• Tag Archives regulation

  • 3 Reasons Why Facebook’s Zuckerberg Wants More Government Regulation

    Posted on by Azrael 1 Comment

    Facebook CEO Mark Zuckerberg wants more government regulation of social media. In a March 30 op-ed for The Washington Post, Zuckerberg trots out the innocent-sounding pablum we’ve come to expect from him:

    I believe we need a more active role for governments and regulators. By updating the rules for the Internet, we can preserve what’s best about it — the freedom for people to express themselves and for entrepreneurs to build new things — while also protecting society from broader harms.

    But what sort of regulation will this be? Specifically, Zuckerberg concludes “we need new regulation in four areas: harmful content, election integrity, privacy and data portability.”

    He wants more countries to adopt versions of the European Union’s General Data Protection Regulation.

    Needless to say, anyone hearing such words from Zuckerberg should immediately assume this newfound support for regulation is calculated to help Facebook financially. After all, this is a man who lied repeatedly to his customers (and Congress) about who can access users’ personal data, and how it will be used. He’s a man who once referred to Facebook users as “Dumb F-cks.” Facebook lied to customers (not to be confused with the users) about the success of Facebook’s video platform. The idea that Zuckerberg now voluntarily wants to sacrifice some of his own power and money for humanitarian purposes is, at best, highly doubtful. (Although politicians like Mark Warner seem to take it at face value.)

    Fortunately for Zuckerberg, thanks to the economic realities of government regulation, he can both support government regulation and enrich himself personally.

    Those who are familiar with the effects of government regulation will not be surprised to hear a billionaire CEO throw his support behind it. Large firms with dominant market share have long made peace with government regulation because it often helps these firms create and solidify monopoly power for themselves.

    Specifically, there are three ways that regulation will help Facebook.

    Many Facebook critics like to claim that Facebook is a natural monopoly. That is, they think Facebook is so dominant in the marketplace, that it can use its supposed market power to keep out competitors. We’re told that Facebook has so many users, no serious competition will ever be possible.

    But remember MySpace? People used to say exactly the same thing about that social media platform. A recently as 2007, The Guardian was asking “Will Myspace ever lose its monopoly?” Xerox corporation was once a tech powerhouse, as well. It has now all but disappeared.

    Obviously, the answer to The Guardian‘s question is “yes.” But we’re now hearing about how Facebook is a monopoly. The reality, however, is that unless governments artificially erect barriers to entry, no firm can expect a safe place as a dominant firm. Other firms with new ideas will come along, threatening the older firm’s dominance.

    The answer to this problem, from the point of view of a firm like Facebook, is to make things more expensive and difficult for smaller startups and potential competitors.

    Facebook knows that if government regulations of tech firms increase, the cost of doing business will increase. Larger firms will be able to deal with these additional costs more easily than smaller startups. Big firms can access financing more easily. They have more equity. They already have a sizable market share and can afford to be more conservative. Large firms can absorb high labor costs, higher legal costs, and other high fixed costs brought on by regulation. A high-regulation environment is an anti-startup, anti-entrepreneurial environment.

    In an earlier age, many might have taken Zuckerberg’s new proclamation as sincere. Fortunately, we live in a cynical age, and even a beat reporter at Mashable knows how this game is played. Mashable‘s Karissa Bell writes:

    It may seem obvious that Zuckerberg’s proposal is self-interested, but it’s important to remember that his ideas are, of course, designed to help Facebook….

    And by touting the social network’s existing work around political advertising and content moderation, Facebook has an opportunity to determine the rules the rest of the industry will also have to abide by.

    Part of the reason Zuckerberg has made peace with the idea of government regulation is the knowledge that Facebook will be one of the most powerful groups at the negotiating table when it comes to writing the new regulations. In other words, Facebook will be in a position to make sure the new rules favor Facebook over its competitors.

    This is a common occurrence in regulatory schemes and is known as “regulatory capture.” When new regulatory bodies are created to regulate firms like Facebook, the institutions with the most at stake in a regulatory agency’s decisions end up controlling the agencies themselves. We see this all the time in the revolving door between legislators, regulators, and lobbyists. And you can also be sure that once this happens, the industry will close itself off to new innovative firms seeking to enter the marketplace. The regulatory agencies will ensure the health of the status quo providers at the cost of new entrepreneurs and new competitors.

    Moreover, as economist Douglass North noted, regulatory regimes do not improve efficiency, but serve the interests of those with political power:

    Institutions are not necessarily or even usually created to be socially efficient; rather they, or at least the formal rules, are created to serve the interests of those with the bargaining power to create new rules.

