line with a substantive legal standard, though, will generate years of litigation and may not effectively separate the good from the bad. One alternative, should Congress opt to give personal 3D printing some immunity, would be to set a relatively high minimum amount-in-controversy for federal jurisdiction over any [patent] infringement claims involving this technology. (p. 1717)

Getting this balance right will be tricky, yet essential. “Patent law and industries that rely on patents will have to adapt to this new environment or face potential obsolescence,” Desai and Magliocca correctly conclude.

Immersive Technology

A final sector we might eventually want to apply some sort of intermediary immunity model to is immersive technology. “Immersive technology” refers to services that currently utilize wearable devices (such as a head-mounted display or headset) to let users explore virtual worlds, virtual objects, or hologram-like projections. Immersive technology can be separated into two different, but related groups: virtual reality (VR) and augmented reality (AR).

These technologies are still in the cradle, but many companies are already developing VR and AR technologies for both entertainment and professional uses. As they gain more widespread usage, immersive technologies could raise some policy issues, including concerns about privacy, intellectual property (ex: who owns certain “experiences”), and potentially even worries about distraction and addiction.

It would not be surprising, therefore, if some critics begin advocating greater regulation of, or liability for, VR and AR intermediaries. If that happens, policymakers will need to consider immunizing them from the threat of lawsuits or else innovation will die in these sectors.

Conclusion

Following the general logic of permissionless innovation, and understanding the importance of keeping intermediaries free of punishing liability for what others might do with their general-purpose technologies and platforms, the proper focus of regulation should remain on the user and uses of those technologies.

Accordingly, policymakers should craft a “Section 230 for the maker movement” by adopting legal protections for robotics, 3D printing, and immersive technology. At the same time, we should seek out better solutions—legal and otherwise—to the old problems that might persist or new ones that might come about due to the use of these new devices and platforms. But we should not let hypothetical worst-case scenarios and concerns about future technologies lead us down a path where intermediaries are “deputized” or hit with punishing liability for downstream actions by third parties.

Note#1 : This is a preliminary sketch of a law review article I would eventually like to write entitled, “A Section 230 for the “Makers” Movement: Extending Section 230 Immunities to Robotics, 3D Printing & Virtual Reality.” Toward that end, I welcome suggestions for (a) which general-purpose technologies deserve some sort of immunization, and also (b) what other legal immunity regimes exist that we could learn from. Please forward any ideas you might have along to me.

Note #2: My thanks to Adam Marcus and Christopher Koopman for their helpful suggestions on this essay.

The big news out of Europe today is that the European Court of Justice (ECJ) has invalidated the 15-year old EU-US safe harbor agreement, which facilitated data transfers between the EU and US. American tech companies have relied on the safe harbor to do business in the European Union, which has more onerous data handling regulations than the US. [PDF summary of decision here.] Below I offer some quick thoughts about the decision and some of its potential unintended consequences.

#1) Another blow to new entry / competition in the EU: While some pundits are claiming this is a huge blow to big US tech firms, in reality, the irony of the ruling is that it will bolster the market power of the biggest US tech firms, because they are the only ones that will be able to afford the formidable compliance costs associated with the resulting regulatory regime. In fact, with each EU privacy decision, Google, Facebook, and other big US tech firms just get more dominant. Small firms just can’t comply with the EU’s expanding regulatory thicket. “It will involve lots of contracts between lots of parties and it’s going to be a bit of a nightmare administratively,” said Nicola Fulford, head of data protection at the UK law firm Kemp Little when commenting on the ruling to the BBC. “It’s not that we’re going to be negotiating them individually, as the legal terms are mostly fixed, but it does mean a lot more paperwork and they have legal implications.” And by driving up regulatory compliance costs and causing constant delays in how online business is conducted, the ruling will (again, on top of all the others) greatly limits entry and innovation by new, smaller players in the digital world. In essence, EU data regulations have already wiped out much of the digital competition in Europe and now this ruling finishes off any global new entrants who might have hoped of breaking in and offering competitive alternatives. These are the sorts of stories never told in antitrust circles: costly government rulings often solidify and extend the market dominance of existing companies. Dynamic effects matter. That is certainly going to be the case here.

