tech – Technology Liberation Front https://techliberation.com Keeping politicians' hands off the Net & everything else related to technology Mon, 16 Oct 2023 17:33:58 +0000 en-US hourly 1 6772528 Studies Document Growing Cost of EU Privacy Regulations https://techliberation.com/2023/02/09/studies-document-growing-cost-of-eu-privacy-regulations/ https://techliberation.com/2023/02/09/studies-document-growing-cost-of-eu-privacy-regulations/#comments Thu, 09 Feb 2023 16:22:47 +0000 https://techliberation.com/?p=77086

[Originally published on Medium on 2/5/2022]

In an earlier essay, I explored “Why the Future of AI Will Not Be Invented in Europe” and argued that, “there is no doubt that European competitiveness is suffering today and that excessive regulation plays a fairly significant role in causing it.” This essay summarizes some of the major academic literature that leads to that conclusion.

Since the mid-1990s, the European Union has been layering on highly restrictive policies governing online data collection and use. The most significant of the E.U.’s recent mandates is the 2018 General Data Protection Regulation (GDPR). This regulation established even more stringent rules related to the protection of personal data, the movement thereof, and limits what organizations can do with data. Data minimization is the major priority of this system, but there are many different types of restrictions and reporting requirements involved in the regulatory scheme. This policy framework also has ramifications for the future of next-generation technologies, especially artificial intelligence and machine learning systems, which rely on high-quality data sets to improve their efficacy.

Whether or not the E.U.’s complicated regulatory regime has actually resulted in truly meaningful privacy protections for European citizens relative to people in other countries remains open to debate. It is very difficult to measure and compare highly subjective values like privacy across countries and cultures. This makes benefit-cost analysis for privacy regulation extremely challenging — especially on the benefits side of the equation.

What is no longer up for debate, however, is the cost side of the equation and the question of what sort of consequences the GDPR has had on business formation, competition, investment, and so on. On these matters, standardized metrics exist and the economic evidence is abundantly clear: the GDPR has been a disaster for Europe.

Summary of Major Studies on Impact of EU Data Regulation

Consider the impact of E.U. data controls on business startups and market structure. GDPR and other regulations greatly limit the flow of data to innovative upstarts who need it most to compete, leaving only the largest companies who can afford to comply to control most of the market. Benjamin Mueller of ITIF notes that it is already the case that just “two of the world’s 30 largest technology firms by market capitalization are from the EU,” and only “5 of the 100 most promising AI startups are based in Europe,” while private funding of AI startups in Europe for 2020 ($4 billion) was dwarfed by US ($36 billion) and China ($25 billion). These issues are even more pressing as the E.U. looks to advance a new AI Act, which would layer on still more regulatory restrictions.

In concrete terms, this has meant that the E.U. came away from the digital revolution with “the complete absence of superstar companies,” argue competition policy experts Nicolas Petit and David Teece. There are no European versions of Microsoft, Google, or Apple, even though Europeans clearly demand the sort of products and services those US-based companies provide. Entrepreneurialism scholar Zoltan Acs asks: “What has been the outcome of E.U. policy in limiting entrepreneurial activity over recent decades?” His conclusion:

It is immediately clear… that the United States and China dominate the platform landscape. Based on the market value of top companies, the United States alone represents 66% of the world’s platform economy with 41 of the top 100 companies. European platform-based companies play a marginal role, with only 3% of market value.

Several recent studies have documented the costs associated with the GDPR and the E.U.’s heavy-handed approach to data flows more generally. Here is a rundown of some of the academic evidence and a summary of the major findings from these studies.

“There is a growing body of economic literature and commentary showing that the costs of implementing the GDPR benefit large online platforms, and that consent-based data collection gives a competitive advantage to firms offering a range of consumer-facing products compared to smaller market actors. This in turn increases concentration in a number of digital markets where access to data is important, by creating barriers to entry or encouraging market exit.” (p. 2–3)

“this paper examines how privacy regulation shaped firm performance in a large sample of companies across 61 countries and 34 industries. Controlling for firm and country-industry-year unobserved characteristics, we compare the outcomes of firms at different levels of exposure to EU markets, before and after the enforcement of the GDPR in 2018. We find that enhanced data protection had the unintended consequence of reducing the financial performance of companies targeting European consumers. Across our full sample, firms exposed to the regulation experienced a 8% decline in profits, and a 2% reduction in sales. An exception is large technology companies, which were relatively unaffected by the regulation on both performance measures. Meanwhile, we find the negative impact on profits among small technology companies to be almost double the average effect across our full sample. Following several robustness tests and placebo regressions, we conclude that the GDPR has had significant negative impacts on firm performance in general, and on small companies in particular.” (p. 1)

“We show that websites’ vendor use falls after the European Union’s General Data Protection Regulation (GDPR), but that market concentration also increases among technology vendors that provide support services to websites. We collect panel data on the web technology vendors selected by more than 27,000 top websites internationally. The week after the GDPR’s enforcement, website use of web technology vendors falls by 15% for EU residents. Websites are more likely to drop smaller vendors, which increases the relative concentration of the vendor market by 17%. Increased concentration predominantly arises among vendors that use personal data such as cookies, and from the increased relative shares of Facebook and Google-owned vendors, but not from website consent requests. Though the aggregate changes in vendor use and vendor concentration dissipate by the end of 2018, we find that the GDPR impact persists in the advertising vendor category most scrutinized by regulators. Our findings shed light on potential explanations for the sudden drop and subsequent rebound in vendor usage.” (p. 1)

“GDPR creates inherent tradeoffs between data protection and other dimensions of welfare, including competition and innovation. While some of these effects were acknowledged when constructing the legal data regime, many were disregarded. Furthermore, the magnitude and breadth of such effects may well constitute an unintended and unheeded welfare-reducing consequence. As this article shows, the GDPR limits competition and increases concentration in data and data-related markets, and potentially strengthens large data controllers. It also further reinforces the already existing barriers to data sharing in the EU, thereby potentially reducing data synergies that might result from combining different datasets controlled by separate entities.” (pp. 3–4)

“Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half. We estimate a structural model of demand and entry in the app market. Comparing long-run equilibria with and without GDPR, we find that GDPR reduces consumer surplus and aggregate app usage by about a third. Whatever the privacy benefits of GDPR, they come at substantial costs in foregone innovation.”

“this paper empirically quantifies the effects of the enforcement of the EU’s General Data Protection Regulation (GDPR) on online user behavior over time, analyzing data from 6,286 websites spanning 24 industries during the 10 months before and 18 months after the GDPR’s enforcement in 2018. A panel differences estimator, with a synthetic control group approach, isolates the short- and long-term effects of the GDPR on user behavior. The results show that, on average, the GDPR’s effects on user quantity and usage intensity are negative; e.g., the numbers of total visits to a website decrease by 4.9% and 10% due to GDPR in respectively the short- and long-term. These effects could translate into average revenue losses of $7 million for e-commerce websites and almost $2.5 million for ad-based websites 18 months after GDPR. The GDPR’s effects vary across websites, with some industries even benefiting from it; moreover, more-popular websites suffer less, suggesting that the GDPR increased market concentration.”

“This paper investigates the impact of the General Data Protection Regulation (GDPR for short) on consumers’ online browsing and search behavior using consumer panels from four countries, United Kingdom, Spain, United States, and Brazil. We find that after GDPR, a panelist exposed to GDPR submits 21.6% more search terms to access information and browses 16.3% more pages to access consumer goods and services compared to a non-exposed panelist, indicating higher friction in online search. The implications of increased friction are heterogeneous across firms: Bigger e-commerce firms see an increase in consumer traffic and more online transactions. The increase in the number of transactions at large websites is about 6 times the increase experienced by smaller firms. Overall, the post-GDPR online environment may be less competitive for online retailers and may be more difficult for EU consumers to navigate through.”

“Privacy regulations should increase trust because they provide laws that increase transparency and allow for punishment in cases in which the trustee violates trust. […] We collected survey panel data in Germany around the implementation date and ran a survey experiment with a GDPR information treatment. Our observational and experimental evidence does not support the hypothesis that the GDPR has positively affected trust. This finding and our discussion of the underlying reasons are relevant for the wider research field of trust, privacy, and big data.”

“We follow more than 110,000 websites and their third-party HTTP requests for 12 months before and 6 months after the GDPR became effective and show that websites substantially reduced their interactions with web technology providers. Importantly, this also holds for websites not legally bound by the GDPR. These changes are especially pronounced among less popular websites and regarding the collection of personal data. We document an increase in market concentration in web technology services after the introduction of the GDPR: Although all firms suffer losses, the largest vendor — Google — loses relatively less and significantly increases market share in important markets such as advertising and analytics. Our findings contribute to the discussion on how regulating privacy, artificial intelligence and other areas of data governance relate to data minimization, regulatory competition, and market structure.”

William Rinehart of the Center for Growth and Opportunity has compiled and summarized many additional studies that document the costs associated with restrictions on data, including many state privacy laws imposed in the United States.

“The Biggest Loser”: Innovation Culture Gone Wrong

Taken together, this evidence makes it clear that, “Well-meaning privacy laws can have the unintended consequence of penalizing smaller companies within technology markets.” It can also have broader geopolitical ramifications for continental competitive advantage and engagement between countries. Some have argued that the United Kingdom’s so-called “Brexit” from the EU can be viewed as not only an effort to reclaim its sovereignty but more specifically “to escape its crippling regulatory structure.” The E.U.’s approach to emerging technology regulation likely had some bearing on this. Acs argues that Britain’s move was logical, “because E.U. regulations were holding back the U.K.’s strong DPE (digital platform economy).” “If the United Kingdom was to realize its economic potential,” he says, “it had to extricate itself from the European Union,” due to the growing “dysfunctional E.U. bureaucracy.”

Can Europe turn things around? Most market watchers do not believe that the E.U. will be willing to change its regulatory course in such a way that the continent would suddenly become more open to data-driven innovation. As part of a Spring 2022 journal symposium, The International Economy asked 11 experts from Europe and the U.S. to consider where the European Union currently stood in “the global tech race.” The responses were nearly unanimous and bluntly summarized in the symposium’s title: “The Biggest Loser.” Several respondents observed how “Europe is considered to be lagging behind in the global tech race,” and “is unlikely to become a global hub of innovation.” “The future will not be invented in Europe,” another respondent concluded. Europe’s risk-averse culture and preference for meticulously detailed and highly precautionary regulatory regimes were repeatedly cited as factors.

Europe has become the biggest loser on the digital technology front not because of their people but because of their policy. Europe is filled with some of the most important advanced education and engineering programs in the world, and countless brilliant minds there could be leading world-leading digital technology companies that could rival the U.S., China, and the rest of the world. But Europe’s current “innovation culture” simply will not allow it.

Innovation culture refers to “the various social and political attitudes and pronouncements towards innovation, technology, and entrepreneurial activities that, taken together, influence the innovative capacity of a culture or nation.” A positive innovation culture depends upon a dynamic, open economy that encourages new entry, entrepreneurialism, continuous investment, and the free movement of goods, ideas, and talent.

At this point in time, it is clear that — at least for data-driven sectors — the E.U. has created the equivalent of an anti-innovation culture, and the GDPR has clearly played a major rule in that outcome. This regulatory regime has also had devastating consequences for venture capital formation and investment more generally in Europe. “Public policy and attitudes explain the relative technological decline and lack of economic dynamism,” Petit and Teece argue, and it has resulted in, “weak venture capital markets, fragmented research capabilities, low worker mobility and frustrated entrepreneurs.”

Industrial Policy Won’t Save Europe

While the E.U. is aggressively regulating data-driven sectors, it is simultaneously trying to use industrial policy programs to advance new technological capabilities and innovations. European policymakers would obviously like to avoid a repeat of the past quarter century and the lack of digital technology competition and innovation they witnessed.

But past European industrial policy efforts on the digital technology front have largely failed, as Connor Haaland and I documented earlier. Zoltan Acs notes that, despite many state efforts to promote digital innovation across the continent in recent decades, the E.U.’s regulatory policies have resulted in the opposite. “The European Union protected traditional industries and hoped that existing firms would introduce new technologies. This was a policy designed to fail,” he argues. A major recent book, Questioning the Entrepreneurial State: Status-quo, Pitfalls, and the Need for Credible Innovation Policy (Springer, 2022), offers additional evidence of the failure of European industrial policy efforts. No amount of industrial policy planning and spending is going to be able to overcome a negative innovation culture that suffocates entrepreneurialism and investment out of the gates.

These findings have lessons for policymakers in the United States, too, especially with President Biden and even many Republicans now calling for heavy-handed top-down regulation of digital technology companies. Basically, “President Biden Wants America to Become Europe on Tech Regulation,” I argued in a recent R Street Institute blog post. In a letter to the Wall Street Journal, I responded to recent opeds by both President Biden and former Trump Administration Attorney General William Barr in which they both advocated regulations that would take us down the disastrous path that the European Union has already charted.

“The only thing Europe exports now on the digital-technology front is regulation,” I noted in my response, and that makes it all the more mind-boggling that Biden and Barr want to go down that same path. “Overregulation by EU bureaucrats led Europe’s best entrepreneurs and investors to flee to the U.S. or elsewhere in search of the freedom to innovate.” This is the wrong innovation culture for the United States if we hope to be a leader in the Computational Revolution that is unfolding — and match expanding efforts by the Chinese to top us at it.

In closing, policymakers should never lose sight of the most fundamental lesson of innovation policy, which can be stated quite simply: You only get as much innovation as you allow to begin with. If the public policy defaults are all set to be maximally restrictive and limit entrepreneurialism and experimentation by design, then it should be no surprise when the country or continent fails to generate meaningful innovation, investment, new companies, and global competitive advantage. The European model is no model for America.

Additional reading:

]]> https://techliberation.com/2023/02/09/studies-document-growing-cost-of-eu-privacy-regulations/feed/ 2 77086 Quick Thoughts on Biden’s Tech-Bashing in the State of the Union https://techliberation.com/2023/02/07/quick-thoughts-on-bidens-tech-bashing-in-the-state-of-the-union/ https://techliberation.com/2023/02/07/quick-thoughts-on-bidens-tech-bashing-in-the-state-of-the-union/#respond Wed, 08 Feb 2023 03:43:49 +0000 https://techliberation.com/?p=77080

  • President Biden began his 2023 State of the Union remarks by saying America is defined by possibilities. Correct! Unfortunately, his tech-bashing will undermine those possibilities by discouraging technological innovation & online freedom in the United States.
  • America became THE global leader on digital tech because we rejected heavy-handed controls on innovators & speech. We shouldn’t return to the broken model of the past by layering on red tape, economic controls & speech restrictions.
  • What has the tech economy done for us lately? Here is a look at the value added to the U.S. economy by the digital sector from 2005-2021. That’s $2.4 TRILLION (with a T) added in 2021. These are astonishing numbers.
  • FACT: According to the BEA, in 2021, “the U.S. digital economy accounted for $3.70 trillion of gross output, $2.41 trillion of value added (translating to 10.3 % of U.S. GDP), $1.24 trillion of compensation + 8.0 million jobs.”

In 2021…

  • $3.70 trillion of gross output
  • $2.41 trillion of value added (=10.3% percent GDP)
  • $1.24 trillion of compensation
  • 8.0 million jobs

FACT: globally, 49 of the top 100 digital tech firms with most employees are US companies. Here they are. Smart public policy made this list possible.

  • FACT: 18 of the world’s Top 25 tech companies by Market Cap are US-based firms.
  • It’d be a huge mistake to adopt Europe’s approach to tech regulation. As I noted recently in the Wall Street Journal, “The only thing Europe exports now on the digital-technology front is regulation.”  Yet, Biden would have us import the EU model to our shores.
  • My R Street colleague Josh Withrow has also noted how, “the EU’s approach appears to be, in sum, ‘If you can’t innovate, regulate.’” America should not be following the disastrous regulatory path of the European Union on digital technology policy.
  • On antitrust regulation, here is a study by my R Street colleague Wayne Brough on the dangerous approach that the Biden administration wants, which would swing a wrecking ball through the tech economy. We have to avoid this.
  • It is particularly important that the US not follow the EU’s lead on artificial intelligence regulation at a time when we are in heated competition w China on the AI front as I noted here.
  • American tech innovators flourished thanks to a positive innovation culture rooted in permissionless innovation & policies like Section 230, which allowed American firms to become global powerhouses. And we’ve moved from a world of information scarcity to one of information abundance. Let’s keep it that way.
]]> https://techliberation.com/2023/02/07/quick-thoughts-on-bidens-tech-bashing-in-the-state-of-the-union/feed/ 0 77080 Self-Inflicted Technological Suicide https://techliberation.com/2023/01/26/self-inflicted-technological-suicide/ https://techliberation.com/2023/01/26/self-inflicted-technological-suicide/#comments Fri, 27 Jan 2023 00:26:11 +0000 https://techliberation.com/?p=77077

The Wall Street Journal has run my response to troubling recent opeds by President Biden (“Republicans and Democrats, Unite Against Big Tech Abuses“) and former Trump Administration Attorney General William Barr (“Congress Must Halt Big Tech’s Power Grab“) in which they both called for European-style regulation of U.S. digital technology markets.

“The only thing Europe exports now on the digital-technology front is regulation,” I noted in my response, and that makes it all the more mind-boggling that Biden and Barr want to go down that same path. “[T]he EU’s big-government regulatory crusade against digital tech: Stagnant markets, limited innovation and a dearth of major players. Overregulation by EU bureaucrats led Europe’s best entrepreneurs and investors to flee to the U.S. or elsewhere in search of the freedom to innovate.”

Thus, the Biden and Barr plans for importing European-style tech mandates, “would be a stake through the heart of the ‘permissionless innovation’ that made America’s info-tech economy a global powerhouse.” In a longer response to the Biden oped that I published on the R Street blog, I note that:

“It is remarkable to think that after years of everyone complaining about the lack of bipartisanship in Washington, we might get the one type of bipartisanship America absolutely does not need: the single most destructive technological suicide in U.S. history, with mandates being substituted for markets, and permission slips for entrepreneurial freedom.”

What makes all this even more remarkable is that they calls for hyper-regulation come at a time when China is challenging America’s dominance in technology and AI. Thus, “new mandates could compromise America’s lead,” I conclude. “Shackling our tech sectors with regulatory chains will hobble our nation’s ability to meet global competition and undermine innovation and consumer choice domestically.”

Jump over to the WSJ to read my entire response (“EU-Style Regulation Begets EU-Style Stagnation“) and to the R Street blog for my longer essay (“President Biden Wants America to Become Europe on Tech Regulation“).

]]> https://techliberation.com/2023/01/26/self-inflicted-technological-suicide/feed/ 1 77077 AI Policy Research: My Year in Review https://techliberation.com/2022/12/26/ai-policy-research-my-year-in-review/ https://techliberation.com/2022/12/26/ai-policy-research-my-year-in-review/#comments Mon, 26 Dec 2022 20:07:40 +0000 https://techliberation.com/?p=77073

I spent much of 2022 writing about the growing policy debate over artificial intelligence, machine learning, robotics, and the Computational Revolution more generally. Here are some of the major highlights of my work on this front.

All these essays + dozens more can be found on my: “Running List of My Research on AI, ML & Robotics Policy.” I have several lengthy studies and many shorter essays coming in the first half of 2023.

