Technocracy pt. 2
How to fix tech and government's relationship: it's... complicated.
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Since we’re diving into an especially wonky topic this week, I’m going to get right into it. Next week, I’ll be back with top tech and tech policy news.
A few weeks ago, I broke down Elizabeth Warren’s plan to break up big tech. While Warren may have staked out the most aggressive plan to rein in tech firms’ growing economic power, she’s not the only one with ideas on this topic. For this issue, I spoke with several people who have very different ideas about what we should (or shouldn’t) do about tech and antitrust.
Here are some highlights from our conversations:
Technocracy pt. 2
To recap last week’s issue, here’s one way to frame the conversation:
We agree technology has led to some unforeseen outcomes — some great and some not so much — but can’t agree on what those are. Tech companies have too much power, but so does our government, and neither is capable of — nor should be in charge of — making (all) the rules for this new world. Oh, and we definitely don’t want to go back to the old world.
That’s a lot to tackle, and by no means does anyone have it all figured out yet. We also can’t talk about antitrust without acknowledging the related — and often overlapping — policy debates around issues like data privacy, free speech, labor laws and taxes.
But today, let’s just focus on some key themes that come up within antitrust specifically.
Bork and Brandeis
Historically, there have been two main schools of thought around antitrust policy in the United States.
The first, advocated by Louis Brandeis, argued that antitrust laws should consider both economic and broader social issues. This thinking, which guided U.S. antitrust policy from the Progressive Era through the early 1970s, favored more active involvement by regulators who wanted to prevent harm to consumers, competitors and other stakeholders, even if that meant at times sacrificing efficiency in the market.
In the 1970s, Robert Bork convinced courts and lawmakers to adopt a “consumer welfare” standard that has prevailed since then. Bork claimed that by intervening in the market to promote competition, regulators were actually preserving inefficiencies that ultimately (and paradoxically) harmed consumers. Bork’s approach used a purely economic test to determine whether a business practice benefited or harmed consumers, and thus didn’t concern itself with broader social issues or the structure of a particular market
Why is that important today?
Tech companies have made massive, indisputable contributions to the economy: tech firms make up the vast majority of top companies, employ millions in the U.S. alone, are highly productive and make lots of products and services that consumers have benefited from — often for free.
Under Bork’s (that is, the current) version of antitrust law, the calculus typically ends there. So, since Amazon’s 50% share of the online retail market helps it offer low prices and fast shipping to millions of consumers, while offering sellers a way to reach those consumers, antitrust regulators should leave it be.
What harm?
Some experts, including Mercatus Center feature writer Andrea O’Sullivan, believe Bork’s approach still works well in today’s digital economy. In her view, the proper role of antitrust law is purely to “limit harm to consumers and ensure we have a competitive market,” and that broader social issues should be dealt with through other policy tools.
O’Sullivan believes tech companies — in most cases — still provide a net economic benefit, both to consumers as well as other parties such as sellers. She brought up Amazon, arguing that, while sellers may complain that Amazon’s control over the marketplace gives it unfair leverage, they wouldn’t even have had a viable business to begin with were it not for Amazon’s marketplace.
Where concerns around issues like inequality or free speech do arise, O’Sullivan said antitrust is not the way to address those and that introducing new laws could have an adverse economic impact. Instead, she made the case for a market-driven solution:
“In terms of what I think that will actually work, it’s usually technology itself.”
O’Sullivan noted how, in response to intrusive ads and tracking online, companies have created products like ad blockers and secure messaging apps.
Transparency
Over the past few years, consumers have begun to learn some surprising details about what they give up in exchange for the benefits they get from “free” products and services. New reports surface almost daily about how major tech companies share users’ data without their consent, mistreat workers, avoid legal responsibility for incidents involving their platforms, and still rely heavily on humans despite touting technological solutions.
Max Gulker, a senior research fellow at the American Institute for Economic Research, is — like O’Sullivan — wary of preventing technology from reaching its full potential by addressing such problems through antitrust. But, acknowledging that regulators aren’t going away anytime soon, he argued:
“[Regulators should be] mandating transparency in all of this… and trying to imbue a sense of ownership in consumers about how their data is being used.”