#2) Cross-border digital trade suffers: This conclusion follows from point #1, of course. Writing just before the decision was announced, lawyers as Norton Rose Fulbright’s Data Compliance Report blog noted that if the safe harbor was invalidated, “the impact on the world economy would be immense.” Well, here we are.  Dan Castro of ITIF hopes that EU and US officials can pull back from the brink of this impending disaster and “finish the process of creating a Safe Harbor 2.0 with terms that give comfort to all parties.” I suspect that many tech companies are hoping for the same miracle to occur. But don’t hold your breath. The Europeans have decided that this is the hill that they will die on. They haven’t shown too much interest in preserving an innovative tech market or enhancing global digital trade flows in the past due to heightened concerns about privacy, and there’s no reason to think they will back down now with a more measured approach. Importantly, as I noted in my earlier essay, “How Attitudes about Risk & Failure Affect Innovation on Either Side of the Atlantic,” this trans-Atlantic clash of vision transcends the debate over privacy law. It’s about broader cultural and political attitudes toward risk-taking and disruption. Most leaders in Europe value stability–both economic and cultural stability–more than US officials and citizens. This tension was always bound to reach a breaking point and the Digital Economy and data handling policies is where the you-know-what is finally hitting the fan.

#3) Web Balkanization accelerates: This is just another blow to the idea of a seamless global Internet. But as tech lawyer Tiffany C. Li pointed out on Twitter this morning in response to the decision, while Web pundits decry balkanization in other contexts, many of them seem to be cheering it on in this case because this decision deals with privacy and data regulation, which they favor more regulation of. But you can’t have your cake and eat it to. Indeed, the great irony of so many “Internet freedom” debates today is that pundits absolutely hate the idea of Internet control and Web balkanization… right up until the point where they absolutely love it! Think of this as the tech policy world’s selective morality problem. (I elaborated on these themes in my essays “When It Comes to Information Control, Everybody Has a Pet Issue & Everyone Will Be Disappointed,” and “Copyright, Privacy, Property Rights & Information Control: Common Themes, Common Challenges.”)

Interesting that the same ppl who decried Russia’s data localization law now cheer EU upping extraterritorial data regulation. #SafeHarbor

— Tiffany C. Li (@tiffanycli) October 6, 2015

@AnupamChander @AdamThierer Yes, #Schrems opens up possibility that companies will now have to comply w/28 different DPAs applying 95/46/EC. — Tiffany C. Li (@tiffanycli) October 6, 2015

This is the beginning of the Balkanization of the Internet: http://t.co/mbFxxhN7tQ

— Dino A. Dai Zovi (@dinodaizovi) October 6, 2015

Another step toward the jurisdictional balkanization of the Internet https://t.co/83FIYvU2Sm — Milton Mueller (@miltonmueller) October 6, 2015

#4) But the big dogs won’t bolt out of Europe: But this should also be another reminder that there are no “John Galt moments” in the world of tech, as some tech libertarians hope. The biggest players won’t pack their bags and head home because there’s still too much money sitting on the table in Europe. Big firms will instead scramble to comply, just as they are trying to do with the so-called Right to Be Forgotten ruling. Of course, this just exacerbates problem #1 already discussed above: The big dogs stay and do their best to comply with the costly regulatory regime while smaller players get crushed by the rules and all the other potential new entrants just stay home.

#5) The decision ignores the real problem: widespread government surveillance: I don’t often find myself agreeing with Cory Doctorow on much, but he gets it exactly right when he notes that, “this doesn’t mean that Europeans won’t be subjected to mass surveillance, including mass surveillance by the NSA.” He elaborates:

If the European Court of Justice wants to end mass surveillance of Europeans, it can only do so by banning mass surveillance — by ruling that laws that treat foreigners’ data as fair game are unconstitutional. If US tech giants want to get loose from a farcical, expensive, and pointless exercise that continues to treat them as adjuncts to the world’s spy agencies, they need to lobby the US government to change the laws under which it treats foreigners as fair game.

Thus, it would certainly be nice if, as CDT suggested in response to the ruling, that the “EU Safe Harbour Ruling Should Reinvigorate Surveillance Reform Efforts.” Of course, that requires that tech companies muster the courage to stand up to public officials here in the States who always want them to (literally) hand over the keys to the kingdom. That’s why the current debate over crypto backdoors is so essential. It’s good to see a number of tech companies pushing back on that front and refusing to get rolled by law enforcement and national security agencies the way that far too many telecom and tech companies have been in the past. Following today’s ECJ ruling, tech companies are realizing just how serious this problem really is because now European officials are striking out against the safe harbor agreement as a surrogate for their general frustrations with US surveillance more generally. Indeed, in a press release following today’s ECJ ruling, the Internet Association, which represents major US tech firms, noted that, “The Internet industry has consistently supported surveillance reform” and the Association pushed for swift congressional action to clarify and limit existing surveillance powers. It remains to be seen whether the US tech sector and other related industries will be able to push back effectively against the growing surveillance state leviathan, but it’s more clear today than ever before why that’s a fight worth having.

