That balloon costs more because the only one who can produce that balloon is Walt Disney, and they will demand a fee for producing that balloon. So, think about copyright and patents as a tax on all of us. They go partly to the shareholders of Disney, but partly to the managers of Disney.
And then once Disney realized that they could turn all of these public-domain stories into cartoons and then get copyrights on those cartoons and take them out of the public domain, then Disney became the sole publisher of that sort of material. But the point that you make is excellent, because it is true that on the one hand, Disney made a fortune by using public-domain stories. But the problem is not just Disney, in a sense.
The Disney story is particularly outrageous. But I think that the problem is a more general problem. It is to what extent granting a monopoly really spurs innovation and to what extent it actually prevents innovation. So, ideally, the right duration for a patent or a copyright is going to be the perfect balance between the benefits you get from a boost in innovation, a boost in creativity, versus those losses, the deadweight losses associated with monopoly prices. There is an entire book written by two economists, Boldrin and Levine, who argue very passionately about the abolition of all forms of intellectual monopolies.
Software is actually a pretty bad example, because now a lot of software is open source. And so, the whole idea is that everyone can build on top of it. If you want to innovate on top of that software, then you might have to pay royalty fees or licensing fees every time you use that software or sell any product associated with the original patent.
And so, that might actually discourage follow-on innovation. Software is a fantastic example, because, in a sense, the innovation brought by open source is giving up on monopoly rights, and it is done precisely because you want to build on the existing code. And if you had to contract for licensing every time you want to build on a piece of code, the cost would be enormous, and innovation in software would be much lower. And, in fact, people tell me that since the diffusion of open source, the speed of innovation in software has increased tremendously. So, in a sense, that is a strong argument for the abolition of intellectual monopolies, because open source has done that.
What fundamentally spurs innovation? Is it the profit motive? Is it the desire for fame and glory in exchange for having invented something really cool? Or is it just intellectual curiosity? Is it benevolence on the part of people who are the natural inventor type? What is kind of shocking, to me at least, is that the vast majority of empirical evidence seems to suggest that there is very little positive impact of patents, except maybe in the pharmaceutical sector. If I invent new software, for example, or I invent a new machine, people can find a way around the patent more easily.
The second is, to be fair, the amount of money that needs to be paid to introduce a new drug, especially in the United States, is enormous. And very few companies will pay that cost without some monopoly rights ex post. The ability to obtain a patent depends crucially on your ability to prove in experimental trials that there is an improvement. And these studies have looked at these interventions on the part of the government and have found that, actually, after the patents are forcibly invalidated or nullified, this has actually led to an explosion of innovation in these areas.
So, to be fair, I think, again, these are industry-specific, so aerospace and defense. I think it happened also with the US when it came to Xerox technology. At the time, it was a highly regulated company. As a result of that regulation, it was forced by the US government to share its license with everybody.
Very many people claim that the explosion of Silicon Valley and computers, et cetera, is a result of that sharing of that patent on a broader basis. Again, the question is when you sum up with the benefit on an ex ante basis, people do patent stuff because they expect a reward.
People go back to history and they see that, for example, Watt, when he invented his better steam engine, he was running out of money, and it was only the prospect of getting a patent that some other external financier came to his rescue and lent him money in order for him to continue and finalize the creation of the new steam engine.
And otherwise, this would have taken much, much longer. So, I think that the debate is still unresolved. But there is another aspect that we need to discuss. So far, we have assumed that the optimal length of a patent is designed to trade off, in a socially optimal way, the costs and benefits. But do you really think that this is what goes on? It was really just Disney that was lobbying pretty hard for it. And they lobbied successfully, they were able to talk to the right people, and they got everyone to sign on for it. This is Disney just getting a handout. Disney made a point of not releasing how much they were spending on the lobbying, not mentioning it in any of their financial reports or their public statements.
As Kate explained, this is public choice On the one hand, we have a very concentrated interest, in one case, Disney, but in other cases, the pharmaceutical industry. On the other hand, there are very diffused beneficiaries of a shorter patent, like the consumers, the consumers of Disney products, or the consumers of every kind of drug. Not surprisingly, in the political arena, the concentrated interests tend to have the upper hand. Certainly this is what happened with copyright. The only defensible line is zero. You actually raise an interesting point, which is that there is a pretty big difference in the amount of time you get for a patent versus the amount of time you get for a copyright.
If anything, I would expect those to be the opposite. We discussed on the last episode that a patent is 20 years. Whereas in copyright law, originally, at least, the idea was that you could double your time by getting an extension, that was the norm. They are people who generally benefit from the copyright laws, because they write books. And so, they are very much in favor of extending the copyright law, and they care less about patents.