    After all, how much incentive does the average person have in monitoring new regulations, staying in touch with regulators, and attempting to affect the regulatory process? The incentive is almost zero. The incentive for regulated firms, on the other hand, is quite large.

    Not only will a small start-up lack the resources and political pull to challenge Facebook in the rule-making sphere, but those small firms won’t be large enough to be considered important “stakeholders” on any level. Thus, Facebook will continue to wield more power than its smaller competitors through its regulatory power.

    Another big benefit of regulation for Facebook will be the potential for using government regulation to limit Facebook’s legal liability when things go wrong. Bell continues:

    By offloading decisions about harmful content, privacy rules, and elections onto third-parties, Facebook may not have to take as much of the heat when mistakes are made.

    Put another way, Facebook can protect itself from both the legal and public-relations repercussions to itself when it uses its platform to delete the posts and visibility of users with whom Facebook employees disagree.

    As FTC commissioner Brendan Carr put it, Facebook’s proposed regulatory agenda would allow it to “outsourc[e] censorship.” Not only would this put the federal government in a position to be directly determining which opinions and ideas ought to be eliminated from tech platforms, it would also allow Facebook to pretend to be an innocent third party: “Don’t blame us for deleting your posts,” Facebook could then say. “The government made us do it!”

    Moreover, regulation can be employed by firms like Facebook to shield the firm from lawsuits. Potentially, in the marketplace, Facebook could be sued for using its platform to endanger domestic abuse victims or victims of suicide. Whether or not the firm should be found guilty of such things would be complex legal questions decided on a case-by-case basis. However, regulation can be used to circumvent this process entirely, and serve the interests of large, abusive firms.

    This phenomenon was explained by Murray Rothbard in the context of construction regulations:

    Suppose, for example, that A builds a building, sells it to B,and it promptly collapses. A should be liable for injuring B’s person and property and the liability should be proven in court, which can then enforce the proper measures of restitution and punishment. But if the legislature has imposed building codes and inspections in the name of “safety,” innocent builders (that is, those whose buildings have not collapsed) are subjected to unnecessary and often costly rules, with no necessity by government to prove crime or damage.

    They have committed no tort or crime, but are subject to rules, often only distantly related to safety, in advance by tyrannical governmental bodies. Yet, a builder who meets administrative inspection and safety codes and then has a building of his collapse, is often let off the hook by the courts. After all, has he not obeyed all the safety rules of the government, and hasn’t he thereby received the advance imprimatur of the authorities?

    Let’s apply this to the tech industry: Firm A is a new startup which has developed a way to make money in a way that satisfies consumers and does not expose them to any unwanted harassment, de-platforming, or violations of privacy. Meanwhile, Facebook (Firm B) continues to use its dominance in the regulatory process to keep in place costly regulations that prevent new startups from making much headway. These same regulations, however, continue to allow privacy violations, and other abuses up to a certain threshold established by regulators.

    Thus, the outcome is this: Firm A is unable to deploy its new, inventive, non-abusive model at all because regulatory costs are too high. Meanwhile, Facebook can continue to endanger and abuse some users because regulations allow it. Moreover, Facebook enjoys greater immunity from lawsuits because it complies with regulations. Thus consumers are denied both the benefits of the new startup and legal remedies from suing Facebook for its continued abuse.

    In short, Zuckerberg’s pro-regulation position is just a pro-Zuckerberg position. By further politicizing and regulating the internet, policymakers will assist large firms—and their billionaire owners—in crushing the competition, and ensuring the public has fewer choices.

    This article is republished with permission from the Mises Institute.

    Ryan McMaken

    Ryan McMaken is the editor of Mises Wire and The Austrian. Ryan has degrees in economics and political science from the University of Colorado and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

    This article was originally published on FEE.org. Read the original article.


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  • Repealing Net Neutrality: The Internet Apocalypse That Never Came

    Posted on by Azrael Comment

    This month marks one year since the FCC repealed the controversial net neutrality rules, officially killing the internet as we knew it forever—or so net neutrality proponents would have liked you to believe. But as we take a closer look at what has actually happened in the year since the rules have been abolished, we find that the (often hysterical) rhetoric doesn’t reflect reality at all. On the contrary, the internet has actually improved since regulations were relaxed.

    The internet has been a household commodity available for public use since August 6, 1991. However, according to net neutrality’s most fervent supporters, the internet didn’t truly take off until February 2015, when the FCC passed and adopted the new rules.