Finally, here is a Federalist Society podcast discussion about AI policy hosted by Jennifer Huddleston in which Hodan Omaar of ITIF and I offer a big picture overview of where things are headed next.

]]> https://techliberation.com/2022/12/26/ai-policy-research-my-year-in-review/feed/ 2 77073 Revisionist Histories of America’s Digital Revolution https://techliberation.com/2022/12/11/revisionist-histories-of-americas-digital-revolution/ https://techliberation.com/2022/12/11/revisionist-histories-of-americas-digital-revolution/#comments Sun, 11 Dec 2022 16:15:09 +0000 https://techliberation.com/?p=77068

Everywhere you look in tech policy land these days, people decry China as a threat to America’s technological supremacy or our national security. Many of these claims are well-founded, while others are somewhat overblown. Regardless, as I argue in a new piece for National Review this week, “America Won’t Beat China by Becoming China.” Many pundits and policymakers seem to think that only a massive dose of central planning and Big Government technocratic bureaucracy can counter the Chinese threat. It’s a recipe for a great deal of policy mischief.

Some of these advocates for a ‘let’s-be-more-like-China’ approach to tech policy also engage in revisionist histories about America’s recent success stories in the personal computing revolution and internet revolution. As I note in my essay, “[t]he revisionists instead prefer to believe that someone high up in government was carefully guiding this decentralized innovation. In the new telling of this story, deregulation had almost nothing to do with it.” In fact, I was asked by  National Review to write this piece in response to a recent essay by Wells King of American Compass, who has penned some rather remarkable revisionist tales of government basically being responsible for all the innovation in digital tech sectors over the past quarter century. Markets and venture capital had nothing to do with it by his reasoning. It’s what Science writer Matt Ridley correctly labels “innovation creationism,” or the notion that it basically takes a village to raise an innovator.

Perhaps the best example of this sort of twisted logic was President Barack Obama’s infamous 2012 “you didn’t build that” speech, which was widely mocked by many conservatives at the time as being completely off the mark. The conservative critics rightly lambasted Obama for underplaying the role of markets, entrepreneurs, and private investors as the primary engine of America’s remarkably innovative economy. Unfortunately, however, many of today’s “national conservatives” are borrowing Obama’s twisted revisionist vision and, worse yet, fabricating entirely new nonsensical ‘it-takes-a-village’ narratives that go well beyond it.

In my essay, I explain why innovation creationism about the internet and the Digital Revolution gets the story of the past quarter century horribly wrong. The tech revisionist misidentify and overplay the role government played in this arena and they also ignore the many mistakes our government and other governments (especially in Europe) have made when trying to technocratically plan tech systems. As I conclude in my essay,

America’s world-leading digital-technology companies and technologies were not the product of intentional design or bureaucratic initiatives. Corporatism and central planning should be rejected as the basis for U.S. technology policy. And regardless of whether they happen to be trendy right now, economically illiterate arguments like King’s should be relegated to the ash heap of history.

Jump over to  National Review to read the entire essay.  And here’s a list of some of my other recent writing on industrial policy:

]]> https://techliberation.com/2022/12/11/revisionist-histories-of-americas-digital-revolution/feed/ 2 77068 New Report: “Governing Emerging Technology in an Age of Policy Fragmentation and Disequilibrium” https://techliberation.com/2022/05/02/new-report-governing-emerging-technology-in-an-age-of-policy-fragmentation-and-disequilibrium/ https://techliberation.com/2022/05/02/new-report-governing-emerging-technology-in-an-age-of-policy-fragmentation-and-disequilibrium/#respond Mon, 02 May 2022 18:00:35 +0000 https://techliberation.com/?p=76982

The American Enterprise Institute (AEI) has kicked off a new project called “Digital Platforms and American Life,” which will bring together a variety of scholars to answer the question: How should policymakers think about the digital platforms that have become embedded in our social and civic life? The series, which is being edited by AEI Senior Fellow Adam J. White, highlights how the democratization of knowledge and influence in the Internet age comes with incredible opportunities but also immense challenges. The contributors to this series will approach these issues from various perspectives and also address different aspects of policy as it pertains to the future of technological governance.

It is my honor to have the lead paper in this new series. My 19-page essay is entitled, Governing Emerging Technology in an Age of Policy Fragmentation and Disequilibrium, and it represents my effort to concisely tie together all my writing over the past 30 years on governance trends for the Internet and related technologies. The key takeaways from my essay are:

  • Traditional governance mechanisms are being strained by modern technological and political realities. Newer technologies, especially digital ones, are developing at an ever-faster rate and building on top of each other, blurring lines between sectors.
  • Congress has failed to keep up with the quickening pace of technological change. It also continues to delegate most of its constitutional authority to agencies to deal with most policy concerns. But agencies are overwhelmed too. This situation is unlikely to change, creating a governance gap.
  • Decentralized governance techniques are filling the gap. Soft law—informal, iterative, experimental, and collaborative solutions—represents the new normal for technological governance. This is particularly true for information sectors, including social media platforms, for which the First Amendment acts as a major constraint on formal regulation anyway.
  • No one-size-fits-all tool can address the many governance issues related to fast-paced science and technology developments; therefore, decentralized governance mechanisms may be better suited to address newer policy concerns.

My arguments will frustrate many people of varying political dispositions because I adopt a highly pragmatic approach to technological governance. No matter what your preferred ideal state of affairs looks like in terms of technological governance, you’re bound to be disappointed by the way high-tech policy is unfolding today. Many people desire bright-letter hard law that has government(s) establishing comprehensive, precautionary regulation of various tech sectors. Others prefer a clearly defined but more light-touch policy regime for emerging technology. Alas, neither of these preferred hard law dispositions describe the world we live in today, nor will either of them likely govern the future. My essay outlines a variety of reasons why such hard law approaches are breaking down today, including general legislative dysfunctionalism, the endless delegation of power from Congress to regulatory agencies or the states, and the the intensifying “pacing problem” (i.e., the fact that technological change is happening at a must faster rate than policy change).

In light of this, I argue:

it is smart to think practically about alternative governance frameworks when traditional hard-law approaches prove slow or ineffective in addressing governance needs. It is also wise to consider alternative governance frameworks that might address the occasional downsides of disruptive technologies without completely foreclosing ongoing innovation opportunities the way many hard-law solutions would.

I also show that, whether anyone cares to admit it or not, we already live in a world of multiplying “soft law” mechanisms and decentralized governance approaches. I use the example of how these new governance trends are unfolding for autonomous vehicles, but note how we see decentralized governance approaches being utilized in many other sectors. This is equally true across the Atlantic where the United Kingdom is increasingly experimenting with new governance approached for emerging technologies.

What counts as “soft law” or “decentralized governance” is an open-ended and ever-changing topic of discussion. But I note that it, at a minimum, it includes: multi-stakeholder processes, experimental “sandboxes,” industry best practices or codes of conduct, technical standards, private certifications, agency workshops and guidance documents, informal negotiations, and education and awareness building efforts. I unpack these ideas in the essay in more detail.

For social media, soft law approaches are the current governance norm, even as hard law regulatory proposals continue to multiply rapidly. But I note that despite all that pressure for more formal regulatory governance of social media platforms, the First Amendment presents a formidable barrier to most of those proposals. Thus, soft law will continue to be the dominant governance approach here. I also conclude by predicting that that soft law will become the dominant approach for artificial intelligence, too, even as regulatory proposals multiply there as well.

I’ll have more to say about my paper and other papers in the AEI series in coming weeks and month. For now, I encourage you to jump over to the website AEI has set up for the series and take a look at my new paper.

Additional Reading :

]]> https://techliberation.com/2022/05/02/new-report-governing-emerging-technology-in-an-age-of-policy-fragmentation-and-disequilibrium/feed/ 0 76982 Slide Presentation on “The Future of Innovation Policy” https://techliberation.com/2022/04/18/slide-presentation-on-the-future-of-innovation-policy/ https://techliberation.com/2022/04/18/slide-presentation-on-the-future-of-innovation-policy/#comments Mon, 18 Apr 2022 19:24:10 +0000 https://techliberation.com/?p=76968

Here’s a slide presentation on “The Future of Innovation Policy” that I presented to some student groups recently. It builds on themes discussed in my recent books, Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom, and Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments. I specifically discuss the tension between permissionless innovation and the precautionary principle as competing policy defaults.

]]> https://techliberation.com/2022/04/18/slide-presentation-on-the-future-of-innovation-policy/feed/ 1 76968 Should All Kids Under 18 Be Banned from Social Media? https://techliberation.com/2022/04/18/should-all-kids-under-18-be-banned-from-social-media/ https://techliberation.com/2022/04/18/should-all-kids-under-18-be-banned-from-social-media/#respond Mon, 18 Apr 2022 15:00:00 +0000 https://techliberation.com/?p=76966

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.

 

]]> https://techliberation.com/2022/04/18/should-all-kids-under-18-be-banned-from-social-media/feed/ 0 76966 Samuel Florman & the Continuing Battle over Technological Progress https://techliberation.com/2022/04/06/samuel-florman-the-continuing-battle-over-technological-progress/ https://techliberation.com/2022/04/06/samuel-florman-the-continuing-battle-over-technological-progress/#comments Wed, 06 Apr 2022 18:37:45 +0000 https://techliberation.com/?p=76961

Almost every argument against technological innovation and progress that we hear today was identified and debunked by Samuel C. Florman a half century ago. Few others since him have mounted a more powerful case for the importance of innovation to human flourishing than Florman did throughout his lifetime.

Chances are you’ve never heard of him, however. As prolific as he was, Florman did not command as much attention as the endless parade of tech critics whose apocalyptic predictions grabbed all the headlines. An engineer by training, Florman became concerned about the growing criticism of his profession throughout the 1960s and 70s. He pushed back against that impulse in a series of books over the next two decades, including most notably: The Existential Pleasures of Engineering (1976), Blaming Technology: The Irrational Search for Scapegoats (1981), and The Civilized Engineer (1987). He was also a prolific essayist, penning hundreds of articles for a wide variety of journals, magazines, and newspapers beginning in 1959. He was also a regular columnist for MIT Technology Review for sixteen years.

Florman’s primary mission in his books and many of those essays was to defend the engineering profession against attacks emanating from various corners. More broadly, as he noted in a short autobiography on his personal website, Florman was interested in discussing, “the relationship of technology to the general culture.”

Florman could be considered a “rational optimist,” to borrow Matt Ridley’s notable term [1] for those of us who believe, as I have summarized elsewhere, that there is a symbiotic relationship between innovation, economic growth, pluralism, and human betterment.[2] Rational optimists are highly pragmatic and base their optimism on facts and historical analysis, not on dogmatism or blind faith in any particular viewpoint, ideology, or gut feeling. But they are unified in the belief that technological change is a crucial component of moving the needle on progress and prosperity.

Florman’s unique contribution to advancing rational optimism came in the way he itemized the various claims made by tech critics and then powerfully debunked each one of them. He was providing other rational optimists with a blueprint for how defend technological innovation against its many critics and criticisms. As he argued in The Civilized Engineer, we need to “broaden our conception of engineering to include all technological creativity.”[3] And then we need to defend it with vigor.

In 1982, the American Society of Mechanical Engineers appropriately awarded Florman the distinguished Ralph Coats Roe Medal for his “outstanding contribution toward a better public understanding and appreciation of the engineer’s worth to contemporary society.” Carl Sagan had won the award the previous year. Alas, Forman never attained the same degree of notoriety as Sagan. That is a shame because Florman was as much a philosopher and a historian as he was an engineer, and his robust thinking on technology and society deserves far greater attention. More generally, his plain-spoken style and straight-forward defense of technological progress continues to be a model for how to counter today’s techno-pessimists.

This essay highlights some of the most important themes and arguments found in Florman’s writing and explains its continuing relevance to the ongoing battles over technology and progress.

What Motivates The “Antitechnologists”?

Florman was interested in answering questions about what motivates both engineers as well as their critics. He dug deep into psychology and history to figure out what makes these people tick. Who are engineers, and why do they do what they do? That was his primary question, and we will turn to his answers momentarily. But he also wanted to know what drove the technology critics to oppose innovation so vociferously.

Florman’s most important contribution to the history of ideas lies in his 6-part explanation of “the main themes that run through the works of the antitechnologists.”[4] Florman used the term “antitechnologists” to describe the many different critics of engineering and innovation. He recognized that the term wasn’t perfect and that some people he labelled as such would object to it. Nevertheless, because they offer no umbrella label for their movement or way of thinking, Florman noted that opposition to, or general discomfort with, technology was what motivated these critics. Hence, the label “antitechnologists.”

Florman surveyed a wide swath of technological critics from many different disciplines—philosophy, sociology, law, and other fields. He condensed their main criticisms into six general points:

  • Technology is a “thing” or a force that has escaped from human control and is spoiling our lives.
  • Technology forces man to do work that is tedious and degrading.
  • Technology forces man to consume things that he does not really desire.
  • Technology creates an elite class of technocrats, and so disenfranchises the masses.
  • Technology cripples man by cutting him off from the natural world in which he evolved.
  • Technology provides man with technical diversions which destroy his existential sense of his own being.[5]

No one else before this had ever crafted such a taxonomy of complaints from tech critics, and no one has done it better since Florman did so in 1976. In fact, it is astonishing how well Florman’s list continues to identify what motivates modern technology critics. New technologies have come and gone, but these same concerns tend to be brought up again and again. Florman’s books addressed and debunked each of these concerns in powerful fashion.

The Relentless Pessimism & Elitism of the Antitechnologists

Florman identified the way a persistent pessimism unifies antitechnologists. “Our intellectual journals are full of gloomy tracts that depict a society debased by technology,” he noted.[6] What motivated such gloom and doom? “It is fear. They are terrified by the scene unfolding before their eyes.”[7] He elaborated:

“The antitechnologists are frightened; they counsel halt and retreat. They tell the people that Satan (technology) is leading them astray, but the people have heard that story before. They will not stand still for vague promises of a psychic contentment that is to follow in the wake of voluntary temperance.”[8]

The antitechnologist’s worldview isn’t just relentlessly pessimistic but also highly elitist and paternalistic, Florman argued. He referred to it as “Platonic snobbery.”[9] The economist and political scientist Thomas Sowell would later call that snobbish attitude, “the vision of the anointed.”[10] Like Sowell, Florman was angered at the way critics stared down their noses at average folk and disregarded their values and choices:

“The antitechnologists have every right to be gloomy, and have a bounden duty to express their doubts about the direction our lives are taking. But their persistent disregard of the average person’s sentiments is a crucial weakness in their argument—particularly when they then ask us to consider the ‘real’ satisfactions that they claim ordinary people experienced in other cultures of other times.”[11]

Florman noted that critics commonly complain about “too many people wanting too many things,” but he noted that, “[t]his is not caused by technology; it is a consequence of the type of creature that man is.”[12] One can moralize all they want about supposed over-consumption or “conspicuous consumption,” but in the end, most of us strive to better our lives in various ways—including by working to attain things that may be out of our reach or even superfluous in the eyes of others.

For many antitechnologists and other social critics, only the noble search for truth and wisdom will suffice. Basically, everybody should just get back to studying philosophy, sociology, and other soft sciences. Modern tech critics, Forman said, fashion themselves as the intellectual descendants of Greek philosophers who believed that, “[t]he ideal of the new Athenian citizen was to care for his body in the gymnasium, reason his way to Truth in the academy, gossip in the agora, and debate in the senate. Technology was not deemed worthy of a free man’s time.”[13]

“It is not surprising to find philosophers recommending the study of philosophy as a way of life,” Florman noted amusingly.[14] But that does not mean all of us want (or even need) to devote our lives to such things. Nonetheless, critics often sneer at the choices made by the rest of us—especially when they involve the fruits of science and technology. “The most effective weapon in the arsenal of the antitechnologists is self-righteousness,” he noted,[15] and, “[a]s seen by the antitechnologists, engineers and scientists are half-men whose analysis and manipulation of the world deprives them of the emotional experiences that are the essence of the good life.”[16]

Indeed, it is not uncommon (both in the past and today) to see tech critics self-anoint themselves “humanists” and then suggest that anyone who thinks differently from them (namely, those who are pro-innovation) are the equivalent of anti-humanistic. I wrote about this in my 2018 essay, “Is It ‘Techno-Chauvinist’ & ‘Anti-Humanist’ to Believe in the Transformative Potential of Technology?” I argued that, “[p]roperly understood, ‘technology’ and technological innovation are simply extensions of our humanity and represent efforts to continuously improve the human condition. In that sense, humanism and technology are compliments, not opposites.”

But the critics remain fundamentally hostile to that notion and they often suggest that there is something suspicious about those who believe, along with Florman, that there is a symbiotic relationship between innovation, economic growth, pluralism, and human betterment. We rational optimists, the critics suggest, are simply too focused on crass, materialistic measures of happiness and human flourishing.

Florman observed this when noting how much grief he and fellow engineers and scientists got when engaging with critics. “Anyone who has attempted to defend technology against the reproaches of an avowed humanist soon discovers that beneath all the layers of reasoning—political, environmental, aesthetic, or moral—lies a deep-seated disdain for ‘the scientific view.’”[17]

Everywhere you look in the world of Science & Technology Studies (STS) today, you find this attitude at work. In fact, the field is perhaps better labelled Anti-Science & Technology Studies, or at least Science & Technology Skeptical Studies. For most STSers, the burden of proof lies squarely on scientists, engineers, and innovators who must prove to some (often undefined) higher authorities that their ideas and inventions will bring worth to society (however the critics measure worth and value, which is often very unclear). Until then, just go slow, the critics say. Better yet, consult your local philosophy department for a proper course of action!

The critics will retort that they are just looking out for society’s best interests and trying to counter that selfish, materialist side of humanity. Florman countered by noting how, “most people are in search of the good life—not ‘the goods life’ as [Lewis] Mumford puts it, although some goods are entailed—and most human desires are for good things in moderate amounts.”[18] Trying to better our lives through the creation and acquisition of new and better goods and services is just a natural and quite healthy human instinct to help us attain some ever-changing definition of whatever each of us considers “the good life.” “Something other than technology is responsible for people wanting to live in a house on a grassy plot beyond walking distance to job, market, neighbor, and school,” Florman responded.[19] We all want to “get ahead” and improve our lot in life. That’s not because technology forces the urge upon us. Rather, that urge comes quite naturally as part of a desire to improve our lot in life.

The Power of Nostalgia

I have spent a fair amount of time in my own writing documenting the central role that nostalgia plays in motivating technological criticism.[20] Florman’s books repeatedly highlighted this reality. “The antitechnologists romanticize the work of earlier times in an attempt to make it seem more appealing than work in a technological age,” he noted. “But their idyllic descriptions of peasant life do not ring true.”[21]

The funny thing is, it is hard to pin down the critics regarding exactly when the “golden era” or “good ‘ol days” were. But if there is one thing that they all agree on, it’s that those days have long passed us by. In a 2019 essay on “Four Flavors of Doom: A Taxonomy of Contemporary Pessimism,” philosopher Maarten Boudry noted:

“In the good old days, everything was better. Where once the world was whole and beautiful, now everything has gone to ruin. Different nostalgic thinkers locate their favorite Golden Age in different historical periods. Some yearn for a past that they were lucky enough to experience in their youth, while others locate utopia at a point farther back in time…”

Not all nostalgia is bad. Clay Routledge has written eloquently about how “nostalgia serves important psychological functions,” and can sometimes possess a positive character that strengthens individuals and society. But the nostalgia found in the works of tech critics is usually a different thing altogether. It is rooted in misery about the present and dread of the future—all because technology has apparently stolen away or destroyed all that was supposedly great about the past. Florman noted how, “the current pessimism about technology is a renewed manifestation of pastoralism,” that is typically rooted in historical revisionism about bygone eras.[22] Many critics engage in what rhetoricians call “appeals to nature” and wax poetic about the joys of life for Pre-Technological Man, who apparently enjoyed an idyllic life free of the annoying intrusions created by modern contrivances.