If you look purely from a monetary point of view, I think that we have very strong groups in favor of copyrights or patents in both camps or in both fields. But I think that if we were to extend or try to extend the cost of drugs, you would have a general uproar, and this uproar would probably be led by a lot of intellectuals in the newspapers. Part of me also feels like it has something to do with just the nature of the difference in the two forms of intellectual property.
But I think the public would get angry if you had that protection for a century. Do you actually think, Luigi, that we should just get rid of patents and copyrights altogether? We have plenty of evidence that they create frictions and we should get rid of them. And then, once they come up with a new drug, that will just be available to everyone for much less than they currently are. So, yeah, I agree. Even though I think that. So, I think that by creating the awareness that patents have costs, you will create the political demand to shorten their length and potentially to actually change the patent system.
People who review patents are only given, in some cases, a matter of hours to do this. You have to do a lot of historical searches and then understand the technology. And so, we need to have the funding to give them the time to make the right decisions. And that means that maybe we should also change the funding structure of the patent and trademark office. So, I think that there are some practical changes that need to take place on the patent side. I would actually go back to 15, 20 years or something like that. And we make it so difficult to grant any that de facto we have no patents.
But, you know, the biggest tragedies in humankind have been made with good intentions. And today, I think that the world has changed. I like your framing of capital-was. I think that what we do know is that there is a growing body of evidence that our current patent, as well as our copyright, system has overreached. Speaker 2 : In recent years, a broad fight over the enforcement of patents and what should qualify as a true invention has drawn players from every corner.
It was this honor that was reserved for a few people. And now they have college classes where the whole point is to try to get a patent at the end of the day, or at least submit a patent application. It depends on how influential it is. Why the patent system?
And what are the important things that you need to address, in order to create a functioning patent system? In order to protect his innovation, he kept his secret. So secret that today, I think three centuries later, we cannot reproduce a Stradivarius violin. Now, compare that with the saxophone. The saxophone is an instrument created by Mr. He actually patented the saxophone. He used the patent for a while until the patent expired, and now everybody can produce a saxophone as good as the one that Mr.
Sax invented. So, the patent is a way to ensure protection for a while, but it also makes sure that eventually this information is diffused, because the benefits of diffusion of information are enormous, as we know in economics. And we want to make sure that this takes place. I mean, also, not everyone can keep a secret as well as Mr. Stradivari, apparently. But historically, the way they were maintaining secrets was actually much more violent.
Very often, they were killing people so that the thing would not be reproduced. And yet we still want to encourage innovation but also disseminate ideas at the end of the day. And so, one of the tenets of the US patent system, and actually our fee structure is somewhat designed around this, is that everyone needs to be able to participate, right?
We want to encourage inventions from big companies and small companies. So, we want everyone to be able to apply. But on the other hand, if everyone can apply, then anyone can just submit anything, right? And so, you also want to discourage people from submitting bad patents or getting patents on things that are pretty obvious or have already been invented. So, you need some sort of review system. You need some experts who are looking over these patents and making a decision.
So, in the old days, they had pretty talented people in the patent office. Yeah, I have felt that need before in the past. What are the first things you need to do? This application gives the patent office the time to have a glimpse at the patent and also helps reduce the chance that somebody steals this great idea. And so, for a big corporation to be paying 1, bucks for a patent application is not that much.
The actual fee of filing an application is less than the cost of reviewing the application for the patent office. In fact, if broadening access was not an issue, the optimal system would be a system in which you put in a big deposit, and if your patent is applied, you get most of your money back. And if it is not accepted, then you forego the deposit, because that is a way to discourage silly patents. But if the only concern was to minimize the silly patents and minimize the time wasted by the patent office in reviewing silly patents, that would be, from an economic point of view, the optimal system.
Second, I must prove that this stuff is new and useful. Useful in the sense that it provides utility in using it, and new in a sense that it should be nonobvious and not disclosed to the public before. So, if you would have written an article about your awesome new invention, then that counts as a disclosure, and that would hurt your chances of getting the patent.
And then it becomes unpatentable. Oh, no. Well, if Giuseppe is really angry, we might need to pay him. He might sue us, we might have to pay him damages for early disclosure. I have to read this application, I have to search for prior patents, which for some reason are called prior art. Then, I have to compare all of this prior art with their patent. Then, finally, I make a recommendation. So, in my mind, it seems like all of this should take at least a week.
You know, maybe a couple of weeks if drawn out, but on average, each patent examiner only spends 18 hours on this entire process, including the final recommendation. I think one of the most famous delayed examples is TiVo. So, if I start producing the product while the patent is pending, does this make the product not novel and not patentable?