    In both the lead up to the vote on net neutrality and its subsequent repeal, mass hysteria ensued in which many people were honestly convinced that without government intervention, all the online services we enjoyed would cease to exist. In an article called “How the FCC’s Killing of Net Neutrality Will Ruin the Internet Forever,” the magazine GQ even went so far as to say:

    Think of everything that you’ve ever loved about the Internet. That website that gave you all of the Grand Theft Auto: Vice City cheat codes. YouTube videos of animals being friends. The illegal music you downloaded on Napster or Kazaa. The legal music you’ve streamed on Spotify. …The movies and TV shows you’ve binged on Netflix and Amazon and Hulu. The dating site that helped you find the person you’re now married to. All of these things are thanks to net neutrality.

    It’s rather shocking that this sentiment was so widely accepted as truth considering that every single one of the listed examples existed prior to net neutrality. In fact, the only reason the internet was able to become such an integral part of our lives was that it was left virtually untouched by regulatory forces. And since spontaneous order was allowed to occur, internet users were blessed with unbridled innovation that brought forth a robust variety of services, which GQ prefers to attribute to government action that wasn’t taken until nearly 24 years after internet use became the norm.

    These small details were, of course, ignored by much of the public, and the panic continued. The ACLU joined the frenzy, telling readers that without net neutrality we “are at risk of falling victim to the profit-seeking whims of powerful telecommunications giants.”

    We now realize that these dire warnings actually came to fruition, reminding us just how absurd the push for net neutrality rules was in the first place.

    Net neutrality sought to define the internet as a public utility, putting it in the same category as water, electric, and telephone services. Doing so left it open to regulatory oversight, specifically when it came to connection speeds and the price providers were allowed to charge consumers for its use.

    The new rules mandated that each internet service provider was henceforth forced to provide equal connection speeds to all websites, regardless of content. Prior to its passage, providers had the freedom to offer different connection speeds to users, including the option to pay more for faster speeds on certain websites.

    If, for example, Comcast noticed that a majority of its users were streaming content on Netflix, it might offer packages that charge extra for the promise of being able to connect to the site at quicker speeds. In reality, this is just the market responding to consumer demand, but not everyone saw it this way. Others saw it as an abuse of power by “greedy” internet service providers.

    Then-President Obama praised net neutrality, saying:

    For almost a century, our law has recognized that companies who connect you to the world have special obligations not to exploit the monopoly they enjoy over access in and out of your home or business. It is common sense that the same philosophy should guide any service that is based on the transmission of information—whether a phone call, or a packet of data.

    Unfortunately for those who think net neutrality rules are a good idea, the railroad industry serves as a perfect example of just how hazardous declaring consumer goods “public utilities” can truly be.

    Like the internet, railroads changed the world by connecting us with people, ideas, and goods to which we did not previously have access. In 1887, the Interstate Commerce Commission (ICC) was created specifically to regulate railroads in order to “protect” consumers from falling prey to the “profit-seeking whims” of the railroad industry. Much like today, the concern was that powerful railroad companies would arbitrarily increase rates or partner with other companies in a way that harmed consumers, just like the aforementioned Comcast/Netflix example. And as a result, the ICC made the railroads public utilities. But the ICC ended up doing more harm than good.

    As Robert J. Samuelson of the Washington Post writes:

    The railroads needed ICC approval for almost everything: rates, mergers, abandonments of little-used branch lines. Shippers opposed changes that might increase costs. Railroads struggled to meet new competition from trucks and barges. In 1970, the massive Penn Central railroad — serving the Northeast — went bankrupt and was ultimately taken over by the government. Others could have followed.

    Without the freedom to innovate and provide the best possible service to consumers without having to first jump through a series of regulatory hoops, the railroad industry’s hands were tied, and progress was stagnant.

    In 1980, the negative impacts became too much for even the government to ignore, and the ICC was abolished. Shortly thereafter, the industry recovered. Not only did freight rates and overall costs decrease, but railroads were also finally able to make a profit again—something that became a struggle in the wake of the ICC’s creation. In other words, the repeal of regulatory oversight resulted in a win-win situation for all parties involved. And it appears the same is true of the repeal of net neutrality.

    If we were to believe the hype being spread last year, by now the sky should have fallen and the internet made obsolete or exorbitantly expensive, as Banksy implied, from the lack of oversight. But that has not been the case. Instead of costs skyrocketing or connection speeds slowing down, things have actually gotten much better.

    According to Recode, internet speeds actually have increased nearly 40 percent since net neutrality was abolished. Uninhibited by government regulations, service providers have been free to expand their fiber optic networks, allowing for greater speed:

    Finally some good news: The internet is getting faster, especially fixed broadband internet. Broadband download speeds in the U.S. rose 35.8 percent and upload speeds are up 22 percent from last year, according to internet speed-test company Ookla in its latest U.S. broadband report.