Such “good ol days” romanticism is largely untethered from reality. “For most of recorded history humanity lived on the brink of starvation,” Wall Street Journal columnist Greg Ip noted in a column in early 2019. Even a cursory review of history offers voluminous, unambiguous proof that the old days were, in reality, eras of abject misery. Widespread poverty, mass hunger, poor hygiene, disease, short lifespans, and so on were the norm. What lifted humanity up and improved our lot as a species is that we learned how to apply knowledge to tasks in a better way through incessant trial-and-error experimentation. Recent books by Hans Rosling,[23] Steven Pinker,[24] and many others[25] have thoroughly documented these improvements to human well-being over time.

The critics are unmoved by such evidence, preferring to just jump around in time and cherry-pick moments when they feel life was better than it is now. “Fond as they are of tribal and peasant life, the antitechnologists become positively euphoric over the Middle Ages,” Florman quipped.[26] Why? Mostly because the Middle Ages lacked the technological advances of modern times, which the critics loathe. But facts are pesky things, and as Florman insisted, “it is fair to go on to ask whether or not life was ‘better’ in these earlier cultures than it is in our own.”[27] “We all are moved to reverie by talk of an arcadian golden age,” he noted. “But when we awaken from this reverie, we realize that the antitechnologists have diverted us with half-truths and distortions.”[28]

The critics’ reverence for the old days would be humorous if it wasn’t rooted in an arrogant and dangerous belief that society can be somehow reshaped to resemble whatever preferred past the critics desire. “Recognizing that we cannot return to earlier times, the antitechnologists nevertheless would have us attempt to recapture the satisfactions of these vanished cultures,” Florman noted. “In order to do this, what is required is nothing less than a change in the nature of man.”[29] That is, the critics will insist that, “something must be done” (namely be forced from above via some grand design) to remake humans and discourage their inner homo faber desire to be an incessant tool-builder. But this is madness, Florman argued in one of the best passages from his work:

“we are beginning to realize that for mankind there will never be a time to rest at the top of the mountain. There will be no new arcadian age. There will always be new burdens, new problems, new failures, new beginnings. And the glory of man is to respond to his harsh fate with zest and ever-renewed effort.”[30]

If the critics had their way, however, that zest would be dampened and those efforts restrained in the name of recapturing some mythical lost age. This sort of “rosy retrospection bias” is all the more shocking coming, as it does, from learned people who should know a lot more about the actual history of our species and the long struggle to escape utter despair and destitution. Alas, as the great Scottish philosopher David Hume observed in a 1777 essay, “The humour of blaming the present, and admiring the past, is strongly rooted in human nature, and has an influence even on persons endued with the profoundest judgment and most extensive learning.”[31]

Why Invent? Homo Faber is our Nature

While taking on the critics and debunking their misplaced nostalgia about the past, Florman mounted a defense of engineers and innovators by noting that the need to tinker and create is in our blood. He began by noting how “the nature of engineering has been misconceived”[32] because, in a sense, we are all engineers and innovators to some degree.

Florman’s thinking was very much in line with Benjamin Franklin, who once noted, “man is a tool-making animal.” “Both genetically and culturally the engineering instinct has been nurtured within us,” Florman argued, and this instinct “was as old as the human race.”[33] “To be human is to be technological. When we are being technological we are being human—we are expressing the age-old desire of the tribe to survive and prosper.”[34] In fact, he claimed, it was no exaggeration to say that humans, “are driven to technological creativity because of instincts hardly less basic than hunger and sex.”[35] Had our past situation been as rosy as the critics sometimes suggest, perhaps we would have never bothered to fashion tools to escape those eras! It was precisely because humans wanted to improve their lives and the lives of their loved ones that we started crafting more and better tools. Flint and firewood were never going to suffice.

But our engineering instincts do not end with basic needs. “Engineering responds to impulses that go beyond mere survival: a craving for variety and new possibilities, a feeling for proportion—for beauty—that we share with the artist,” Florman argued.[36] In essence, engineering and innovation respond to both basic human needs and higher ones at every stage of “Maslow’s pyramid,” which describes a five-level hierarchy of human needs. This same theme is developed in Arthur Diamond’s recent book, Openness to Creative Destruction: Sustaining Innovative Dynamism. As Diamond argues, one of the most unheralded features of technological innovation is that, “by providing goods that are especially useful in pursuing a life plan full of challenging, worthwhile creative projects,” it allows each of us the pursue different conceptions of what we consider a good life.[37] But we are only able to do so by first satisfying our basic physiological needs, which innovation also handles for us.

Florman was frustrated that critics failed to understand this point and equally concerned that engineers and innovators had been cast as uncaring gadget-worshipers who did not see beauty and truth in higher arts and other more worldly goals and human values. That’s hogwash, he argued:

“What an ironic turn of events! For if ever there was a group dedicated to—obsessed with—morality, conscience, and social responsibility, it has been the engineering profession. Practically every description of the practice of engineering has stressed the concept of service to humanity.[38] [. . .] Even in an age of global affluence, the main existential pleasure of the engineer will always be to contribute to the well-being of his fellow man.”[39]

Engineers and innovators do not always set out with some grandiose design to change the world, although some aspire to do so. Rather, the “existential pleasures of engineering” that Florman described in the title of his most notable book comes about by solving practical day-to-day problems:

“The engineer does not find existential pleasure by seeking it frontally. It comes to him gratuitously, seeping into him unawares. He does not arise in the morning and say, ‘Today I shall find happiness.’ Quite the contrary. He arises and says, ‘Today I will do the work that needs to be done, the work for which I have been trained, the work which I want to do because in doing it I feel challenged and alive.’ Then happiness arrives mysteriously as a byproduct of his effort.”[40]

And this pleasure of getting practical work done is something that engineers and innovators enjoy collectively by coming together and using specialized skills in new and unique combinations. “[T]echnological progress depends upon a variety of skills and knowledge that are far beyond the capacity of any one individual,” he insisted. “High civilization requires a high degree of specialization, and it was toward high civilization that the human journey appears always to have been directed.”[41] Adam Smith could not have said it any better.

“Muddling Through”: Why Trial-and-Error is the Key to Progress

My favorite insights from Florman’s work relate to the way humans have repeatedly faced up to adversity and found ways to “muddle through.” This was the focus of an old essay of mine— “Muddling Through: How We Learn to Cope with Technological Change”—which argued that humans are a remarkably resilient species and that we regularly find creative ways to deal with major changes through constant trial-and-error experimentation and the learning that results from it.[42]

Florman made this same point far more eloquently long ago:

“We have been attempting to muddle along, acknowledging that we are selfish and foolish, and proceeding by means of trial and error. We call ourselves pragmatists. Mistakes are made, of course. Also, tastes change, so that what seemed desirable to one generation appears disagreeable to the next. But our overriding concern has been to make sure that matters of taste do not become matters of dogma, for that is the way toward violent conflict and tyranny. Trial and error, however, is exactly what the antitechnologists cannot abide.[43]

It is the error part of trial-and-error that is so vital to societal learning. “Even the most cautious engineer recognizes that risk is inherent in what he or she does,” Florman noted. “Over the long haul the improbable becomes the inevitable, and accidents will happen. The unanticipated will occur.”[44] But “[s]ometimes the only way to gain knowledge is by experiencing failure,” he correctly observed[45] “To be willing to learn through failure—failure that cannot be hidden—requires tenacity and courage.”[46]

I’ve argued that this represents the central dividing line between innovation supporters and technology critics. The critics are so focused on risk-adverse, precautionary principle-based thinking that they simply cannot tolerate the idea that society can learn more through trial-and-error than through preemptive planning. They imagine it is possible to override that process and predetermine the proper course of action to create a safer, more stable society. In this mindset, failure is to be avoided at all costs through prescriptions and prohibitions. Innovation is to be treated as guilty until proven innocent in the hope of eliminating the error (or risk / failure) associated with trial-and-error experiments. To reiterate, this logic misses the fact that the entire point of trial-and-error is to learn from our mistakes and “fail better” next time, until we’ve solved the problem at hand entirely.[47]

Florman noted that, “sensible people have agreed that there is no free lunch; there are only difficult choices, options, and trade-offs.”[48] In other words, precautionary controls come at a cost. “All we can do is do the best we can, plan where we can, agree where we can, and compromise where we must,” he said.[49] But, again, the antitechnologists absolutely cannot accept this worldview. They are fundamentally hostile to it because they either believe that a precautionary approach will do a better job improving public welfare, or they believe that trial-and-error fails to safeguard any number of other values or institutions that they regard as sacrosanct. This shuts down the learning process from which wisdom is generated. As the old adage goes, “nothing ventured, nothing gained.” There can be no reward without some risk, and there can be no human advances without unless we are free to learn from the error portion of trial-and-error.

The Costs of Precautionary Regulation

Florman did not spend much time in his writing mulling over the finer points of public policy, but he did express skepticism about our collective ability to define and enforce “the public interest” in various contexts. A great many regulatory regimes—and their underlying statutes—rest on the notion of “protecting the public interest.” It is impossible to be against that notion, but it is often equally impossible to define what it even means.[50]

This leads to what Florman called, “the search for virtues that nobody can define”[51] “As engineers we are agreed that the public interest is very important; but it is folly to think that we can agree on what the public interest is. We cannot even agree on the scientific facts!”[52] This is especially true today in debates over what constitutes “responsible innovation” or “ethical innovation.”[53] What Florman noted about such conversations three decades ago is equally true today:

“Whenever engineering ethics is on the agenda, emotions come quickly to a boil. […] “It is oh so easy to mouth clichés, for example to pledge to protect the public interest, as the various codes of engineering ethics do. But such a pledge is only a beginning and hardly that. The real questions remain: What is the public interest, and how is it to be served?”[54]

That reality makes it extremely difficult to formulate consensus regarding public polices for emerging technologies. And it makes it particularly difficult to define and enforce a “precautionary principle” for emerging technologies that will somehow strike the Goldilocks balance of getting things just right. This was the focus of my 2016 book Permissionless Innovation, which argued that the precautionary principle should be the last resort when contemplating innovation policy. Experimentation with new technologies and business models should generally be permitted by default because, “living in constant fear of worst-case scenarios—and premising public policy on them—means that best-case scenarios will never come about,” I argued. The precautionary principle should only be tapped when the harms alleged to be associated with a new technology are highly probable, tangible, immediate, irreversible, catastrophic, or directly threatening to life and limb in some fashion.

For his part, Florman did not want to get his defense of engineering mixed up with politics and regulatory considerations. Engineers and technologists, he noted, come in many flavors and supported many different causes. Generally speaking, they tend to be quite pragmatic and shun strong ideological leanings and political pronouncements.

Of course, at some point, there is no avoiding this fight; one must comment on how to strike the right balance when politics enter the picture and threatens to stifle technological creativity. Florman’s perspectives on regulatory policy were somewhat jumbled, however. On one hand, he expressed concern about excessive and misguided regulations, but he also saw government playing an important role both in supporting various types of engineering projects and regulating certain technological developments:

“The regulatory impulse, running wild, wreaks havoc, first of all by stifling creative and productive forces that are vital to national survival. But it does harm also—and perhaps more ominously—by fomenting a counter-revolution among outraged industrialists, the intensity of which threatens to sweep away many of the very regulations we most need.”[55]

In his 1987 book, The Civilized Engineer, Florman even expressed surprise and regret about growing pushback against regulation during the Reagan years. He also expressed skepticism about “the deceptive allure” of benefit-cost analysis, which was on the rise at the time, saying that the “attempt to apply mathematical consistency to the regulatory process was deplorably simplistic.”[56] I have always been a big believer in the importance of benefit-cost analysis (BCA), so I was surprised to read of Florman’s skepticism of it. But he was writing in the early days of BCA and it was not entirely clear how well it work in practice. Four decades on, BCA has become far more rigorous, academically respected, and well-established throughout government. It has widespread and bipartisan support as a policy evaluation tool.

Florman adamantly opposed any sort of “technocracy”—or administration of government by technically-skilled elites. He thought it was silly that so many tech critics believe that such a thing already existed. “The myth of the technocratic elite is an expression of fear, like a fairy tale about ogres,” he argued. “It springs from an understandable apprehension, but since it has no basis in reality, it has no place in serious discourse.”[57] Nor did he believe that there was any real chance a technocracy would ever take hold. “No matter how complex technology becomes, and no matter how important it turns out to be in human affairs, we are not likely to see authority vested in a class of technocrats.”[58]

Florman hoped for wiser administration of law and regulations that affected engineering endeavors and innovation more generally. Like so many others, he did not necessarily want more law, just better law. One cannot fault that instinct, but Florman was not really interested in fleshing out the finer details of policy about how to accomplish that objective. He preferred instead to use history as a rough guide for policy. From the fall of the Roman Empire to the decline of Britain’s economic might in more recent times, Florman observed the ways in which societal and governmental attitudes toward innovation influenced the relative growth of science, technology, and national economies. In essence, he was explaining how “innovation culture” and “innovation arbitrage” had been realities for far longer than most people realize.[59]

“Where the entrepreneurial spirit cannot be rewarded, and where non-productive workers cannot be discharged, stagnation will set in,” Florman concluded.[60] This is very much in line with the thinking of economic historians like Joel Mokyr[61] and Deirdre McCloskey,[62] who have identified how attitudes toward creativity and entrepreneurialism affect the aggregate innovative capacity of nations, and thus their competitive advantage and relative prosperity in the world.

Debunking Determinism, Anxiety & Alienation Concerns

One of the ironies of modern technological criticism is the way many critics can’t seem to get their story straight when it comes to “technological determinism” versus social determinism. In the extreme view, technological determinism is the idea that technology drives history and almost has a will of its own. It is like an autonomous force that is practically unstoppable. By contrast, social determinism means that society (individuals, institutions, etc.) guide and control the development of technology.

In the field of Science and Technology Studies, technological determinism is a very hot matter. Academic and social critics are fond of painting innovation advocates as rigid tech determinists who are little better than uncaring anti-humanistic gadget-worshipers. The critics have employed a variety of other creative labels to describe tech determinism, including: “techno-fundamentalism,” “technological solutionism,” and even “techno-chauvinism.”

Engineers and other innovators often get hit with such labels and accused of being rigid technological determinists who just want to see tech plow over people and politics. But this was, and remains, a ridiculous argument. Sure, there will always be some wild-eyed futurists and extropian extremists who make preposterous claims about how “there is no stopping technology.” “Even now the salvation-through-technology doctrine has some adherents whose absurdities have helped to inspire the antitechnological movement, Florman said.”[63] But that hardly represents the majority of innovation supporters, who well understand that society and politics play a crucial role in shaping the future course of technological development.

As Florman noted, we can dismiss extreme deterministic perspectives for a rather simple reason: technologies fail all the time! “If promising technologies can suffer fatal blows from unexpected circumstances,” Florman correctly argued, then “[t]his means that we are still—however precariously—in control of our own destiny.”[64] He believed that, “technology is not an independent force, much less a thing, but merely one of the types of activities in which people engage.”[65] The rigid view of tech determinism can be dismissed, he said, because “it can be shown that technology is still very much under society’s control, that it is in fact an expression of our very human desires, fancies, and fears.”[66]

But what is amazing about this debate is that some of the most rigid technological determinists are the technology critics themselves! Recall how Florman began his 6-part taxonomy of common complaints from tech critics. “A primary characteristic of the antitechnologists,” Florman argued, “is the way in which they refer to ‘technology’ as a thing, or at least a force, as if it had an existence of its own” and which “has escaped from human control and is spoiling our lives.”[67]

He noted that many of the leading tech critics of the post-war era often spoke in remarkably deterministic ways. “The idea that a man of the masses has no thoughts of his own, but is something on the order of a programmed machine, owes part of its popularity with the antitechnologists to the influential writings of Herbert Marcuse,” he believed.[68] But then such thinking accelerated and gained greater favor with the popularity of critics like French philosopher Jacques Ellul, American historian Lewis Mumford, and American cultural critic Neil Postman.

Their books painted a dismal portrait of a future in which humans were subjugated to the evils of “technique” (Ellul), “technics” (Mumford), or “technopoly” (Postman).  The narrative of their works read like dystopian science fiction. Essentially, there was no escaping the iron grip that technology had on us. Postman claimed, for example, that technology was destined to destroy “the vital sources of our humanity” and lead to “a culture without a moral foundation” by undermining “certain mental processes and social relations that make human life worth living.”

Which gets us to commonly heard concerns about how technology leads to “anxiety” and “alienation.” “Having established the view of technology as an evil force, the antitechnologists then proceed to depict the average citizen as a helpless slave, driven by this force to perform work he detests,” Florman notes.[69] “Anxiety and alienation are the watchwords of the day, as if material comforts made life worse, rather than better.”[70]

These concerns about anxiety, alienation, and “dehumanization” are omnipresent in the work of modern tech critics, and they are also tied up with traditional worries about “conspicuous consumption.” It’s all part of the “false consciousness” narrative they also peddle, which basically views humans as too ignorant to look out for their own good. In this worldview, people are sheep being led to the slaughter by conniving capitalists and tech innovators, who are just trying to sell them things they don’t really need.

Florman pointed out how preposterous this line of thinking is when he noted how critics seem to always forget that, “a basic human impulse precedes and underlies each technological development”:[71]

“Very often this impulse, or desire, is directly responsible for the new invention. But even when this is not the case, even when the invention is not a response to any particular consumer demand, the impulse is alive and at the ready, sniffing about like a mouse in a maze, seeking its fulfillment. We may regret having some of these impulses. We certainly regret giving expression to some of them. But this hardly gives us the right to blame our misfortunes on a devil external to ourselves.”[72]

Consider the automobile, for example. Industrial era critics often focused on it and lambasted the way they thought industrialists pushed auto culture and technologies on the masses. Did we really need all those cars? All those colors? All those options? Did we really even need cars? The critics wanted us to believe that all these things were just imposed upon us. We were being force-fed options we really didn’t even need or want. “Choice” in this worldview is just a fiction; a front for the nefarious ends of our corporate overlords.