I am pleased to announce the release of my latest book, “Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom.” It’s a short manifesto (just under 100 pages) that condenses — and attempts to make more accessible — arguments that I have developed in various law review articles, working papers, and blog posts over the past few years. I have two goals with this book.

First, I attempt to show how the central fault line in almost all modern technology policy debates revolves around “the permission question,” which asks: Must the creators of new technologies seek the blessing of public officials before they develop and deploy their innovations? How that question is answered depends on the disposition one adopts toward new inventions. Two conflicting attitudes are evident.

One disposition is known as the “precautionary principle.” Generally speaking, it refers to the belief that new innovations should be curtailed or disallowed until their developers can prove that they will not cause any harms to individuals, groups, specific entities, cultural norms, or various existing laws, norms, or traditions.

The other vision can be labeled “permissionless innovation.” It refers to the notion that experimentation with new technologies and business models should generally be permitted by default. Unless a compelling case can be made that a new invention will bring serious harm to society, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later.

I argue that we are witnessing a grand clash of visions between these two mindsets today in almost all major technology policy discussions today.

The second major objective of the book, as is made clear by the title, is to make a forceful case in favor of the latter disposition of “permissionless innovation.” I argue that policymakers should unapologetically embrace and defend the permissionless innovation ethos — not just for the Internet but also for all new classes of networked technologies and platforms. Some of the specific case studies discussed in the book include: the “Internet of Things” and wearable technologies, smart cars and autonomous vehicles, commercial drones, 3D printing, and various other new technologies that are just now emerging.

I explain how precautionary principle thinking is increasingly creeping into policy discussions about these technologies. The urge to regulate preemptively in these sectors is driven by a variety of safety, security, and privacy concerns, which are discussed throughout the book. Many of these concerns are valid and deserve serious consideration. However, I argue that if precautionary-minded regulatory solutions are adopted in a preemptive attempt to head-off these concerns, the consequences will be profoundly deleterious.

The central lesson of the booklet is this: Living in constant fear of hypothetical 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.

Again, that doesn’t mean we should ignore the various problems created by these highly disruptive technologies. But how we address these concerns matters greatly. If and when problems develop, there are many less burdensome ways to address them than through preemptive technological controls. The best solutions to complex social problems are almost always organic and “bottom-up” in nature. Luckily, there exists a wide variety of constructive approaches that can be tapped to address or alleviate concerns associated with new innovations. These include:

• education and empowerment efforts (including media literacy, digital citizenship efforts);
• social pressure from activists, academics, and the press and the public more generally.
• voluntary self-regulation and adoption of best practices (including privacy and security “by design” efforts); and,
• increased transparency and awareness-building efforts to enhance consumer knowledge about how new technologies work.

Such solutions are almost always superior to top-down, command-and-control regulatory edits and bureaucratic schemes of a “Mother, May I?” (i.e., permissioned) nature. The problem with “top-down” traditional regulatory systems is that they often tend to be overly-rigid, bureaucratic, inflexible, and slow to adapt to new realities. They focus on preemptive remedies that aim to predict the future, and future hypothetical problems that may not ever come about. Worse yet, administrative regulation generally preempts or prohibits the beneficial experiments that yield new and better ways of doing things. It raises the cost of starting or running a business or non-business venture, and generally discourages activities that benefit society.

To the extent that other public policies are needed to guide technological developments, simple legal principles are greatly preferable to technology-specific, micro-managed regulatory regimes. Again, ex ante (preemptive and precautionary) regulation is often highly inefficient, even dangerous. To the extent that any corrective legal action is needed to address harms, ex post measures, especially via the common law (torts, class actions, etc.), are typically superior. And the Federal Trade Commission will, of course, continue to play a backstop here by utilizing the broad consumer protection powers it possesses under Section 5 of the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” In recent years, the FTC has already brought and settled many cases involving its Section 5 authority to address identity theft and data security matters. If still more is needed, enhanced disclosure and transparency requirements would certainly be superior to outright bans on new forms of experimentation or other forms of heavy-handed technological controls.

In the end, however, I argue that, to the maximum extent possible, our default position toward new forms of technological innovation must remain: “innovation allowed.” That is especially the case because, more often than not, citizens find ways to adapt to technological change by employing a variety of coping mechanisms, new norms, or other creative fixes. We should have a little more faith in the ability of humanity to adapt to the challenges new innovations create for our culture and economy. We have done it countless times before. We are creative, resilient creatures. That’s why I remain so optimistic about our collective ability to confront the challenges posed by these new technologies and prosper in the process.