Gulker said he hopes the past few years have given people a better understanding of how tech companies make money and what they do with consumers’ data, so that — if they care enough and have a viable alternative — they’ll simply take their business elsewhere. He pointed to Facebook, which has seen its stock drop in response to several major scandals, including an investigation that found it had allowed Cambridge Analytica to illicitly obtain millions of users’ data.
Interoperability
In some cases, consumers are able to — and do — “vote with their dollars.” For example, search engines like DuckDuckGo and email clients like ProtonMail provide alternatives to Google search and Gmail for consumers who are more privacy oriented (and who don’t mind forgoing the benefits of sharing their data).
However, there are also times where consumers grow frustrated with a product but can’t easily turn to a comparable one. Often, that lack of competition comes not from a lack of demand, but simply because the most dominant tech companies have such a massive amount of data, users, money or control over a market to fend off or buy up any potential competitors.
Cory Doctorow, a science fiction author, activist, journalist and co-editor of blogging site Boing Boing, believes that one way to promote competition in those cases is to allow “interoperability” between different technology providers. As he put it:
“It would be really nice if, rather than every time we have a problem with the way that a firm is interacting with us, we [have to] lobby for regulatory change, we can just change vendors instead.”
So, say someone no longer wanted to rely on YouTube’s algorithm because it kept funneling their kids to violent content. With interoperability, potential competitors could access YouTube’s library of videos — without its permission — and use that data to create alternative algorithms that gave users more control.
Users would still need to grant this new service permission to alter their own feed on YouTube. But, as Doctorow argued, this would encourage YouTube to continually work at improving the experience for users or risk losing them.
Doctor (and others I talked to) noted that strict regulations — like Europe’s GDPR — often further cement big tech companies’ market power because they’re the only ones with enough money to hire the lawyers and implement the technologies needed to meet those requirements.
Doctorow said that interoperability offers an advantage over more cumbersome regulations in that “it becomes a kind of judo for incumbency.” That is, a company’s massive size or trove of user data actually makes it easier for competitors to build better products.
A new (old) standard
O’Sullivan and Gulker both thought that consumers have enough ability to drive change in the market absent any major change in antitrust legislation or regulations (so, not including changes to say, data privacy laws). However, not everyone believes the current antitrust philosophy has held up. Doctorow, for his part, advocated for returning to a “pre-Bork, robust vision.”
Luigi Zingales, a professor of entrepreneurship and finance at the University of Chicago — where Bork taught, ironically — went further, saying that regulators:
“Should create some new criteria, let’s call them of citizens’ welfare, that incorporate other characteristics.”
Zingales echoed Brandeis’ view that, when determining whether a company has violated antitrust laws, regulators should consider broader social harms — like promoting misinformation over quality news — and market dominance, even if the business practices in question led to lower prices for consumers.
Zingales noted that Bork’s approach does have the advantage of relying on a more objective economic analysis, which creates predictability for businesses looking to avoid violating antitrust laws as well as regulators and judges who want to apply those laws consistently. That’s why, Zingales said, the University of Chicago’s next antitrust conference, which it has hosted since 2017, will focus on “discussing what scientific tool we can use to actively measure citizen welfare.”
Surgical precision
O’Sullivan and Gulker both said that reviving a new version of Brandeis’ approach risks giving government regulators such extensive power to intervene in markets — especially ones involving emerging technologies that we may not yet fully understand — which could lead to corruption or lost economic benefits for consumers (or sellers, producers, etc.).
Doctorow and Zingales, meanwhile, were more worried that the concentration of economic and political power among such a small number of massive tech companies has adversely impacted both economic and political systems in ways that antitrust regulators could (and should) meaningfully address.
While each proposed varying solutions to these distinct problems, they all agreed that Warren’s proposal is too simplistic. When the companies involved rely on so many different business models and underlying technologies, they said, there can’t be a one-size-fits-all solution.
The big four tech companies — Facebook, Apple, Amazon and Alphabet — collectively deal in mass media, financial services, e-commerce, search engines, digital ads, website services, smartphones, computers, wearable tech, home security, healthcare, digital payments, artificial intelligence, autonomous vehicles and space travel — and that list is far from complete.
As Zingales put it, Warren’s plan “might be the right way to communicate a political message,” but that effective antitrust policy should apply a more surgical approach, “differentiating across various platforms.”
Ultimately, it seems, this issue will continue to be a complicated one.
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