Florman demolished this reasoning throughout his books. “However much we deplore the growth of our automobile culture, clearly it has been created by people making choices, not by a runaway technology,” he argued.[73] Consumer demand and choice is not some fiction fabricated and forced upon us, as the antitechnologists suggest. We make decisions. “Those who would blame all of life’s problems on an amorphous technology, inevitably reject the concept of individual responsibility,” Florman retorted. “This is not humanism. It is a perversion of the humanistic impulse.”[74]

A modern tweak on the conspicuous consumption and false consciousness arguments is found in the work of leading tech critics like Evgeny Morozov, who pens attention-grabbing screeds decrying what he regards as “the folly of technological solutionism.” Morozov bluntly states that “our enemy is the romantic and revolutionary problem solver who resides within” of us, but most specifically within the engineers and technologists.[75]

But would the world really be better place it tinkerers didn’t try to scratch that itch?[76] In 2021, the Wall Street Journal profiled JoeBen Bevirt, an engineer and serial entrepreneur who has been working to bring flying cars from sci-fi to reality. Channeling Florman’s defense of the existential pleasures associated with engineering, Bevirt spoke passionately about the way innovators can help “move our species forward” through their constant tinkering to find solutions to hard problems. “That’s kind of the ethos of who we are,” he said. “We see problems, we’re engineers, we work to try to fix them.”[77]

When tech critics like Morozov decry “solutionism,” they are essentially saying that innovators like Bevirt need to just shut up and sit down. Don’t try to improve the world through tinkering; just settle for the status quo, the critics basically state. That’s the kiss of death for human progress, however, because it is only through incessant experimentation with the new and different approaches to hard problems that we can advance human well-being. “Solutionism” isn’t about just creating some shiny new toy; it’s about expanding the universe of potentially life-enriching and life-saving technologies available to humanity.

Conclusion

This review of Samuel Florman’s work may seem comprehensive, but it only scratches the surface of his wide-ranging writing. Florman was troubled that engineering lacked support or at least understanding. Perhaps that was because, he reasoned, that “[t]here is no single truth that embodies the practice of engineering, no patron saint, no motto or simple credo. There is no unique methodology that has been distilled from millenia of technological effort.”  Or, more simply, it may also be the case that the profession lacked articulate defenders. “The engineer may merely be waiting for his Shakespeare,” he suggested.[78]

Through his life’s work, however, Samuel Florman became that Shakespeare; the great bard of engineering and passionate defender of technological innovation and rational optimism more generally. In looking for a quote or two to close out my latest book, I ended with this one from Florman:

“By turning our backs on technological change, we would be expressing our satisfaction with current world levels of hunger, disease, and privation. Further, we must press ahead in the name of the human adventure. Without experimentation and change our existence would be a dull business.”[79]

Let us resolve to make sure that Florman’s greatest fear does not come to pass. Let us resolve to make sure that the great human adventure never ends. And let us resolve to counter the antitechnologists and their fundamentally anti-humanist worldview, which would most assuredly make our existence the “dull business” that Florman dreaded.

We can do better when we put our minds and hands to work innovating in an attempt to build a better future for humanity. Samuel Florman, the great prophet of progress, showed us the way forward.

 

Additional Reading from Adam Thierer:

 

Endnotes:

[1]    Matt Ridley, The Rational Optimist: How Prosperity Evolves (New York: Harper Collins, 2010).

[2]    Adam Thierer, “Defending Innovation Against Attacks from All Sides,” Discourse, November 9, 2021, https://www.discoursemagazine.com/ideas/2021/11/09/defending-innovation-against-attacks-from-all-sides.

[3]    Samuel C. Forman, The Civilized Engineer (New York: St. Martin’s Griffin, 1987), p. 26.

[4]    Samuel C. Florman, The Existential Pleasures of Engineering (New York, St. Martins Griffin, 2nd Edition, 1994), p. 53-4.

[5]    Existential Pleasures of Engineering, p. 53-4.

[6]    Samuel C. Florman, Blaming Technology: The Irrational Search for Scapegoats (New York: St. Martin’s Press, 1981), p. 186.

[7]    Existential Pleasures of Engineering, p. 76.

[8]    Existential Pleasures of Engineering, p. 77.

[9]    The Civilized Engineer, p. 38.

[10]   Thomas Sowell, The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy (New York: Basic Books, 1995).

[11]   Existential Pleasures of Engineering, p. 72.

[12]   Existential Pleasures of Engineering, p. 76.

[13]   The Civilized Engineer, p. 35.

[14]   Existential Pleasures of Engineering, p. 102.

[15]   Blaming Technology, p. 162.

[16]   Existential Pleasures of Engineering, p. 55.

[17]   Blaming Technology, p. 70.

[18]   Existential Pleasures of Engineering, p. 77.

[19]   Existential Pleasures of Engineering, p. 60.

[20]   Adam Thierer, “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle,” Minnesota Journal of Law, Science & Technology 14, no. 1 (2013), p. 312–50, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2012494.

[21]   Existential Pleasures of Engineering, p. 62.

[22]   Blaming Technology, p. 9.

[23]   Hans Rosling, Factfulness: Ten Reasons We’re Wrong about the World—and Why Things Are Better Than You Think (New York: Flatiron Books, 2018).

[24]   Steven Pinker, Enlightenment Now: The Case for Reason, Science, Humanism, and Progress (New York: Viking, 2018).

[25]   Gregg Easterbrook, It’s Better than It Looks: Reasons for Optimism in an Age of Fear (New York: Public Affairs, 2018); Michael A. Cohen & Micah Zenko, Clear and Present Safety: The World Has Never Been Better and Why That Matters to Americans (New Haven, CT: Yale University Press, 2019).

[26]   Existential Pleasures of Engineering, p. 54.

[27]   Existential Pleasures of Engineering, p. 72.

[28]   Existential Pleasures of Engineering, p. 72.

[29]   Existential Pleasures of Engineering, p. 55.

[30]   Existential Pleasures of Engineering, p. 117.

[31]   David Hume, “Of the Populousness of Ancient Nations,” (1777), https://oll.libertyfund.org/titles/hume-essays-moral-political-literary-lf-ed.

[32]   The Civilized Engineer, p. 20.

[33]   Existential Pleasures of Engineering, p. 6.

[34]   The Civilized Engineer, p. 20.

[35]   Existential Pleasures of Engineering, p. 115.

[36]   The Civilized Engineer, p. 20.

[37]   Arthur Diamond, Openness to Creative Destruction: Sustaining Innovative Dynamism (Oxford: Oxford University Press, 2019).

[38]   Existential Pleasures of Engineering, p. 19.

[39]   Existential Pleasures of Engineering, p. 147.

[40]   Existential Pleasures of Engineering, p. 148.

[41]   The Civilized Engineer, p. 30.

[42]   Adam Thierer, “Muddling Through: How We Learn to Cope with Technological Change,” Medium, June 30, 2014, https://medium.com/tech-liberation/muddling-through-how-we-learn-to-cope-with-technological-change-6282d0d342a6.

[43]   Existential Pleasures of Engineering, p. 84.

[44]   The Civilized Engineer, p. 71.

[45]   The Civilized Engineer, p. 72.

[46]   The Civilized Engineer, p. 72.

[47]   Adam Thierer, “Failing Better: What We Learn by Confronting Risk and Uncertainty,” in Sherzod Abdukadirov (ed.), Nudge Theory in Action: Behavioral Design in Policy and Markets (Palgrave Macmillan, 2016): 65-94.

[48]   The Civilized Engineer, p. xi.

[49]   Existential Pleasures of Engineering, p. 85.

[50]   Adam Thierer, “Is the Public Served by the Public Interest Standard?” The Freeman, September 1, 1996,  https://fee.org/articles/is-the-public-served-by-the-public-interest-standard.

[51]   The Civilized Engineer, p. 84.

[52]   The Existential Pleasures of Engineering, p. 22.

[53]   Adam Thierer, “Are ‘Permissionless Innovation’ and ‘Responsible Innovation’ Compatible?” Technology Liberation Front, July 12, 2017, https://techliberation.com/2017/07/12/are-permissionless-innovation-and-responsible-innovation-compatible.

[54]   The Civilized Engineer, p. 79.

[55]   Blaming Technology, p. 106.

[56]   The Civilized Engineer, p. 158.

[57]   Blaming Technology, p. 41.

[58]   Blaming Technology, p. 40-1.

[59]   Adam Thierer, “Embracing a Culture of Permissionless Innovation,” Cato Online Forum, November 17, 2014, https://www.cato.org/publications/cato-online-forum/embracing-culture-permissionless-innovation; Christopher Koopman, “Creating an Environment for Permissionless Innovation,” Testimony before the US Congress Joint Economic Committee, May 22, 2018, https://www.mercatus.org/publications/creating-environment-permissionless-innovation.

[60]   The Civilized Engineer, p. 117.

[61]   Joel Mokyr, Lever of Riches: Technological Creativity and Economic Progress (New York: Oxford University Press, 1990).

[62]   Deirdre N. McCloskey, The Bourgeois Virtues: Ethics for an Age of Commerce (Chicago: The University of Chicago Press, 2006); Deirdre N. McCloskey, Bourgeois Dignity: Why Economics Can’t Explain the Modern World (Chicago: The University of Chicago Press. 2010).

[63]   Existential Pleasures of Engineering, p. 57.

[64]   Blaming Technology, p. 22.

[65]   The Existential Pleasures of Engineering, p. 58.

[66]   Blaming Technology, p. 10.

[67]   The Existential Pleasures of Engineering, p. 48, 53.

[68]   Existential Pleasures of Engineering, p. 70.

[69]   Existential Pleasures of Engineering, p. 49.

[70]   Existential Pleasures of Engineering, p. 16.

[71]   Existential Pleasures of Engineering, p. 61.

[72]   Existential Pleasures of Engineering, p. 61.

[73]   Existential Pleasures of Engineering, p. 60.

[74]   Blaming Technology, p. 104.

[75]   Evgeny Morozov, To Save Everything, Click Here: The Folly of Technological Solutionism (New York: Public Affairs, 2013).

[76]   Adam Thierer, “A Net Skeptic’s Conservative Manifesto,” Reason, April 27, 2013, https://reason.com/2013/04/27/a-net-skeptics-conservative-manifesto-2/.

[77]   Emily Bobrow, “JoeBen Bevirt Is Bringing Flying Taxis from Sci-Fi to Reality,” Wall Street Journal, July 9, 2021, https://www.wsj.com/articles/joeben-bevirt-is-bringing-flying-taxis-from-sci-fi-to-reality-11625848177.

[78]   Existential Pleasures of Engineering, p. 96.

[79]   Blaming Technology, p. 193.

]]> https://techliberation.com/2022/04/06/samuel-florman-the-continuing-battle-over-technological-progress/feed/ 4 76961 Podcast: What’s Wrong with Industrial Policy? https://techliberation.com/2022/02/18/podcast-whats-wrong-with-industrial-policy/ https://techliberation.com/2022/02/18/podcast-whats-wrong-with-industrial-policy/#comments Fri, 18 Feb 2022 15:54:29 +0000 https://techliberation.com/?p=76954

I recently joined Rep. Dan Crenshaw on his Hold These Truths podcast to discuss, “What’s Wrong with Industrial Policy.” We chatted for 25 minutes about a wide range of issues related to the the growing push for grandiose industrial policy schemes in the US, including the massive new 3,000-page, $350 billion “COMPETES Act” legislation that recently passed in the House and which will soon be conferenced with a Senate bill that already passed.

On the same day this podcast was released this week, I also had a new op-ed appear in  The Hill on “The Coming Industrial Policy Hangover.” In both that essay and the podcast with Rep. Crenshaw, I stress that, beyond all the other problems with these new industrial policy measures, no one is talking about the fiscal cost of it all. As I note:

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

Read my oped for more details and for a deeper dive of what’s wrong with the bills, see my earlier essay here on “Thoughts on the America COMPETES Act: The Most Corporatist & Wasteful Industrial Policy Ever.”

Additional Reading from Adam Thierer on Industrial Policy:

]]> https://techliberation.com/2022/02/18/podcast-whats-wrong-with-industrial-policy/feed/ 1 76954 Thoughts on the America COMPETES Act: The Most Corporatist & Wasteful Industrial Policy Ever https://techliberation.com/2022/01/26/thoughts-on-the-competes-act-the-most-corporatist-wasteful-industrial-policy-ever/ https://techliberation.com/2022/01/26/thoughts-on-the-competes-act-the-most-corporatist-wasteful-industrial-policy-ever/#comments Wed, 26 Jan 2022 19:37:24 +0000 https://techliberation.com/?p=76942

On Tuesday, Nancy Pelosi, Speaker of the U.S. House of Representatives, posted the text of the “America Creating Opportunities for Manufacturing, Pre-Eminence in Technology and Economic Strength Act of 2022,” or “The America COMPETES Act.” As far as industrial policy measures go, the COMPETES Act is one of the most ambitious and expensive central planning efforts in American history. It represents the triumph of top-down, corporatist, techno-mercantilist thinking over a more sensible innovation policy rooted in bottom-up competition, entrepreneurialism, private investment, and free trade.

Unprecedented Planning & Spending

First, the ugly facts: The full text of the COMPETES Act weighs in at a staggering 2,912 pages. A section-by-section “summary” of the measure takes up 109 pages alone. Even the shorter “fact sheet” for the bill is 20 pages long. It is impossible to believe that anyone in Congress has read every provision of this bill. It will be another case of having “to pass the bill so you can find out what’s in it,” as Speaker Pelosi once famously said about another mega-measure.

Of course, a mega bill presents major opportunities for lawmakers to sneak in endless gobs of pork and unrelated policy measures they can’t find any other way to get through Congress. The Senate already passed a similar 2,600-page companion measure last summer, “The U.S. Innovation and Competition Act.” Lawmakers loaded up that measure with so much pork and favors for special interests that Sen. John N. Kennedy (R-La.) labelled the effort an “orgy of spending porn.” Like that effort, the new COMPETES Act includes $52 billion to boost domestic semiconductor production as well as $45 billion in grants and loans to address supply chain issues.

But there are billions allocated for other initiatives, as well as countless provisions addressing other technologies and sectors. The list is seemingly endless and includes: 5G mobile networks, biometrics, quantum information science, “the development of safe and trustworthy artificial intelligence and data science,” cybersecurity literacy, drone security, microelectronics, electronic waste, genomics, isotope development, and the Large Hadron Collider and high intensity lasers, among many other things. The measure also proposes a broad array of Green New Deal-esque efforts focused on things like: biometrology, climate and Earth modeling, deforestation and overfishing / “driftnet” fishing matters, marine mammal research, solar energy, bioenergy, the creation of a National Engineering Biology Research and Development Initiative and a Regional Clean Energy Innovation Program at the Department of Energy, clean water programs, a national clean energy incubator program, and helium conservation, again among many other things. There are even provisions addressing the trading of shark fins and almost 70 pages of provisions on coral reef conservation.

A Sweeping Macroeconomic Planning Exercise

There are more sweeping macroeconomic provisions and mandates in the bill. For example, the COMPETES Act would create a new “national supply chain database,” as well as a Supply Chain Resiliency and Crisis Response Office in the Department of Commerce, while also requiring the Director of White House Office of Science & Technology Policy to develop and submit to Congress a 4-year comprehensive national S&T strategy. The measure also includes trade adjustment assistance for workers, firms, and farmers and even provisions dealing with currency undervaluation. There are also many provisions addressing drug manufacturing and medical supply chain issues. There are even proposed expansions of federal antitrust power. (Apparently, once America’s grandiose industrial policies magically create global powerhouses in every sector, we’ll need expanding antitrust action to tear them all down and start all over again! Meanwhile, perhaps the greatest irony of the new industrial policy efforts is that, while lawmakers are falling all over themselves to shower corporate America with hundreds of billions of taxpayer dollars, policymakers are simultaneously on a regulatory and antitrust jihad against many successful tech companies with bills that would break them up or destroy their business models.)

Perhaps most radically, the measure includes a 25-page section proposing a sweeping new “National Critical Capabilities Review” process to oversee outbound investments. Covington lawyers noted that, if such a regulatory regime is enacted, “the United States would become the first major Western advanced economy to adopt a broad-gauged outbound investment screening process, raising the prospect of a new era in national security-based reviews and restrictions of international investment flows.”

Finally, the COMPETES Act includes a huge assortment of other national security and foreign policy-related provisions, most of which focus on countering China in some fashion. “There’s a lot of Cold War-style influence mongering happening here,” says Reason’s Elizabeth Nolan Brown, including programs that sound like they could have been concocted by the CIA, such as the bill’s “Countering China’s Educational and Cultural Diplomacy in Latin America” initiative. But there is also a lot of language here addressing other regions or countries, including: Oceania, Africa, the Arctic, the Middle East, Iran, Hong Kong, Taiwan, and others.

The relationship of most of these provisions to U.S. industrial competitiveness is tenuous to say the least. Nonetheless, those provisions take up a huge amount of space in this nearly 3,000-page industrial policy measure and may end up complicating its passage.

A Chicken in Every Pot

The inclusion of “Regional Technology and Innovation Hubs” in the bill deserves special attention. The Act proposes $7 billion over four years to fund 10 different innovation hubs and it includes many provisions about how and where money will be spent. It’s hard to see how spreading $7 billion across 10 hubs is actually going to result in much once every special interest gets their cut of the action, but proposals like these are all the rage these days. It’s the equivalent of policymakers promising a high-tech chicken in every pot, or a Silicon Valley in every state.

In a two-part series for Discourse, I documented the problems associated with the many previous government efforts to create innovation hubs, tech clusters, or science parks. The government’s  track record in this regard is long and lamentable. Instead of following a time-tested approach getting the broad innovation policy environment right through a “generalized” approach to economic growth and development, most policymakers took unwise shortcuts and tried using “targeted” development schemes that were incredibly risky and ended up squandering a huge amount of taxpayer resources.

But all those failed past efforts probably won’t stop this high-tech pork barrel effort from rolling forward in some fashion. The proposed new regional hub effort comes on top of an announcement last July by the Commerce Department that the agency plans to allocate $1 billion in pandemic recovery funds to create or expand “regional industry clusters” as part of the administration’s new “Build Back Better Regional Challenge.” The agency’s list of possible winning funding ideas includes an “artificial intelligence corridor” and a “climate-friendly electric vehicle cluster.” And there are many other federal and state programs throwing money at the idea of hub or “cluster” formation, or even just highly cronyist efforts to attract a single big tech firm. (Anyone remember the Foxconn fiasco in Wisconsin?)

As Matt Mitchell and I have noted, this growing trend represents the collision of federal industrial policy and long-standing state-based economic development efforts. Regardless of how well-intentioned they may be, it is highly unlikely these new tech pork barrel efforts will produce better results than the long string of earlier federal and state failures.

Secondary Effects & Unforeseeable Costs

A bill this big presents many other big opportunities for corporations and other special interests. It’s no wonder that many companies, trade associations, and other special interests are lining up to support this effort. In a recent study co-authored with Connor Haaland (“Does the US Need a More Targeted Industrial Policy for AI & High-Tech”), we outlined “the way rent-seeking and cronyism often become chronic problems for highly targeted, big-budget industrial policy efforts.” Those problems will grow exponentially if the COMPETES Act passes. Everyone expects a cut of the action when Washington starts showering sectors with money.

But there’s a bigger problem associated with the everything-and-the-kitchen-sink approach to such a massive industrial policy bill.  All the ambiguities associated with a monster measure like this means that agency bureaucrats will be left to fill in all the details for many years to come. It is folly of the highest order to believe that all these agencies will work together in a tightly coordinated and consistent way to advance industrial policy efforts or address “strategic objectives.” Anyone currently following the fight between the FAA and FCC over the rollout of 5G wireless networks will know what I am talking about. Moreover, delegating broad authority and big money to all these agencies just further reinforces the rent-seeking instincts of special interests, who will rush to their respective regulatory masters with hat in hand. This presents agencies with an added policy lever to blackmail companies into doing what they want without any new regulations even being issued.