    You’d think this news would have inspired a slew of “oops, we were wrong” articles to be written by those who worked so diligently to spread fear in the lead-up to the repeal. But this has not been the case.

    Wired, which published many articles in favor of net neutrality, did publish an article called “A Year without Net Neutrality: No Big Changes (Yet),” where it admits that none of the scary predictions actually came true. But it still clung to its paradoxical belief that an internet free from regulation is not truly free.

    Whether the naysayers are willing to admit it or not, less government regulation results in better outcomes for both companies and consumers. So the next time we are told that a lack of regulation is going to be the end of life as we know it, we would do well to remember what really happened when the government finally freed the internet from its grasp.

    Source: Repealing Net Neutrality: The Internet Apocalypse That Never Came – Foundation for Economic Education




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  • The Sectors Driving America’s Cost of Living Spike All Have One Thing in Common: They’re Heavily Regulated by Government

    Posted on by Azrael Comment

    In a recent extract of her book Squeezed, Guardian columnist Alissa Quart documented in detail the insecurities faced by many ordinary American families. Student loan debt, housing costs, and health care bills can be crippling even for those on decent enough incomes. For the struggling poor with job insecurities, the situation can be worse still.

    Even with the US labor market tightening, concern about working- and middle-class living standards has left politicians reaching for radical solutions. In the past year, mainstream politicians have advocated federal job guarantees, universal basic income, huge minimum wage hikes, attempts to boost union power and membership, expanding tax credits, co-determination laws, universal single-payer health care, and much else besides.

    A better first step is surely to ask why certain things are expensive in the first place.

    Putting aside the legion risks of such policies, these proposals have one major thing in common: they could be described as “income-based approaches” to trying to raise living standards. They all assume that markets, left to their own devices, cannot provide adequate living standards, necessitating interventions to raise households’ disposable incomes (through affecting income via pay or transfers directly, or reducing household payments for certain goods or services).

    For sure, some policies in this mold can help to alleviate financial hardship. But Quart highlighting out-of-control costs of different goods or services surely suggests a better first step is surely to ask why certain things are expensive in the first place, before reaching for compensatory interventions or transfers.

    In a recent research paper for the Cato Institute, I did precisely that for basic goods and services which poor households spend disproportionately on. And I found that nine types of intervention alone in housing, food, child-care, transport, clothing, and sectors governed by occupational licensing combine to raise the cost of typical poor households directly by anywhere between $830 and $3,500 per year. All these “income-based approach” things we do, in other words, are compensating households for cost-inflating government policies elsewhere.

    The average household in the bottom income quintile puts 25.2 percent of total spending per year towards direct housing costs, for example. Yet land use planning and zoning laws imposed at local levels of government, particularly in desirable metropolitan areas, impose a significant regulatory tax. This costs households anywhere up to around $2,000 per year, depending on location. This not only has direct financial consequences but makes it more difficult for poor households to move to good job opportunities.

    The best evidence suggests too that state-level child-care regulation, including staff-child ratios and qualification requirements for center staff, raises prices by $500 per year or more across the country, not to mention making it more difficult for low-income parents to return to work.

    In fact, in area after area, one sees misguided interventions raise the costs of everyday items. Ethanol mandates and protectionist sugar and milk programs raise the cost of everyday groceries. Regulations relating to fuel efficiency and car dealerships raise the cost of cars and hence driving. Tariffs on clothing and footwear are extraordinarily regressive because the poor spend disproportionately on these goods, and lower-quality variants of products tend to attract the highest tariffs. It’s well established too that occupational licensing raises wages in sectors and the price of associated services.

    Any analysis of this type has to stop somewhere. Mine focused on basic goods and poorer families, but one could make similar arguments for other sectors, not least health care and utilities, and some of the analysis applies even more forcefully for those further up the income scale.

    A recent Cato book, Overcharged: Why Americans Pay So Much For Healthcare, documents in lucid detail how the whole US healthcare system encourages high costs for services, for example. It’s not my area of expertise, but no doubt similar logic applies to the university sector, too.

    With the federal budget deficit already large, and most of the ideas floating around all coming with risky unintended consequences, now seems an opportune time for a cost-of-living agenda which examines and undoes these cost-inflating interventions at all levels of government.

    Some goods and services will always be expensive, and there may be a role for government to supplement the incomes of the unfortunate. But we should at least, from a regulatory perspective, aim for a “first do no harm” approach which does not raise living costs for families unnecessarily.

    Rather than treating the symptoms of the financial struggles outlined in Squeezed and talked about every day, let’s do what we can to address the underlying causes.

    Source: https://fee.org/articles/government-is-behind-the-cost-of-living-spike-in-the-us/



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