If you’re interested in taking a look, you can find a free PDF of the book at the Mercatus Center website or you can find out how to order it from there as an eBook. Hardcopies are also available. I’ll be doing more blogging about the book in coming weeks and months. The debate between the “permissionless innovation” and “precautionary principle” worldviews is just getting started and it promises to touch every tech policy debate going forward.

Related Essays :

• “The Growing Conflict of Visions over the Internet of Things & Privacy,” Technology Liberation Front, January 14, 2014.
• “CES 2014 Report: The Internet of Things Arrives, but Will Washington Welcome It?” Technology Liberation Front, January 8, 2014.
• “Who Really Believes in ‘Permissionless Innovation’?” Technology Liberation Front, March 4, 2013.
• “What Does It Mean to ‘Have a Conversation’ about a New Technology?” Technology Liberation Front, May 23, 2013.
• “On the Line between Technology Ethics vs. Technology Policy,” Technology Liberation Front, August 1, 2013.
• “Planning for Hypothetical Horribles in Tech Policy Debates,” Technology Liberation Front, August 6, 2013.
• “Edith Ramirez’s ‘Big Data’ Speech: Privacy Concerns Prompt Precautionary Principle Thinking,” Technology Liberation Front, August 29, 2013.
• “When It Comes to Information Control, Everybody Has a Pet Issue & Everyone Will Be Disappointed,” Technology Liberation Front, April 29, 2011.
• “Copyright, Privacy, Property Rights & Information Control: Common Themes, Common Challenges,” Technology Liberation Front, April 10, 2012.
• “Can We Adapt to the Internet of Things?” IAPP Privacy Perspectives, June 19, 2013.
• “Why Do We Always Sell the Next Generation Short?” Forbes, January 8, 2012.
• “The Six Things That Drive ‘Technopanics,’” Forbes, March 4, 2012.

Robert Scoble, Startup Liaison Officer at Rackspace discusses his recent book, Age of Context: Mobile, Sensors, Data and the Future of Privacy, co-authored by Shel Israel. Scoble believes that over the next five years we’ll see a tremendous rise in wearable computers, building on interest we’ve already seen in devices like Google Glass. Much like the desktop, laptop, and smartphone before it, Scoble predicts wearable computers represent the next wave in groundbreaking innovation. Scoble answers questions such as: How will wearable computers help us live our lives? Will they become as common as the cellphone is today? Will we have to sacrifice privacy for these devices to better understand our preferences? How will sensors in everyday products help companies improve the customer experience?

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Related Links

• Age of Context: Mobile, Sensors, Data and the Future of Privacy , Amazon
• Naked Conversations: How Blogs are Changing the Way Businesses Talk with Customers, Amazon
• The Rackspace Blog & Newsroom, Scoble

Alice Marwick, assistant professor of communication and media studies at Fordham University, discusses her newly-released book, Status Update: Celebrity, Publicity, and Branding in the Social Media Age. Marwick reflects on her interviews with Silicon Valley entrepreneurs, technology journalists, and venture capitalists to show how social media affects social dynamics and digital culture. Marwick answers questions such as: Does “status conscious” take on a new meaning in the age of social media? Is the public using social media the way the platforms’ creators intended? How do you quantify the value of online social interactions? Are social media users becoming more self-censoring or more transparent about what they share? What’s the difference between self-branding and becoming a micro-celebrity? She also shares her advice for how to make Twitter, Tumblr, Instagram and other platforms more beneficial for you.

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Related Links

• Status Update: Celebrity, Publicity, and Branding in the Social Media Age, Marwick
• Engineered Performances Alice E. Marwick’s ‘Status Update’, The New York Times
• Biography, Marwick

Christopher Wolf, director of the law firm Hogan Lovells’ Privacy and Information Management group, addresses his new book with co-author Abraham Foxman, Viral Hate: Containing Its Spread on the Internet. To what extent do hateful or mean-spirited Internet users hide behind anonymity? How do we balance the protection of the First Amendment online while addressing the spread of hate speech? Wolf discusses how to define hate speech on the Internet; whether online hate speech leads to real-world violence; how news sites like the Huffington Post and New York Times have dealt with anonymity; lessons we should impart on the next generation of Internet users to discourage hate speech; and cases where anonymity has proved particularly beneficial or valuable.

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Related Links

• Viral Hate: Containing its Spread on the Internet, Amazon
• About Christopher Wolf, Future of Privacy
• Christopher Wolf Biography, Huffington Post