And then there is the final consideration: where will all the money come from for this grand exercise in technocratic central planning? The Senate bill costs an estimated $250 billion. To be clear, that’s A QUARTER TRILLION DOLLARS. We’re talking big money, and chances are that the final price tag for the House’s COMPETES Act will be even higher. Does the money to fund all this profligate spending just fall like manna from industrial policy heaven? No, it will come out the pockets of the American taxpayer and American companies (who will just pass the bill along to consumers). This will have dynamic effects on growth and innovation that are almost never discussed in industrial policy debates. Here’s how Connor Haaland and I put it in our big study:

“First, a dollar spent pursuing one objective is a dollar that could have been invested differently, and potential better. Second, the very act of imposing taxes to cover these state gambits results in costs and distortions that must be accounted for. Some of these costs are deadweight losses associated with taxes and tax collection more generally. But this points to a third lesson: The true potential costs associated with industrial policy programs also need to account for the negative secondary effects of rent-seeking, bureaucracy, and the many other downsides of the political system, included cost overruns and corruption.”

As the old saying goes: There is no free lunch.

Conclusion: There Is a Better Way

Some advocates of the COMPETES Act label it a “competitiveness bill” or an “innovation initiative.” It takes a great deal of hubris to pretend that that the economy is just a giant machine to be manipulated and that policymakers can easily “dial in” the desired innovation results through massive bills and expanded bureaucracy.

Lawmakers and bureaucrats are not going to allocate capital more efficiently than private innovators and investors. Nor are they going to be able to “shore up supply chains” or create tech hubs in every city just by sprinkling a little magical industrial policy pixie dust thinly across the entire nation.

We should not try to compete with China by becoming China. Nor do we need to. Markets and supply chains recover from setbacks faster than governments can. This week, the White House reiterated its support for industrial policy efforts to strengthen supply chains and extend subsidies to the semiconductors industry. But, assuming the COMPETES Act passes, it’ll take years to get all the planning and spending going. When government spins those proverbial dials, it does so very slowly and extremely inefficiently. Meanwhile, the same day the White House was making these announcements, it was also touting that $80 billion in private investment has been announced by the US semiconductor industry recently. Just last week, Intel announced it plans to invest at least $20 billion in two new chip-making facilities in Ohio. Scott Lincicome and Ilana Blumsack have documented the many other private initiatives underway by the semiconductor industry to expand domestic manufacturing capacity, as well as efforts by foreign firms like Samsung to invest here to take advantage of our skilled workforce and vibrant capital market. This is all happening despite the fact that Congress is still debating an industrial policy measure that may end up being too bloated to even achieve successful passage this session.

Does government have any role to play? It certainly does. Most current industrial policy proposals fail to understand that the most important thing that policymakers can do is to clean up decades of earlier failed industrial policy efforts. Industrial policies in fields like energy, aviation, space, communications and other sectors skewed markets in unnatural and inefficient ways by favoring specific technologies and companies over others. This is because industrial policy all too often devolves into the business of picking winners and losers. This is not always done in a formal way or even with clear intent. Rather, when government is throwing around billions and engaging in casino economics by placing big bets, a lucky few will win at the expense of others.

Of course, not all government support is as wasteful or corporatist in character. “Basic” R&D efforts are certainly more defensible than most “applied” or “targeted” efforts. “When government is supporting basic R&D,” Connor Haaland and I have noted, “the chances of wasting scarce resources on risky investments can be minimized to some degree, at least as compared with highly targeted applied R&D investments in unproven technologies and firms.”

And then there are all of the education and training efforts governments can undertake. If lawmakers were smart, they would have just limited their efforts to the sort of things found in Titles III, V, and VI of the COMPETES Act, which relates to boosting STEM education, high-tech workforce training, improving National Science Foundation research efforts, and funding various other federal science agencies and labs, that conduct more basic research. And more flexible immigration policies are also essential.

Meanwhile, government defense spending isn’t going to dry up anytime soon and it continues to represent an indirect form of industrial policy given the trillions of dollars that are spread around through the so-called “military-industrial complex.” That certainly doesn’t mean America should be greatly expanding its already bloated defense budgets in the name of expanding industrial policy. Yet, for better or worse, government is always going to be spending a lot of money on defense priorities and it gives it a chance to address whatever “strategic” needs it has.

But the current industrial policy behemoth advancing in Congress represents a misguided effort at domestic retrenchment and a collapse into a lamentable sort of techno-mercantilism thinking that happens every quarter century or so. In my paper with Haaland as well as a separate essay, I have documented just how misguided the “Japan panic” of the 1980s and 90s was. One policymaker and pundit after another lined up to breathlessly proclaim the end of America if we failed to adopt a grandiose industrial policy to counter Japan. Of course, that industrial policy approach ended up being such a disaster that even the Japanese government itself declared in a 2000 report that “the Japanese model was not the source of Japanese competitiveness but the cause of our failure.”

Moreover, it is worth noting what happened with the Internet and digital technology in the U.S. versus the rest of the world in the 1990s and beyond. America essentially put a policy firewall between the emerging digital technology sector and the old industrial policy regime we had for analog sectors and technologies, like broadcasting and wireline telephony. And thank God we did! America’s digital technology sector thrived, and U.S.-headquartered tech companies became household names across the globe. Meanwhile, the Europeans have spent 20 years crafting one misguided industrial policy scheme after another to equal America’s accomplishments. Despite highly targeted and expensive efforts to foster a domestic digital tech base, the EU has instead generated a string of industrial policy failures that Haaland and I documented in detail here.

Corporatism, cronyism, and profligate pork-barrel spending were not the sources of America’s competitive advantage in digital technology, and top-down planning did not make our digital technology companies global powerhouses.  Instead, we got our innovation culture right for digital technology. First and foremost, our the default regulatory policy for the digital economy was permissionless innovation. No one had to ask anyone for the right to develop all those new digital technologies and online platforms. The Clinton Administration’s 1997 “Framework for Global Electronic Commerce” announced that “governments should encourage industry self-regulation and private sector leadership where possible” and “avoid undue restrictions on electronic commerce.” Second, investors saw that positive policy ecosystem developing and moved quickly to shower entrepreneurs in this sector with unprecedented private venture capital investment. Third, education and career opportunities in these sectors expanded accordingly. Real-time “learning by doing” took place as millions of people learned new digital skillsets on the fly. Kids learned how to code before anyone could even teach them how to type. Most importantly, talented immigrants and foreign investors then came here to take advantage of all this, allowing America to steal away the best and brightest from the rest of the world.

This constitutes one of the greatest capitalist success stories in human history, and it all happened without targeted, technocratic, top-down industrial policy planning. This is the more principled and less costly vision for innovation policy America needs today to counter China and the rest of the world. There is absolutely no reason that we can’t apply this same vision to aviation, space, semiconductors, energy, nanotech, AI, and many other sectors of importance.

Additional Reading from Adam Thierer on Industrial Policy:

Other critical essays on industrial policy:

]]> https://techliberation.com/2022/01/26/thoughts-on-the-competes-act-the-most-corporatist-wasteful-industrial-policy-ever/feed/ 2 76942 The Case for Innovation, Progress & Abundance: Some Readings https://techliberation.com/2022/01/25/the-case-for-innovation-progress-abundance-some-readings/ https://techliberation.com/2022/01/25/the-case-for-innovation-progress-abundance-some-readings/#comments Tue, 25 Jan 2022 20:27:31 +0000 https://techliberation.com/?p=76937

This is a compendium of readings on “ progress studies ,” or essays and books which generally make the case for technological innovation, dynamism, economic growth, and abundance. I will update this list as additional material of relevance is brought to my attention.   

[Last update: 10/11/22]

Recent Essays

Books

]]> https://techliberation.com/2022/01/25/the-case-for-innovation-progress-abundance-some-readings/feed/ 3 76937 The Most Important Technology Policy Book of the Past Quarter Century https://techliberation.com/2022/01/20/the-most-important-technology-policy-book-of-the-past-quarter-century/ https://techliberation.com/2022/01/20/the-most-important-technology-policy-book-of-the-past-quarter-century/#comments Thu, 20 Jan 2022 14:17:10 +0000 https://techliberation.com/?p=76935

Discourse magazine has just published my review of Where Is My Flying Car?, by J. Storrs Hall, which I argue is the most important book on technology policy written in the past quarter century. Hall perfectly defines what is at stake if we fail to embrace a pro-progress policy vision going forward. Hall documents how a “Jetsons” future was within our grasp, but it was stolen away from us. What held back progress in key sectors like transportation, nanotech & energy was anti-technological thinking and the overregulation that accompanies it. “[T]he Great Stagnation was really the Great Strangulation,” he argues. The culprits: negative cultural attitudes toward innovation, incumbent companies or academics looking to protect their turf, litigation-happy trial lawyers, and a raft of risk-averse laws and regulations.

Hall coins the term “the Machiavelli Effect” to identify why many people simultaneously fear the new and different, and they also want to protect whatever status quo they benefit from (or at least feel comfortable with). He builds on this passage from Niccolò Machiavelli’s classic 1532 study of political power, “The Prince”:

[I]t ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, then to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly, in such wise that the prince is endangered along with them.

Hall notes that the Machiavelli Effect “has nothing to do with any conspiracy.” Rather, it comes down to human nature: Many people simultaneously fear the new and different, and they also want to protect whatever status quo they benefit from (or at least feel comfortable with). Isaac Asimov identified the same problem in a 1974 lecture when he noted how there had been “bitter, exaggerated, last-stitch resistance . . . to every significant technological change that had taken place on earth.” [On this same point, also see Innovation and Its Enemies: Why People Resist New Technologies, by Calestous Juma. It’s the best history on the topic.]

Hall identifies how the Machiavelli Effect held back nuclear, nanotech, and aviation technologies. “Over the long run, unchecked regulation destroys the learning curve, prevents innovation, protects and preserves inefficiency, and makes progress run backward.” The problem is the Precautionary Principle, which undermines the learning curve is by setting policy defaults to no trial and error as opposed to free to experiment. There can be no reward without some risk! Hall quotes Wilbur Wright on this, who once noted that, “If you are looking for perfect safety, you would do well to sit on a fence and watch the birds.”

Over-regulation of those sectors also resulted in massive misallocation of talent, “taking more than a million of the country’s most talented and motivated people and putting them to work making arguments and filing briefs instead of inventing, developing, and manufacturing.” Hall is equally critical of government R&D efforts. “One of the great tragedies of the latter 20th century, and clearly one of the causes of the Great Stagnation,” he argues, “was the increasing centralization and bureaucratization of science and research funding.”

Hall’s book builds on Jason Crawford’s insight that, “We need a new philosophy of progress,” that is rooted in optimism about the future and support for a culture of trial-and-error experimentation. Hall’s book is a major contribution to that effort. Hall makes a profoundly moral case for innovation. “The zero-sum society is a recipe for evil,” because it leaves us with a “static level of existence” that denies us the ability to improve the human condition. Indeed, Hall’s book is the most full-throated defense of innovation by a trained scientist or engineer since Samuel Florman’s 1976 “Existential Pleasures of Engineering.” Both are celebrations of the potential for humanity to build more and better tools to improve the world.

Hall’s book should also be read alongside books from Virginia Postrel (“The Future and Its Enemies”), Steven Pinker (“Enlightenment Now”), Matt Ridley (“How Innovation Works”) and Deirdre McCloskey’s three-volume trilogy about the history of modern economic growth. These scholars argue that there is a symbiotic relationship between innovation, economic growth, pluralism and human betterment, and that to deny people the ability to improve their lot in life is fundamentally anti-human.

Image

I just cannot recommend Hall’s Where Is My Flying Car? highly enough. It’s a masterpiece. And bravo to Stripe Press for publishing a beautiful hardbound edition. It is a stunning book both to behold and read. Order it now, and jump over to Discourse to read my entire review of it.

 

]]> https://techliberation.com/2022/01/20/the-most-important-technology-policy-book-of-the-past-quarter-century/feed/ 2 76935 New Mercatus Center Report on Industrial Policy https://techliberation.com/2021/11/17/new-mercatus-center-report-on-industrial-policy/ https://techliberation.com/2021/11/17/new-mercatus-center-report-on-industrial-policy/#comments Wed, 17 Nov 2021 21:21:29 +0000 https://techliberation.com/?p=76921

The Mercatus Center has just released a new special study that I co-authored with Connor Haaland entitled, “Does the United States Need a More Targeted Industrial Policy for High Tech?” With industrial policy reemerging as a major issue — and with Congress still debating a $250 billion, 2,400-page industrial policy bill — our report does a deep dive into the history various industrial policy efforts both here and abroad over the past half century. Our 64-page survey of the historical record leads us to conclude that, “targeted industrial policy programs cannot magically bring about innovation or economic growth, and government efforts to plan economies from the top down have never had an encouraging track record.”

We zero in on the distinction between general versus targeted economic development efforts and argue that:

whether we are referring to federal, state, or local planning efforts—the more highly tar­geted development efforts typically involve many tradeoffs that are often not taken into consider­ation by industrial policy advocates. Downsides include government steering of public resources into unproductive endeavors, as well as more serious problems, such as cronyism and even corruption.

We also stress the need to more tightly define the term “industrial policy” to ensure rational evaluation is even possible. We argue that, “industrial policy has intentionality and directionality, which distinguishes it from science policy, innovation policy, and economic policy more generally.” We like the focus definition used by economist Nathaniel Lane, who defines industrial policy as “intentional political action meant to shift the industrial structure of an economy.”

Our report examines the so-called “Japan model” of industrial policy that was all the rage in intellectual circles a generation ago and then compares it to the Chinese and European industrial policy efforts of today, which many pundits claim that the US needs to mimic. We find problems with those models and argue that:

America’s goal should not be to “imitate China” or “copy its playbook” when it comes to targeted industrial policy and technological governance of AI and other high-tech sectors. Europe’s approach, although not as heavy-handed, is also not a good model. Not only would the Chinese and European approaches potentially undermine the permissionless innovation ethos that made America’s tech companies become global powerhouses, but expanded industrial policy efforts would entail massive state bets on risky ventures using taxpayer resources.

We discuss the public choice dynamics surrounding many industrial development efforts and note that, “what is often described as “industrial policy” is in reality nothing more than industrial politics.” We highlight how many of the largest industrial policy programs have been prone to highly inefficient contracting procedures and massive cost overruns. Sometimes outright corruption even becomes a problem with some of the largest programs. But that’s not the only cost. Sometimes, in their effort to promote specific industrial outputs or outcomes, government undermines the very innovation they hope to spur.

When governments repress the entrepreneurial spirit of their most innovative creators and companies, this is bound to have negative ramifications for long-term competitiveness and economic growth. Heavy-handed industrial policy schemes can contribute to this sort of repression as the state gains more levers of control over private companies.

We note how that has certainly been the case in the European Union, where “countries have adopted a highly precautionary regulatory model for new digital sectors that shuns risk-taking and focuses on maximizing other values at the expense of disruptive change. This approach has resulted in fewer national champions, and it has cost Europe in terms of global competitive advantage,” we note. We also highlight the long string of failed European industrial policy programs.

Ours is not a doctrinaire analysis; we take a pragmatic approach to the evaluation of industrial policy programs and proposals. Some of them may succeed based simply on the reality that “if government officials roll the proverbial industrial policy dice enough times, some bets are bound to pay off, at least indirectly.” But any serious analysis of these efforts, we argue, must fully weigh the trade-offs associated with the potential tax and compliance burdens associated with funding them to begin with.

But we admit that, “industrial policy will always be with us to some extent, given the sheer size of government and the many existing programs already devoted to economic development or high-tech initiatives.” Toward that end, we wrap up the paper with a variety of high-level recommendations about industrial policy. We highlight how:

The priority should be generalized economic development over targeted development efforts. The most important thing that policymakers can do to boost economic opportunities is to create a legal and regulatory environment that is conducive to entrepreneurship, investment, innovation, and free trade.  [. . . ] government should focus on setting the table for entrepreneurial activity instead of trying to determine everything on the plate. To put this differently, policymakers need to avoid the “fun stuff” and focus on “boring” issues that often get neglected.

We apply these insights to the ongoing debate over regional economic development and the specific effort currently underway at the federal level to encourage “regional innovation hubs,” as federal and state lawmakers look to create “the next Silicon Valley” elsewhere.

In terms of our nation’s overall investment in R&D, we note that “[t]he United States has the most vibrant venture capital (VC) market in the world, and this market helps support risky ventures without gambling with taxpayer dollars.” While some bemoan the fact that private enterprise provides the bulk of R&D expenditures in the US – and that amount is increasing relative to governmental sources – this is actually something that should be celebrated. The strength of private-funded R&D helps set the US apart and make investment markets nimbler and more responsive to real-world needs. Moreover, global unicorn growth in the US continues at a healthy clip. From 2010 to mid-2021, the US created 53 percent of global unicorns, compared with 20 percent for China. These facts are often overlook in industrial policy debates.

While our paper is comprehensive, admittedly, there are some things we leave out of the analysis or do not spend as much time discussing. For example, there is a never-ending debate about the relationship between national security and industrial policy that raises many hard questions. A nation needs military hardware to defend itself, and almost every program to provide weapons and military equipment in the US involve private contracting to get them. These are the biggest industrial policy programs at all, but we don’t spend a lot of time focus on them in our paper because that would have taken us far afield.

We have a short section on these issues that notes how “defense-related programs have also been prone to highly inefficient contracting procedures and massive cost overruns.” Many of these programs remain vital, however, and must find a way to make them more efficient and cost-effective. But there are still other issues related to national security and industrial policy that raise hard questions, including: export or import controls, trade restrictions, and more. These continue to be challenging issues and I personally hope to revisit some of them in upcoming essays.

With Congress still trying to finalize its mega industrial policy bill, our paper is relevant to the short-term debate over these issues. But our hope is that this paper offers a big-picture, long-term framework for thinking through the challenges associated with industrial policy issues both here and abroad.

Here is the outline of the paper and, again, you can find it at this link. (The report can also be found on SSRN & Research Gate).

  1. Introduction: Definitional Challenges 5
  2. Calls for Expanding Industrial Policy to Boost High-Tech Innovation 8
  3. Some (Quickly Forgotten) Recent History 11
  4. The Romantic View of Industrial Policy vs. Reality 15
  5. The Challenge of Creating “National Champions”: Europe’s Failures 20
  6. Adverse Effects of State-Led Promotion: The China Model Examined 23
  7. Where Does Real Competitive Advantage Come From? 27
  8. Industrial Policy Did Not Give Us the Internet and the iPhone 33
  9. Evaluating Other Industrial Policy Efforts 39
  10. Using Competitions and Prizes to Encourage Innovation More Efficiently 46
  11. Conclusion: Generality Is Better Than Targeting

Additional Reading:

]]> https://techliberation.com/2021/11/17/new-mercatus-center-report-on-industrial-policy/feed/ 1 76921 Can Government Reproduce Silicon Valley Everywhere? https://techliberation.com/2021/09/12/can-government-reproduce-silicon-valley-everywhere/ https://techliberation.com/2021/09/12/can-government-reproduce-silicon-valley-everywhere/#comments Sun, 12 Sep 2021 17:36:07 +0000 https://techliberation.com/?p=76903

Wishful thinking is a dangerous drug. Some pundits and policymakers believe that, if your intentions are pure and you have the “right” people in power, all government needs to do is sprinkle a little pixie dust (in the form of billions of taxpayer dollars) and magical things will happen.

Of course, reality has a funny way of throwing a wrench into the best-laid plans. Which brings me to the question I raise in a new 2-part series for  Discourse magazine: Can governments replicate Silicon Valley everywhere?

In the first installment, I explore the track record of federal and state attempts to build tech clusters, science parks & “regional innovation hubs” using state subsidies and industrial policy. This is highly relevant today because of the huge new industrial policy push at the federal level is building on top of growing state and local efforts to create tech hubs, science parks, or various other types of industrial “clusters.

At the federal level, this summer, the Senate passed a 2,300-page industrial policy bill, the “United States Innovation and Competition Act of 2021,” that included almost $10 billion over four years for a Department of Commerce-led effort to fund 20 new regional technology hubs, “in a manner that ensures geographic diversity and representation from communities of differing populations.” A similar proposal that is moving in the House, the “Regional Innovation Act of 2021,” proposes almost $7 billion over five years for 10 regional tech hubs. Meanwhile, the Biden administration also is pitching ideas for new high-tech hubs. In late July, the Commerce Department’s Economic Development Administration announced plans to allocate $1 billion in pandemic recovery funds to create or expand “regional industry clusters” as part of the administration’s new Build Back Better Regional Challenge. Among the possible ideas the agency said might win funding are an “artificial intelligence corridor,” an “agriculture-technology cluster” in rural coal counties, a “blue economy cluster” in coastal regions, and a “climate-friendly electric vehicle cluster.”

In my essay, I note that the economic literature on these efforts has been fairly negative, to put it mildly. There is no precise recipe for growing tech clusters, as most economists and business analysts note.

“Despite several attempts, Silicon Valley has not been successfully copied elsewhere,” notes Mark Zachary Taylor, author of “The Politics of Innovation: Why Some Countries Are Better Than Others at Science and Technology.” Judge Glock, a senior policy adviser with the Cicero Institute, offers a more blistering assessment of such efforts: “Almost every American state has tried to fund the creation of biotech clusters, projects that almost inevitably end with weeds growing through the parking-lot pavement and a trail of corrupt bargains.”

I then highlight the key findings from several major studies of these efforts, all of which make it clear that, as cluster scholars by Aaron Chatterji, Edward Glaeser and William Kerr noted in 2014 after gathering all the research conducted on the topic: existing evidence “suggests that the regional foundation for growth-enabling innovation is complex and that we should be cautious of single policy solutions that claim to fit all needs.” Furthermore, “even if clusters of entrepreneurship are good for local growth, it is less clear that cities or states have the ability to generate those clusters.”

I also highlight research from my Mercatus Center colleagues on “The Economics of a Targeted Economic Development Subsidy” documenting costs of state-level planning & case study of Foxconn fiasco. They summarize the fairly miserable track record of state and local mini-industrial policy efforts. As they note, the extensive economic literature on this matter finds that “the net effect of targeted economic development subsidies is likely to be negative” because “the taxes funding the subsidies will discourage more economic activity than will be encouraged by the subsidies themselves.” Similarly, Harvard Business School economist Josh Lerner evaluated dozens of similar targeted development efforts from around the globe in his 2009 book Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do About It. He concluded that “for each effective government intervention, there have been dozens, even hundreds, of failures, where substantial public expenditures bore no fruit.”

In my essay, I also discuss the astonishing array of federal efforts to promote the geographic spread of high-tech sectors and jobs since 2000. Throughout Bush, Obama, Trump & Biden admins, there’s been a lot of spending, but not a lot of success. Just lots of new laws and bureaucracies:

In 2012, the Obama administration launched the multiagency Rural Jobs and Innovation Accelerator Challenge and Advanced Manufacturing Jobs and Innovation Accelerator Challenge. This occurred at roughly the same time President Obama was launching his Startup America initiative. He also signed the JOBS Act (Jump-start Our Business Startups) in 2012. All these efforts included various measures to support the spread of advanced manufacturing and high-tech startups across the U.S. But none of these efforts have borne much fruit so far.

In the second installment of this series, I explore better ways to encourage regional tech innovation and economic development without doubling down on failed programs of the past. Specifically, I explain why, when it comes to economic development efforts, policymakers would be wise to avoid the costly, ineffective “fun stuff” and refocus on time-tested “boring” strategies:

The boring approach to economic development seeks to promote an open innovation culture that is conducive to risk-taking, investment and growth without the need to extend targeted privileges to particular firms or industries. Such a culture comes down to a classic mix of simplified and equally applied taxes, streamlined permitting processes and sensible regulations, limits on frivolous lawsuits, and clear protection of contracts and property rights. As Matt Mitchell and I argued previously, policymakers need to resist the urge to go for broke with splashy policies and programs. They need to appreciate the benefits of generalized economic development policy (a.k.a. the boring approach) as opposed to far riskier targeted development efforts.

I also highlight recent research explaining how perhaps the simplest way to strengthen existing clusters, or give rise to new ones, is to make sure America’s immigration policies are hospitable to the best and brightest minds from across the globe.

And I note how, due to the problems associated with many other forms of government-sponsored R&D assistance, many scholars and policymakers are increasingly turning to the idea of government-sponsored competitions and prizes as a superior way to distribute R&D assistance.

With competitions, governments can set broad goals to help facilitate the search for important societal needs. The prizes then create a powerful incentive for innovators to pursue those goals, not only to win money, but also to gain recognition from peers and the public. Another alternative is just using lotteries to distribute R&D money instead of having agencies target grants. That at least avoids political shenanigans and paperwork delays, although it may not be a particularly effective approach.

There is also some good news is overlooked in today’s rush to make big industrial policy gambles: Venture capitalists and new startups are already spreading out naturally.

A 2021 study on “The State of the Startup Ecosystem” by Engine, a research and advocacy organization supporting startups, revealed that “as Series A funding grew over the last fifteen years, more of that growth has started to shift to areas located outside of the largest ecosystems.” Series A funding refers to the initial round of outside venture capitalist investment in startups. The report looked at Series A deals from 2003 to 2018 and found that “Series A rounds outside of the top five ecosystems grew nearly 900 percent, while the number of rounds outside of the top nine grew nearly tenfold.” Whereas Series A fundings outside of the top five ecosystems stood at 38% in 2003, they had jumped up to 43% in 2018. “The increase in deal location diversity over this period reflects an increasing spread in venture capital investment across the country and less centralization of investment in areas like Silicon Valley,” the report concluded.

Meanwhile, tech innovators and investors are increasingly engaging in innovation arbitrage as they move to cities and states across the nation that are more hospitable to entrepreneurial activities. Firms and investors are voting with their feet (and dollars) by flocking to areas where tech clusters can more naturally sprout because the general policy environment is sound.

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

Jump over to  Discourse to read both installments here and here.

Also, down below I list several other things I have written recently on industrial policy efforts more generally.

]]> https://techliberation.com/2021/09/12/can-government-reproduce-silicon-valley-everywhere/feed/ 1 76903 Keeping Uncle Sam out of the Industrial Policy Casino https://techliberation.com/2021/07/16/keeping-uncle-sam-out-of-the-industrial-policy-casino/ https://techliberation.com/2021/07/16/keeping-uncle-sam-out-of-the-industrial-policy-casino/#comments Fri, 16 Jul 2021 19:01:32 +0000 https://techliberation.com/?p=76898

Financial Help for Gamblers: How to Get Find ReliefIn my latest column for The Hill, I consider that dangers of government gambling our tax dollars on risky industrial policy programs. I begin by noting:

Roll the dice at a casino enough times, and you are bound to win a few games. But knowing the odds are not in your favor, how much are you willing to risk losing by continuing to gamble? This is the same issue governments confront when they gamble taxpayer dollars on industrial policy efforts, which can best be described as targeted and directed efforts to plan for specific future industrial outputs and outcomes. Throwing enough money at risky ventures might net a few wins, but at what cost? Could those resources have been better spent? And do bureaucrats really make better bets than private investors?

I continue on to note that, while the US is embarking on a major new industrial policy push, history does not provide us with a lot of hope regarding Uncle Sam’s betting record when he starts rolling those industrial policy dice. “How much tolerance should the public have for government industrial policy gambling?” I ask. I continue on:

Generally speaking, “basic” support (broad-based funding for universities and research labs) is wiser than “applied” (targeted subsidies for specific firms or sectors). With basic R&D funding, the chances of wasting resources on risky investments can be contained, at least as compared to highly targeted investments in unproven technologies and firms.

I also argue that “The riskiest bets on new technologies and sectors are better left to private investors,” and note how, “America’s venture capital industry remains the envy of the world because it continues to power world-beating advanced technology.” Accordingly, I conclude:

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

Read the whole thing here. And here’s a list of more of my recent writing on industrial policy:

]]> https://techliberation.com/2021/07/16/keeping-uncle-sam-out-of-the-industrial-policy-casino/feed/ 2 76898 Video: Lessons from the “Hall of Fallen Giants” https://techliberation.com/2021/03/17/video-lessons-from-the-hall-of-fallen-giants/ https://techliberation.com/2021/03/17/video-lessons-from-the-hall-of-fallen-giants/#comments Wed, 17 Mar 2021 13:47:10 +0000 https://techliberation.com/?p=76852

Here’s a new animated explainer video that I narrated for the Federalist Society’s Regulatory Transparency Project. The 3-minute video discusses how earlier “tech giants” rose and fell as technological innovation and new competition sent them off to what the New York Times once appropriately called “The Hall of Fallen Giants.” It’s a continuing testament to the power of “creative destruction” to upend and reorder markets, even as many pundits insist that there’s no possibility change can happen.

This is an important lesson for us to remember today, as I noted in the recent editorial for The Hill about why, “Open-ended antitrust is an innovation killer“:

Those who worry about today’s largest tech giants becoming supposedly unassailable monopolies should consider how similar fears were expressed not so long ago about other tech titans, many of which we laugh about today. Just 14 years ago, headlines proclaimed that “MySpace Is a Natural Monopoly,” and asked, “Will MySpace Ever Lose Its Monopoly?” We all know how that “monopoly” ceased to exist. At the same time, pundits insisted “Apple should pull the plug on the iPhone,” since “there is no likelihood that Apple can be successful in a business this competitive.” The smartphone market of that era was viewed as completely under the control of BlackBerry, Palm, Motorola and Nokia. A few years prior to that, critics lambasted the merger of AOL and TimeWarner as a new corporate “Big Brother” that would decimate digital diversity and online competition.

Accordingly, policymakers should be humble and recognize that, “it’s better to let rivalry and innovation emerge organically,” and only bring in the wrecking ball of heavy-handed antitrust regulation as a last resort, I argued. Technological change and entrepreneurialism has a way of upending and reordering markets when we least expect it. Just ask all those members of the Hall of Fallen Giants.

]]> https://techliberation.com/2021/03/17/video-lessons-from-the-hall-of-fallen-giants/feed/ 3 76852 Skeptical Takes on Expansive Industrial Policy Efforts https://techliberation.com/2021/03/15/skeptical-takes-on-expansive-industrial-policy-efforts/ https://techliberation.com/2021/03/15/skeptical-takes-on-expansive-industrial-policy-efforts/#comments Mon, 15 Mar 2021 17:09:11 +0000 https://techliberation.com/?p=76845

[Last updated 3/25/22]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Oren Cass asserts that markets cannot generally allocate resources efficiently by industry. Yet he provides no meaningful metrics to show this is the case, nor shows why his policies would deliver better outcomes. His two main claims about the benefits of a manufacturing sector — “stable employment” and “strong productivity growth” — are directly contradictory. A plethora of evidence suggests as countries’ get richer due to automation and technological improvements, they demand relatively more services, and so the industrial sector declines in employment terms.
Scott Lincicome, “ Manufactured Crisis: ‘Deindustrialization, Free Markets, and National Security,” Cato Policy Analysis No. 907, January 27, 2021.
This skepticism—mostly absent from Washington—is indeed warranted: analyses of the U.S. manufacturing sector and the relationship between trade and national security, as well as the United States’ long and checkered history of security‐​related protectionism, undermine the theoretical justifications for imposing protectionism and industrial policy in the name of national defense. Instead, open trade, freer markets, and global interdependence will in almost all cases produce better outcomes in terms of national security and, most importantly, preventing wars and other forms of armed conflict.
Matthew Lau, “Trudeau government’s ‘industrial policy’ creates all the wrong incentives,” Toronto Sun, March 16, 2021.
]]> https://techliberation.com/2021/03/15/skeptical-takes-on-expansive-industrial-policy-efforts/feed/ 4 76845 European Industrial Policy Follies https://techliberation.com/2021/02/15/european-industrial-policy-follies/ https://techliberation.com/2021/02/15/european-industrial-policy-follies/#comments Mon, 15 Feb 2021 16:17:36 +0000 https://techliberation.com/?p=76842

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.

]]> https://techliberation.com/2021/02/15/european-industrial-policy-follies/feed/ 2 76842 New Jurimetrics Article: “Soft Law in U.S. ICT Sectors: Four Case Studies” https://techliberation.com/2021/02/01/new-jurimetrics-article-soft-law-in-u-s-ict-sectors-four-case-studies/ https://techliberation.com/2021/02/01/new-jurimetrics-article-soft-law-in-u-s-ict-sectors-four-case-studies/#comments Mon, 01 Feb 2021 21:02:45 +0000 https://techliberation.com/?p=76836

After a slight delay, Jurimetrics has finally published my latest law review article, “Soft Law in U.S. ICT Sectors: Four Case Studies.” It is part of a major symposium that Arizona State University (ASU) Law School put together on “Governing Emerging Technologies Through Soft Law: Lessons For Artificial Intelligence” for the journal. I was 1 of 4 scholars invited to pen foundational essays for this symposium. Jurimetrics is a official publication of the American Bar Association’s Section of Science & Technology Law.

This report was a major undertaking that involved dozens of interviews, extensive historic research, several events and presentations, and then numerous revisions before the final product was released. The final PDF version of the journal article is attached.

Here is the abstract:

Traditional hard law tools and processes are struggling to keep up with the rapid pace of innovation in many emerging technologies sectors. As a result, policy­makers in the United States rely increasingly on less formal “soft law” governance mech­anisms to address concerns surrounding many newer technologies. This Article explores four case studies from different information technology areas where soft law mechanisms have already been utilized to address governance concerns. These four sectoral case stud­ies include domain name management, content oversight, privacy policy, and cyberse­curity matters. After considering the various soft law mechanisms used to address those issues, the Article concludes with some general thoughts about the effectiveness of those approaches and what lessons those case studies might hold for the use of soft law in other emerging technology sectors and contexts.

]]> https://techliberation.com/2021/02/01/new-jurimetrics-article-soft-law-in-u-s-ict-sectors-four-case-studies/feed/ 6 76836 The End of Permissionless Innovation? https://techliberation.com/2021/01/10/the-end-of-permissionless-innovation/ https://techliberation.com/2021/01/10/the-end-of-permissionless-innovation/#comments Sun, 10 Jan 2021 21:24:12 +0000 https://techliberation.com/?p=76823

Time magazine recently declared 2020 “The Worst Year Ever.” By historical standards that may be a bit of hyperbole. For America’s digital technology sector, however, that headline rings true. After a remarkable 25-year run that saw an explosion of innovation and the rapid ascent of a group of U.S. companies that became household names across the globe, politicians and pundits in 2020 declared the party over. “We now are on the cusp of a new era of tech policy, one in which the policy catches up with the technology,” says Darrell M. West of the Brookings Institution in a recent essay, “The End of Permissionless Innovation.” West cites the House Judiciary Antitrust Subcommittee’s October report on competition in digital markets—where it equates large tech firms with the “oil barons and railroad tycoons” of the Gilded Age—as the clearest sign that politicization of the internet and digital technology is accelerating. It is hardly the only indication that America is set to abandon permissionless innovation and revisit the era of heavy-handed regulation for information and communication technology (ICT) markets. Equally significant is the growing bipartisan crusade against Section 230, the provision of the 1996 Telecommunications Act that shields “interactive computer services” from liability for information posted or published on their systems by users. No single policy has been more important to the flourishing of online speech or commerce than Sec. 230 because, without it, online platforms would be overwhelmed by regulation and lawsuits. But now, long knives are coming out for the law, with plenty of politicians and academics calling for it to be gutted. Calls to reform or repeal Sec. 230 were once exclusively the province of left-leaning academics or policymakers, but this year it was conservatives in the White House, on Capitol Hill and at the Federal Communications Commission (FCC) who became the leading cheerleaders for scaling back or eliminating the law. President Trump railed against Sec. 230 repeatedly on Twitter, and most recently vetoed the annual National Defense Authorization Act in part because Congress did not include a repeal of the law in the measure. Meanwhile, conservative lawmakers in Congress such as Sens. Josh Hawley and Ted Cruz have used subpoenas, angry letters and heated hearings to hammer digital tech executives about their content moderation practices. Allegations of anti-conservative bias have motivated many of these efforts. Even Supreme Court Justice Clarence Thomas questioned the law in a recent opinion. Other proposed regulatory interventions include calls for new national privacy laws, an “Algorithmic Accountability Act” to regulate artificial intelligence technologies, and a growing variety of industrial policy measures that would open the door to widespread meddling with various tech sectors. Some officials in the Trump administration even pushed for a nationalized 5G communications network in the name of competing with China. This growing “techlash” signals a bipartisan “Back to the Future” moment, with the possibility of the U.S. reviving a regulatory playbook that many believed had been discarded in history’s dustbin. Although plenty of politicians and pundits are taking victory laps and giving each other high-fives over the impending end of the permissionless innovation era, it is worth considering what America will be losing if we once again apply old top-down, permission slip-oriented policies to the technology sector.

Permissionless Innovation: The Basics

As an engineering principle, permissionless innovation represents the general freedom to tinker and develop new ideas and products in a relatively unconstrained fashion. As I noted in a recent book on the topic, permissionless innovation can also describe a governance disposition or regulatory default toward entrepreneurial activities. In this sense, permissionless innovation refers to the idea that experimentation with new technologies and innovations should generally be permitted by default and that prior restraints on creative activities should be avoided except in those cases where clear and immediate harm is evident. There is an obvious relationship between the narrow and broad definitions of permissionless innovation. When governments lean toward permissionless innovation as a policy default, it is likely to encourage freewheeling experimentation more generally. But permissionless innovation can sometimes occur in the wild, even when public policy instead tends toward its antithesis—the precautionary principle. As I noted in my latest book, tinkerers and innovators sometimes behave evasively and act to make permissionless innovation a reality even when public policy discourages it through precautionary restraints. To be clear, permissionless innovation as a policy default has not meant anarchy. Quite the opposite, in fact. In the United States, over the past 25 years, no major federal agencies that regulate technology or laws that do so were eliminated. Indeed, most agencies grew bigger. But in spite of this, entrepreneurs during this period got more green lights than red ones, and innovation was treated as innocent until proven guilty. This is how and why social media and the sharing economy developed and prospered here and not in other countries, where layers of permission slips prevented such innovations from ever getting off the drawing board. The question now is, how will the shift to end permissionless innovation as a policy default in the U.S. affect innovative activity here more generally? Economic historians Deirdre McCloskey and Joel Mokyr teach us that societal and political attitudes toward growth, risk-taking and entrepreneurialism have a powerful connection with the competitive standing of nations and the possibility of long-term prosperity. If America’s innovation culture sours on the idea of permissionless-ness and moves toward a precautionary principle-based model, creative minds will find it harder to experiment with bold new ideas that could help enrich the nation and improve the well-being of the citizenry—which is exactly why America discarded its old top-down regulatory model in the first place.

Why America Junked the Old Model

Perhaps the easiest way to put some rough bookends on the beginning and end of America’s permissionless innovation era is to date it to the birth and impending death of Sec. 230 itself. The enactment in 1996 of the Telecommunications Act was important, not only because it included Sec. 230, but also because the law created a sort of policy firewall between the old and new worlds of ICT regulation. The old ICT regime was rooted in a complex maze of federal, state and local regulatory permission slips. If you wanted to do anything truly innovative in the old days, you typically needed to get some regulator’s blessing first—sometimes multiple blessings. The exception was the print sector, which enjoyed robust First Amendment protection from the time of the nation’s founding. Newspapers, magazines and book publishers were left largely free of prior restraints regarding what they published or how they innovated. The electronic media of the 20th century were not so lucky. Telephony, radio, television, cable, satellite and other technologies were quickly encumbered with a crazy quilt of federal and state regulations. Those restraints include price controls, entry restrictions, speech restrictions and endless agency threats. ICT policy started turning the corner in the late 1980s after the old regulatory model failed to achieve its mission of more choice, higher quality and lower prices for media and communications. Almost everyone accepted that change was needed, and it came fast. The 1990s became a whirlwind of policy and technological change. In the mid-1990s, the Clinton administration decided to allow open commercialization of the internet, which, until then, had mostly been a plaything for government agencies and university researchers. But it was the enactment of the 1996 telecommunications law that sealed the deal. Not only did the new law largely avoid regulating the internet like analog-era ICT, but, more importantly, it included Sec. 230, which helped ensure that future regulators or overzealous tort lawyers would not undermine this wonderful new resource. A year later, the Clinton administration put a cherry on top with the release of its Framework for Global Electronic Commerce. This bold policy statement announced a clean break from the past, arguing that “the private sector should lead [and] the internet should develop as a market-driven arena, not a regulated industry.” Permissionless innovation had become the foundation of American tech policy.

The Results

Ideas have consequences, as they say, and that includes ramifications for domestic business formation and global competitiveness. While the U.S. was allowing the private sector to largely determine the shape of the internet, Europe was embarking on a very different policy path, one that would hobble its tech sector. America’s more flexible policy ecosystem proved to be fertile ground for digital startups. Consider the rise of “unicorns,” shorthand for companies valued at $1+ billion. “In terms of the global distribution of startup success,” notes the State of the Venture Capital Industry in 2019, “the number of private unicorns has grown from an initial list of 82 in 2015 to 356 in Q2 2019,” and fully half of them are U.S.-based. The United States is also home to the most innovative tech firms. Over the past decade, Strategy& (PricewaterhouseCooper’s strategy consulting business) has compiled a list of the world’s most innovative companies, based on R&D efforts and revenue. Each year that list is dominated by American tech companies. In 2013, 9 of the top 10 most innovative companies were based in the U.S., and most of them were involved in computing, software and digital technology. Global competition is intensifying, but in the most recent 2018 list, 15 of the top 25 companies are still U.S.-based giants, with Amazon, Google, Intel, Microsoft, Apple, Facebook, Oracle and Cisco leading the way. Meanwhile, European digital tech companies cannot be found on any such list. While America’s tech companies are household names across the European continent, most people struggle to name a single digital innovator headquartered in the EU. Permissionless innovation crushed the precautionary principle in the trans-Atlantic policy wars. European policymakers have responded to the continent’s digital stagnation by doubling down on their aggressive regulatory efforts. The EU closed out 2020 with two comprehensive new measures (the Digital Services Act and the Digital Markets Act), while the U.K. simultaneously pursued a new “online harms” law. Taken together, these proposals represent “the biggest potential expansion of global tech regulation in years,” according to The Wall Street Journal. The measures will greatly expand extraterritorial control over American tech companies. Having decimated their domestic technology base and driven away innovators and investors, EU officials are now resorting to plugging budget shortfalls with future antitrust fines on U.S.-based tech companies. It has essentially been a lost quarter century for Europe on the information technology front, and now American companies are expected to pay for it.

Republicans Revive ‘Regulation-By-Raised-Eyebrow’

In light of the failure of Europe’s precautionary principle-based policy paradigm, and considering the threat now posed by the growing importance of various Chinese tech companies, one might think U.S. policymakers would be celebrating the competitive advantages created by a quarter century of American tech dominance and contemplating how to apply this winning vision to other sectors of the economy. Alas, despite its amazing run, business and political leaders are now turning against permissionless innovation as America’s policy lodestar. What is most surprising is how this reversal is now being championed by conservative Republicans, who traditionally support deregulation. President Trump also called for tightening the screws on Big Tech. For example, in a May 2020 Executive Order on “Preventing Online Censorship,” he accused online platforms of “selective censorship that is harming our national discourse” and suggested that “these platforms function in many ways as a 21st century equivalent of the public square.” Trump and his supporters put Google, Facebook, Twitter and Amazon in their crosshairs, accusing them of discriminating against conservative viewpoints or values. The irony here is that no politician owes more to modern social media platforms than Donald Trump, who effectively used them to communicate his ideas directly to the American people. Moreover, conservative pundits now enjoy unparalleled opportunity to get their views out to the wider world thanks to all the digital soapboxes they now can stand on. YouTube and Twitter are chock-full of conservative punditry, and the daily list of top 10 search terms on Facebook is dominated consistently by conservative voices, where “the right wing has a massive advantage,” according to Politico. Nonetheless, conservatives insist they still don’t get a fair shake from the cornucopia of new communications platforms that earlier generations of conservatives could have only dreamed about having at their disposal. They think the deck is stacked against them by Silicon Valley liberals. This growing backlash culminated in a remarkable Senate Commerce Committee hearing on Oct. 28 in which congressional Republicans hounded tech CEOs and called for more favorable treatment of conservatives, and threatened social media companies with regulation if conservative content was taken down. Liberal lawmakers, by contrast, uniformly demanded the companies do more to remove content they felt was harmful or deceptive in some fashion. In many cases, lawmakers on both sides of the aisle were talking about the exact same content, putting the companies in the impossible position of having to devise a Goldilocks formula to get the content balance just right, even though it would be impossible to make both sides happy. In the broadcast era, this sort of political harassment was known as the “regulation-by-raised-eyebrow” approach, which allowed officials to get around First Amendment limitations on government content control. Congressional lawmakers and regulators at the FCC would set up show trial hearings and use political intimidation to gain programming concessions from licensed radio and television operators. These shakedown tactics didn’t always work, but they often resulted in forms of soft censorship, with media outlets editing content to make politicians happy. The same dynamic is at work today. Thus, when a firebrand politician like Sen. Josh Hawley suggests “we’d be better off if Facebook disappeared,” or when Sohrab Ahmari, the conservative op-ed editor at the New York Post, calls for the nationalization of Twitter, they likely understand these extreme proposals won’t happen. But such jawboning represents an easy way to whip up your base while also indirectly putting intense pressure on companies to tweak their policies. Make us happy, or else! It is not always clear what that “or else” entails, but the accumulated threats probably have some effect on content decisions made by these firms. Whether all this means that Sec. 230 gets scrapped or not shouldn’t distract from the more pertinent fact: few on the political right are preaching the gospel of permissionless innovation anymore. Even tech companies and Silicon Valley-backed organizations now actively distance themselves from the term. Zachary Graves, head of policy at Lincoln Network, a tech advocacy organization, worries that permissionless innovation is little more than a “legitimizing facade for anarcho-capitalists, tech bros, and cynical corporate flacks.” He lines up with the growing cast of commentators on both the left and right who endorse a “Tech New Deal” without getting concrete about what that means in practice. What it likely means is a return to a well-worn regulatory playbook of the past that resulted in innovation stagnation and crony capitalism.

A More Political Future

Indeed, as was the case during past eras of permission slip-based policy, our new regulatory era will be a great boon to the largest tech companies. Many people advocate greater regulation in the name of promoting competition, choice, quality and lower prices. But merely because someone proclaims that they are looking to serve the public interest doesn’t mean the regulatory policies they implement will achieve those well-intentioned goals. The means to the end—new rules, regulations and bureaucracies—are messy, imprecise and often counterproductive. Fifty years ago, the Nobel prize-winning economist George Stigler taught us that, “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefits.” In other words, new regulations often help to entrench existing players rather than fostering greater competition. Countless experts since then have documented the problem of regulatory capture in various contexts. If the past is prologue, we can expect many large tech firms to openly embrace regulation as they come to see it as a useful way of preserving market share and fending off pesky new rivals, most of whom will not be able to shoulder the compliance burdens and liability threats associated with permission slip-based regulatory regimes. True to form, in recent congressional hearings, Facebook head Mark Zuckerberg called on lawmakers to begin regulating social media markets. The company then rolled out a slick new website and advertising campaign inviting new rules on various matters. It is always easy for the king of the hill to call for more regulation when that hill is a mound of red tape of their own making—and which few others can ascend. It is a lesson we should have learned in the AT&T era, when a decidedly unnatural monopoly was formed through a partnership between company officials and the government.

Image Credit: Infrogmation/Wikimedia Commons

Many independent telephone companies existed across America before AT&T’s leaders cut sweetheart deals with policymakers that tilted the playing field in its favor and undermined competition. With rivals hobbled by entry restrictions and other rules, Ma Bell went on to enjoy more than a half century of stable market share and guaranteed rates of return. Consumers, by contrast, were expected to be content with plain-vanilla telephone services that barely changed. Some of us are old enough to remember when the biggest “innovation” in telephony involved the move from rotary-dial phones to the push-button Princess phone, which, we were thrilled to discover, came in multiple colors and had a longer cord. In a similar way, the impending close of the permissionless innovation era signals the twilight of technological creative destruction and its replacement by a new regime of political favor-seeking and logrolling, which could lead to innovation stagnation. The CEOs of the remaining large tech companies will be expected to make regular visits to the halls of Congress and regulatory agencies (and to all those fundraising parties, too) to get their marching orders, just as large telecom and broadcaster players did in the past. We will revert to the old historical trajectory, which saw communications and media companies securing marketplace advantages more through political machinations than marketplace merit.

Will Politics Really Catch Up?

While permissionless innovation may be falling out of favor with elites, America’s entrepreneurial spirit will be hard to snuff out, even when layers of red tape make it riskier to be creative. If for no other reason, permissionless innovation still has a fighting chance so long as Congress struggles to enact comprehensive technology measures. General legislative dysfunction and profound technological ignorance are two reasons that Congress has largely become a non-actor on tech policy in recent years. But the primary limitation on legislative meddling is the so-called pacing problem, which refers to the way technological innovation often outpaces the ability of laws and regulations to keep up. “I have said more than once that innovation moves at the speed of imagination and that government has traditionally moved at, well, the speed of government,” observed former Federal Aviation Administration head Michael Huerta in a 2016 speech.

DNA sequencing machine. Image Credit: Assembly/Getty Images

The same factors that drove the rise of the internet revolution—digitization, miniaturization, ubiquitous mobile connectivity and constantly increasing processing power—are spreading to many other sectors and challenging precautionary policies in the process. For example, just as “Moore’s Law” relentlessly powers the pace of change in ICT sectors, the “Carlson curve” now fuels genetic innovation. The curve refers to the fact that, over the past two decades, the cost of sequencing a human genome has plummeted from over $100 million to under $1,000, a rate nearly three times faster than Moore’s Law. Speed isn’t the only factor driving the pacing problem. Policymakers also struggle with metaphysical considerations about how to define the things they seek to regulate. It used to be easy to agree what a phone, television or medical tracking device was for regulatory purposes. But what do those terms really mean in the age of the smartphone, which incorporates all of them and much more? “‘Tech’ is a very diverse, widely-spread industry that touches on all sorts of different issues,” notes tech analyst Benedict Evans. “These issues generally need detailed analysis to understand, and they tend to change in months, not decades.” This makes regulating the industry significantly more challenging than it was in the past. It doesn’t mean the end of regulation—especially for sectors already encumbered by many layers of preexisting rules. But these new realities lead to a more interesting game of regulatory whack-a-mole: pushing down technological innovation in one way often means it simply pops up somewhere else. The continued rapid growth of what some call “the new technologies of freedom”—artificial intelligence, blockchain, the Internet of Things, etc.—should give us some reasons for optimism. It’s hard to put these genies back in their bottles now that they’re out. This is even more true thanks to the growth of innovation arbitrage—both globally and domestically. Creators and capital now move fluidly across borders in pursuit of more hospitable innovation and investment climates. Recently, some high-profile tech CEOs like Elon Musk and Joe Lonsdale have relocated from California to Texas, citing tax and regulatory burdens as key factors in their decisions. Oracle, America’s second-largest software company, also just announced it is moving its corporate headquarters from Silicon Valley to Austin, just over a week after Hewlett Packard Enterprise said it too is moving its headquarters from California to Texas—in this case, Houston. “Voting with your feet” might actually still mean something, especially when it is major tech companies and venture capitalists abandoning high-tax, over-regulated jurisdictions.

Advocacy Remains Essential

But we shouldn’t imagine that technological change is inevitable or fall into the trap of thinking of it as a sort of liberation theology that will magically free us from repressive government controls. Policy advocacy still matters. Innovation defenders will need to continue to push back against the most burdensome precautionary policies, while also promoting reforms that protect entrepreneurial endeavors. The courts offer us great hope. Groups like the Institute for Justice, the Goldwater Institute, the Pacific Legal Foundation and others continue to litigate successfully in defense of the freedom to innovate. While the best we can hope for in the legislative arena may be perpetual stalemate, these and other public interest law firms are netting major victories in courtrooms across America. Sometimes court victories force positive legislative changes, too. For example, in 2015, the Supreme Court handed down North Carolina State Board of Dental Examiners v. Federal Trade Commission, which held that local government cannot claim broad immunity from federal antitrust laws when it delegates power to nongovernmental bodies, such as licensing boards. This decision made much-needed occupational licensing reform an agenda item across America. Many states introduced or adopted bipartisan legislation aimed at reforming or sunsetting occupational licensing rules that undermine entrepreneurship. Even more exciting are proposals that would protect citizens’ “right to earn a living.” This right would allow individuals to bring suit if they believe a regulatory scheme or decision has unnecessarily infringed upon their ability to earn a living within a legally permissible line of work. Meanwhile, there have been ongoing state efforts to advance “right to try” legislation that would expand medical treatment options for Americans tired of overly paternalistic health regulations. Perhaps, then, it is too early to close the book on the permissionless innovation era. While dark political clouds loom over America’s technological landscape, there are still reasons to believe the entrepreneurial spirit can prevail.
]]> https://techliberation.com/2021/01/10/the-end-of-permissionless-innovation/feed/ 2 76823 Symposium: Hirschman’s “Exit, Voice & Loyalty” at 50 https://techliberation.com/2020/08/27/symposium-hirschmans-exit-voice-loyalty-at-50/ https://techliberation.com/2020/08/27/symposium-hirschmans-exit-voice-loyalty-at-50/#comments Thu, 27 Aug 2020 15:28:01 +0000 https://techliberation.com/?p=76803

Albert Hirschman and the Social Sciences: A Memorial Roundtable – Humanity JournalThis month’s Cato Unbound symposium features a conversation about the continuing relevance of Albert Hirschman’s Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States, fifty years after its publication. It was a slender by important book that has influenced scholars in many different fields over the past five decades. The Cato symposium features a discussion between me and three other scholars who have attempted to use Hirschman’s framework when thinking about modern social, political, and technological developments.

My lead essay considers how we might use Hirschman’s insights to consider how entrepreneurialism and innovative activities might be reconceptualized as types of voice and exit. Response essays by Mikayla Novak, Ilya Somin, and Max Borders broaden the discussion to highlight how to think about Hirschman’s framework in various contexts. And then I returned to the discussion this week with a response essay of my own attempting to tie those essays together and extend the discussion about how technological innovation might provide us with greater voice and exit options going forward. Each contributor offers important insights and illustrates the continuing importance of Hirschman’s book.

I encourage you to jump over to Cato Unbound to read the essays and join the conversations in the comments.

 

]]> https://techliberation.com/2020/08/27/symposium-hirschmans-exit-voice-loyalty-at-50/feed/ 3 76803 Existential Risk & Emerging Technology Governance https://techliberation.com/2020/08/05/existential-risk-emerging-technology-governance/ https://techliberation.com/2020/08/05/existential-risk-emerging-technology-governance/#comments Wed, 05 Aug 2020 16:51:39 +0000 https://techliberation.com/?p=76795

“The world should think better about catastrophic and existential risks.” So says a new feature essay in The Economist. Indeed it should, and that includes existential risks associated with emerging technologies.

The primary focus of my research these days revolves around broad-based governance trends for emerging technologies. In particular, I have spent the last few years attempting to better understand how and why “soft law” techniques have been tapped to fill governance gaps. As I noted in this recent post compiling my recent writing on the topic;

soft law refers to informal, collaborative, and constantly evolving governance mechanisms that differ from hard law in that they lack the same degree of enforceability. Soft law builds upon and operates in the shadow of hard law. But soft law lacks the same degree of formality that hard law possess. Despite many shortcomings and criticisms, compared with hard law, soft law can be more rapidly and flexibly adapted to suit new circumstances and address complex technological governance challenges. This is why many regulatory agencies are tapping soft law methods to address shortcomings in the traditional hard law governance systems.

I argued in recent law review articles as well as my latest book, despite its imperfections, I believe that soft law has an important role to play in filling governance gaps that hard law struggles to address. But there are some instances where soft law simply will not cut it. As I noted in Chapter 7 of my new book, there may be very legitimate existential threats out there that we should be spending more time addressing because the scope, severity, and probability of severe risk are present. Hard law solutions will still be needed in such instances, even if they may be challenged by many of the same factors that are fueling the shift toward soft law for other sectors or issues.

Of course, we are immediately confronted with a definitional challenge: What exactly counts as an “existential risk”? I argue that it is important that we spend more time discussing this question because far too many people today throw around the term “existential risk” when referencing risks that are noting of the sort. For example, increased social media use may indeed be a threat to data security and personal privacy, but those risks are not “existential” in the same way chemical or nuclear weapons proliferation are threats to our existence. This gets to the heart of the matter: the root of “existential” is existence. By definition, an existential risk needs to have some direct bearing on the future of humanity’s ability to survive. Efforts to conflate lesser risks into existential ones cheapen the very meaning of the term.

This shouldn’t be controversial, but somehow it is. Countless pundits today want to suggest that almost every new technological development might somehow pose an existential threat to humanity. But it just isn’t the case. That does not mean their concerns are not important, or potentially deserving of some government attention. It simply means that we need to take risk prioritization more seriously. If everything is an existential risk, than nothing is an existential risk. We must have some sort of ranking of risks if we hope to have a rational conversation about how to use scare societal resources to address matters of public concern.

These issues are discussed at far greater length in the sections of my book (pgs. 228-240) that you will find embedded down below. How should society deal with “killer robots” or the accelerated development of genetic editing capabilities? What kind of coordinated compliance regime might help address rouge actors who seek to use new technological capabilities for nefarious purposes? What can we learn from past global enforcement efforts for chemical and nuclear weapons? These are just some of the questions I take on in this section of the book and plan to spend more time addressing in coming years. Scan these pages from the book to see my initial thoughts on these matters. But I am really just scratching the surface here. I’ll have much more to say on these matters in coming months and years. It’s a massively complicated topic.

]]> https://techliberation.com/2020/08/05/existential-risk-emerging-technology-governance/feed/ 2 76795 Some Recent Essays on the Importance of Innovation & the Fight over Technological Progress https://techliberation.com/2020/07/28/some-recent-essays-on-the-importance-of-innovation-the-fight-over-technological-progress/ https://techliberation.com/2020/07/28/some-recent-essays-on-the-importance-of-innovation-the-fight-over-technological-progress/#comments Tue, 28 Jul 2020 15:35:34 +0000 https://techliberation.com/?p=76778

[Updated: March 2022]

I was speaking at a conference recently and discussing my life’s work, which for 30 years has been focused on the importance of innovation and intellectual battles over what we mean progress. I put together up a short list of some things I have written over the last few years on this topic and thought I would just re-post them here. I will try to keep this regularly updated, at least for a few years.

UNDERSTANDING THE CHALLENGE WE FACE:

HOW WE MUST RESPOND = “Rational Optimism” / Right to Earn a Living / Permissionless Innovation

ADDITIONAL READING:

NEW BOOK (tying together all the essays and papers listed above):

 

]]> https://techliberation.com/2020/07/28/some-recent-essays-on-the-importance-of-innovation-the-fight-over-technological-progress/feed/ 2 76778 “Policy Gone Viral” Podcast on Evasive Entrepreneurialism https://techliberation.com/2020/07/16/policy-gone-viral-podcast-on-evasive-entrepreneurialism/ https://techliberation.com/2020/07/16/policy-gone-viral-podcast-on-evasive-entrepreneurialism/#comments Thu, 16 Jul 2020 12:49:22 +0000 https://techliberation.com/?p=76766

Here’s a new episode of the James Madison Institute “Policy Gone Viral” podcast in which my former Mercatus Center colleague Andrea O’Sullivan and I discuss the future of technological innovation and the public policies governing it. The video is embedded below or you can listen to just the audio here.

]]> https://techliberation.com/2020/07/16/policy-gone-viral-podcast-on-evasive-entrepreneurialism/feed/ 2 76766 Andreessen on Why Innovation Matters https://techliberation.com/2020/06/14/andreessen-on-why-innovation-matters/ https://techliberation.com/2020/06/14/andreessen-on-why-innovation-matters/#respond Sun, 14 Jun 2020 11:44:24 +0000 https://techliberation.com/?p=76754

Marc Andreessen is interviewed by Sriram Krishan in his new newsletter, The Observer Effect, and asked what motivates him to support technological innovation and “to go read up on a new topic every day” related to tech and progress. His answer is inspirational and perfectly encapsulates why I also have made technological progress the focus of my life’s work:

I am a deep believer in – after learning a lot over the years about economic history and of cultural history – that technology really is the driver. There were basically millennia of just subsistence farming industry and all of a sudden, there was this vertical takeoff a few hundred years ago. And quality of life exploded around the world. Not evenly but starting in Europe and expanding out. It’s basically all technology. It’s always the printing press, it’s the internet and on and on. And you get this incredible upward trajectory. We have the potential over the course of the next century or over the next few centuries to really dramatically advance and have life be better for virtually everybody. Technology is quite literally the lever for being able to take natural resources and able to make something better out of them. And so it’s just it’s the most interesting and by far the most useful and the most beneficial thing I can think of doing.

Amen, brother! I devoted my last two books (Permissionless Innovation and Evasive Entrepreneurs) and all my life’s work, to proving that exact point. Also, I really like Andreessen’s definition of technology as, “the lever for being able to take natural resources and able to make something better out of them.” I’ve added that to my running compendium, “Defining Technology,” which features various definitions of technology.

 

]]> https://techliberation.com/2020/06/14/andreessen-on-why-innovation-matters/feed/ 0 76754 Video: Launch Event for “Evasive Entrepreneurs” Book https://techliberation.com/2020/04/29/video-launch-event-for-evasive-entrepreneurs-book/ https://techliberation.com/2020/04/29/video-launch-event-for-evasive-entrepreneurs-book/#respond Wed, 29 Apr 2020 15:22:06 +0000 https://techliberation.com/?p=76706

Here’s yesterday’s full launch event video for the release of my new book, Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments. My thanks to Matthew Feeney, Director of the Project on Emerging Technologies at the Cato Institute, for hosting the discussion and sorting through audience questions. The video is below and some of the topics we discussed are listed down below:

* innovation culture
* charter cities, innovation hubs & competitive federalism
* the pacing problem
* technological determinism
* innovation arbitrage
* existential risk
* the Precautionary Principle vs. Permissionless Innovation
* responsible innovation
* drones, facial recognition & surveillance tech
* why privacy & cybersecurity bills never pass
* regulatory accumulation
* applying Moore’s Law to government
* technological civil disobedience
* 3D printing
* biohacking & the “Right to Try” movement
* technologies of resistance
* “born free” technologies vs. “born in captivity” tech
* regulatory capture
* agency threats & “regulation by raised eyebrow”
* soft law vs. hard law
* autonomous systems & “killer robots”!
]]> https://techliberation.com/2020/04/29/video-launch-event-for-evasive-entrepreneurs-book/feed/ 0 76706 Evasive Entrepreneurialism and Technological Civil Disobedience in the Midst of a Pandemic https://techliberation.com/2020/04/28/evasive-entrepreneurialism-and-technological-civil-disobedience-in-the-midst-of-a-pandemic/ https://techliberation.com/2020/04/28/evasive-entrepreneurialism-and-technological-civil-disobedience-in-the-midst-of-a-pandemic/#comments Tue, 28 Apr 2020 22:39:23 +0000 https://techliberation.com/?p=76704

[Originally published on the Cato Institute blog.]

A pandemic is no time for bad governance. As the COVID-19 crisis intensified, bureaucrats and elected officials slumbered. Government regulations prevented many in the private sector from helping with response efforts. The result was a sudden surge of evasive entrepreneurialism and technological civil disobedience. With institutions and policies collapsing around them, many people took advantage of cutting‐​edge technological capabilities to evade public policies that were preventing practical solutions from emerging.

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 

]]> https://techliberation.com/2020/04/28/evasive-entrepreneurialism-and-technological-civil-disobedience-in-the-midst-of-a-pandemic/feed/ 1 76704 Congress as a Non-Actor in Tech Policy https://techliberation.com/2020/02/04/congress-as-a-non-actor-in-tech-policy/ https://techliberation.com/2020/02/04/congress-as-a-non-actor-in-tech-policy/#comments Tue, 04 Feb 2020 19:28:42 +0000 https://techliberation.com/?p=76658

ImageCongress has become a less important player in the field of technology policy. Why did that happen, and what are the ramifications for technological governance efforts going forward?

I’ve spent almost 30 years covering technology policy. There was a time in my life when I spent almost all my time as a policy analyst preoccupied with developments in the federal legislative arena. I lived in the trenches of Capitol Hill and interacted with lawmakers and their staff morning, noon, and night.

In recent years, however, I have spent very little time focused on the Legislative Branch because it has effectively become a non-actor on technology policy. It is not that congressional lawmakers stopped caring about tech policy. Interest actually remains quite high—perhaps higher than ever before. Congress also continues to introduce lots of bills, host plenty of hearings, and issue mountains of press releases related to tech policy issues.

Nonetheless, all that interest and activity has not really translated into much important legislation. While it is hard to track tech-oriented legislative trends statistically because of the complication of defining “technology policy” over time, judged by substantive output, Congress has largely checked out of technological policymaking.

Think about digital privacy. How many years now have people been predicting a comprehensive “baseline” privacy bill would pass in each legislative session? It never happens. Perhaps it will this year, but if you would like to place a wager on it, I will take that bet.

Speaking of bets, for several years now, I have been wagering with friends that Congress will not pass federal legislation creating a national autonomous vehicles framework. Each session I win that bet. Keep in mind, a framework for driverless cars is far less controversial than privacy policy. Still, nothing substantive ever gets done in Congress.

Same goes for cybersecurity with lots of calls for big measures, but no final action. Folks are now also telling me to expect a big artificial intelligence bill one day soon. I sincerely doubt it. Again, I’ll bet on it if you’d like to lose some money!

Let me be clear, there may actually be some very good reasons why Congress should implement a national framework for privacy, driverless cars, and some AI policy issues. But all the wishful thinking in the world will not magically make it happen.

We need to entertain the possibility that Congress has largely checked out of the world of substantive tech policymaking and isn’t coming back. We may get a few big surprise measures here and there, as we did with clumsily-drafted FOSTA-SESTA. If anything, it is more likely that we instead see misguided legislative riders attached to non-germane measures during late night negotiations. But even haphazard efforts like those will be extremely rare. The days of Congress passing big bills like the Telecom Act of 1996 or the Cable Act of 1992 appear mostly over.

Why Congress Is No Longer the Major Player It Once Was

I think there are probably many obvious explanations for why Congress has checked out of tech policymaking, but let me try to boil it down to a couple of interrelated trends:

The “pacing problem” has intensified: The pacing problem refers to the inability of legal or regulatory regimes to keep adjust to the intensifying pace of technological change. There are just more emerging technologies than ever, and they are evolving faster than ever, too. “New technologies that used to have two-year cycle times now can become obsolete in six months, and the pace of change is not slowing,” says consulting firm Deloitte.

A growing multiplicity of technologies means more tech policy issues to cover. And those issues grow more complicated each year. As soon as lawmakers wrap their heads around one technology (if they do at all), another innovation pops up that complicates things further or crowds out their attention.

Technological convergence and blurring governance boundaries: Technology policymaking increasingly involves metaphysical questions about the underlying nature of things. For example, what is a “phone,” a “medical device,” or an “aerial vehicle”? These things used to be relatively easy to define and had well-understood meanings in federal statutes and regulations. But those concepts evolved rapidly in an age of widespread technological convergence and rapid-fire “combinatorial innovation,” with new technologies multiplying and building on top of one another in the symbiotic fashion. Basically, almost as soon as new tech laws or regulations are enacted, they are confronted with new marketplace realities and technological changes that call into question legal classifications or regulatory distinctions.

For example, today’s smartphones combine dozens of different functions that were previously quite distinct, including health tracking capabilities, mobile payment systems, and video distribution, all of which remain heavily regulated by an assortment of federal laws and agencies. But the convergence of all these capabilities in a single device that we can carry in our pockets creates massive governance challenges, not only for archaic legislative frameworks, but even for newer semantic distinctions that may seem current one moment only to be obliterated the next. These factors also make it harder to figure out who in Congress should be driving policy because technological convergence blurs previously distinct governance categories among legislative committees and the laws they have crafted.

Legislative dysfunctionalism: Policymaking processes move slowly by design. Constitutional constraints and other legal requirements demand it. But things move even slower today because of what Jonathan Rauch calls “demosclerosis,” or the “government’s progressive loss of the ability to adapt.” “[A]s layer is dropped upon layer,” he argued, “the accumulated mass becomes gradually less rational and less flexible.”

Inadequate resources are also part of the problem with Congress facing a complex, rapidly-evolving set of issues but devoting only limited resources to technical staff or studies to better understand these developments. This combined with the factors cited above has led to a never-ending “competency trap,” with lawmakers and their staffs seemingly always one step behind technological developments and societal demands or expectations.

Meanwhile, partisanship increases and the work load on many other fronts grows alongside it. There’s just a lot more on Congress’s plate than ever before. Plus, tech policy matters seemingly always take a back seat to tax, budget, entitlements, defense, and other issues.

Many people hope that boosting technology assessment efforts might help correct these problems. Perhaps better technical advice could help lawmakers ask less ignorant questions at tech-oriented congressional hearings, which have become showcases for the staggering lack of congressional understanding of modern technologies. But just adding new technology assessment capacity, such as in the form of a revived Office of Technology Assessment, won’t likely move the needle much in terms of actual legislative output. More serious structural reforms will be required.

Globalization: Many modern technologies “are truly global and call out for policy approaches that do not respect traditional national borders,” note former NITA officials Lawrence E. Strickling and Jonah Force Hill. Congress only has so much control over technologies that defy national boundaries, further complicating tech governance questions.

Yet, one would think that when America’s global competitive advantage was on the line, Congress would have greater reason to assert itself and craft frameworks to ensure US firms are not disadvantaged by a lack of policy clarity. That has not proven to be the case, however. Congressional lawmakers do plenty of huffing and puffing about the tech governance choices made by Europe, China, and other governments, but they then leave the field wide open to them (as well as lower levels of government) to craft policies that govern national markets throughout the United States.

Endless delegation: Speaking of passing the buck, Congress has been doing it for decades on tech policy by delegating massive and quite amorphous authority to technocratic administrative agencies. Over the past half century, scholars from various disciplines—economics, law, political science, history, and others—have explored the growth of what has been alternatively called the “interest group society,”  “receivership by regulation,”  “iron triangles,” and “client politics.” This literature identifies the way Congress has increasingly abdicated its constitutional role as lawmaker by shifting hard policy questions to regulatory agencies and then hoping that bureaucrats could figure out all the answers.

Delegation is even more common for the most technical policy matters, and that trend has only accelerated in recent years as the complexity increases and overwhelms lawmakers and their staff.

Ramifications for Tech Governance Going Forward

If Congress remains largely incapable of ever getting the ball over the goal line on important tech policy matters, what are some of the ramifications? There are many, but I will identify just a few of the most obvious ones:

  • More tech-oriented legislative activity will shift to the states: In fact, it already has. For each of the tech policy issues I identified earlier (privacy, driverless cars, cybersecurity, and even some AI-related issues like facial recognition), states are—for better or worse—picking up the slack. We should expect that trend to accelerate. This will create an increasingly confusing patchwork of policies that will potentially raise serious barriers to entry and innovation. Nonetheless, I can’t see this trend reversing anytime soon. Perhaps Congress will finally act on privacy or driverless cars legislation if for no other reason than to preempt a crazy-quilt of contradictory policies. Of course, that’s what people have been predicting for years, and it never happens.
  • “Soft law” becomes the dominate governance force for tech: Again, it already has. Soft law refers to informal, collaborative, and constantly evolving governance mechanisms that differ from hard law in that they lack the same degree of enforceability. Soft law can include things like multi-stakeholder processes, industry best practices and standards, agency workshops and guidance documents, and educational efforts. But that just scratches the surface of soft law mechanisms. For better or worse, soft law is becoming the dominant modus operandi for most modern technological governance. We can expect that trend to accelerate to fill the governance gap left by Congressional inaction. For example, we don’t have any formal “rules of the road” for driverless cars, but we do now have four iterations of Department of Transportation guidance on driverless cars. Version 4.0of the DoT guidance for automated vehicles was just released this month. Expect the “soft law-ization” of technological governance to expand considerably in coming years because it is really the only way for agencies to cope with the pacing problem and those metaphysical issues identified earlier. Because soft law is not boxed in by rigid preconceptions of what a particular technology or technological process is or entails, it is often better able to address new marketplace realities. Soft law can adapt as technologies do. With Congress out of the picture, it will have to.
  • The congressional tech policy death spiral accelerates. Some may think (or at least hope) that the situation described here can’t get any worse. To the contrary, it can get radically worse. With our politics increasingly infected with bitter partisanship and rancor, what are the chances that lawmakers can work together to craft comprehensive tech policy measures? I’d say the odds are approaching zero. The Cable Act, the Telecom Act (and Sec. 230), and the Internet Tax Freedom Act all enjoyed broad, bipartisan support when they passed in the 1990s. People reached across the aisle to get things done. It didn’t always work, and sometimes it resulted in misguided policies (like the Communications Decency Act’s provisions trying to censor internet “indecency”). But bipartisan lawmaking scenarios like those seem almost unthinkable now. To the extent many lawmakers even show up at tech-oriented congressional hearings anymore, it is mostly to score points in front of the cameras for Team Red or Team Blue back home. Serious legislative oversight and policymaking is dead; it’s mostly just show-trials and media circuses at this point.

Should I Care about Congress Anymore?

If you believe this miserable thesis is correct but continue to focus on the Legislative Branch for a living, you may be asking yourself: Am I wasting all my time here? Not necessarily. Congress is still actively interested in tech policy matters. For those who hope to limit that damage Congress might do by hastily passing ham-handed, crisis-driven policy measures, your efforts in the trenches will continue to be important in curbing the worst instincts of some lawmakers. In many instances, preserving a perpetual stalemate may go down as a tremendous victory.

For example, as the debate over Section 230 intensifies—with politicians of all stripes looking to gut the most important of all Internet freedom policies—it is vital that smart people work with lawmakers and their staff to beat back misguided and destructive measures. Hopefully this becomes another instance of legislative gridlock winning out! And I think it will.

More realistically, your role will not be to stop Congress from doing insanely destructive things, it will be to just stop them from saying those things. In fact, that seems to be what a lot of people who work with Congress already do today. When I chat with various inside-the-Beltway policy advocates and industry reps today, they usually acknowledge that the prospects for actual legislation on any given issue are quite slim. They will, of course, continue to try to work with lawmakers, their committees, and their staff to either advance or stop legislative measures. Yet, they all seem to accept the utter futility of it all.

Why do they persist? Most obviously, they want to at least preserve the legislative stalemate and not cede the ground to their enemies who might succeed in getting lawmakers to do something if only one side was communicating with Congress.

But the other thing these policy advocates are hoping to achieve is better messaging. Regulatory advocates want lawmakers to use the power of the bully pulpit to put pressure on various people or groups to change behavior, even in the absence of any legislative action. By contrast, many in industry want to make sure that their technologies are understood and not endlessly demonized. Bad press isn’t good for business, even if all the congressional threats never result in final legislation. Also, those defending innovation more generally will want to make sure that even if lawmakers aren’t making any actual laws, they still better understand and appreciate the importance of new technological capabilities for improving human welfare.

Those are all good reasons not to give up your legislative advocacy. For some of us, however, the personal cost-benefit analysis just doesn’t add up. Our focus has shifted to where the real action is at: federal administrative agencies, statehouses and state administrative agencies, the courts, and the growing world of multi-stakeholder governance and other soft law efforts. Congress has checked out, but technological governance lives on in many other forms and venues.

]]> https://techliberation.com/2020/02/04/congress-as-a-non-actor-in-tech-policy/feed/ 1 76658 Why Apocalyptic Rhetoric Dominates Tech Policy Debates https://techliberation.com/2019/10/02/why-apocalyptic-rhetoric-dominates-tech-policy-debates/ https://techliberation.com/2019/10/02/why-apocalyptic-rhetoric-dominates-tech-policy-debates/#comments Wed, 02 Oct 2019 15:20:32 +0000 https://techliberation.com/?p=76603

The endless apocalyptic rhetoric surrounding Net Neutrality and many other tech policy debates proves there’s no downside to gloom-and-doomism as a rhetorical strategy. Being a techno-Jeremiah nets one enormous media exposure and even when such a person has been shown to be laughably wrong, the press comes back for more. Not only is there is no penalty for hyper-pessimistic punditry, but the press actually furthers the cause of such “fear entrepreneurs” by repeatedly showering them with attention and letting them double-down on their doomsday-ism. Bad news sells, for both the pundit and the press.

But what is most remarkable is that the press continues to label these preachers of the techno-apocalypse as “experts” despite a track record of failed predictions. I suppose it’s because, despite all the failed predictions, they are viewed as thoughtful & well-intentioned. It is another reminder that John Stuart Mill’s 1828 observation still holds true today: “I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.”

Additional Reading:

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