Should I wait for the patent to produce? But the question of whether other people have also produced a similar product while the patent is pending and whether you can recover money from sales from them, that I think is still pretty gray. The backlog has gotten better. There were , patents in backlog, just in backlog, in , and it was recognized that this was a huge issue. And so, the PTO tried to hire a bunch of people, tried to—. So, he might have been swept up in that. So, yeah, it usually takes a couple of years for it to get approved. Do you have to have a degree?
Do you have to have a. The people reviewing things like hammers are not the same people as the people reviewing AI. And, in fact, the amount of time that you get to review a hammer is a lot less than the amount of time you get to review AI. But an undergraduate degree counts. That means you get 20 years to be the sole producer or licenser of this new technology. Slate, who is definitely not one of our competitors, has implemented your, or a very similar, technology so that people can underline their podcasts.
If you want to go after them, you can sue them in federal district court. And, as of , there is a new law that introduced other, more specific patent courts within the US PTO where you could also sue. And one way to maintain impartiality is to not be too specific in one particular sector. They can decide from an FBI investigation of drug dealing to the patent.
So why, for the patent, do we have this special court? But at the same time, patents are so specific. Are they really the right people to be reviewing such complicated matters? Certainly your expert in patents is much more knowledgeable than a general judge. But he also probably has a different agenda, because what kind of job did he do before being a judge, and especially what kind of job is he going to do after being a judge? And who appoints him or her? Part of the reason that they were strengthened was because of patent trolls, which we can get into in a second.
And so, even though these patent-specific tribunals or these courts already existed, historically, they always upheld a patent. But then, after the passage of this law, which created more of these types of courts, the pendulum swung in the other direction, and it made it much easier to strike down these patents.
The first patent was granted in , so to give you a sense of how the system has changed, in , the US issued about 66, patents, and by , they were issuing , patents. And so, not only the number of patents granted, but also the number of applications, has just exploded in the past 30, 40 years. A big explosion took place around the IT revolution, right? When we were learning about computers, learning about the internet. And a bunch of people started filing patents then. Then, this concept was born of the patent troll. And so, these companies, their purpose is either to buy up a bunch of patents or to file patent applications themselves.
And also as a way to play some games with other, older patents in a kind of mutual exchange. The people who hated these patent trolls are understandably large tech companies who are getting attacked constantly by these patent trolls. Understandably, high-tech companies hated all of this. It is a bit in the eye of the beholder. Some patents that, for example, the pharmaceutical companies receive are completely and exclusively designed not to reward innovation, but to keep people out and to force Medicare, Medicaid, to pay higher prices for the drugs, or to force the insurance company to pay a high price for the drugs.
So, we can claim that many of those patents are basically patent trolls. You do say that Intellectual Ventures is a patent troll. You raise a good distinction. But the reason that they do that is because the patent lifetime is limited to 20 years. And you raise a good point. I mean, we have this year limit on patents.
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In all other circumstances, they require an act of Congress, and Congress is hard to corral. So, you know that when the patent for Prilosec, which is an antireflux drug, expired, the producer, Pfizer, introduced Nexium, which is basically the same chemical formula with a slight variation, but they gave it a patent.
And so, they pushed this Nexium over the Prilosec. The idea of Kyle Bass was to use this special patent system to challenge this kind of pretend patent or useless patent. He was making money by shorting the stock of the company that he was challenging. Prior to that, it was really easy to get patents, and it was really easy to enforce them.
And he was trying to get some reward for it, but he was doing something that was socially good. Unfortunately, his enterprise in this direction did not succeed, because the pharmaceutical industry is too powerful, even in the special courts, or I will say, especially in the special courts. The US patent office decides by itself what are the levels of the fees?
And who appoints the patent office? And they were trying to figure out whether or not the financial constraints of the US PTO actually affected what types of patents were being granted. So, they looked at periods in which the US PTO had some resource constraints, maybe they were a little underfunded. And they compared patent grant rates between the types of applicants that were likely to be repeat patent filers, so good sources of revenue, versus patent filers that were more likely to be one-time patent filers.
And they found that when the US PTO was resource-constrained, they were more likely to grant patent applications to these repeat filers, potentially because they were a good source of business. Think about this: I have a patent, so I am suing somebody else. Imagine that after our episode, Amazon is going to develop for Kindle a product like the one my son Giuseppe wanted to invent.
And my son decides to sue. Is he a patent troll, or is he a legitimate protector of his right? A patent troll, their singular purpose is to aggregate a bunch of patents and to go after claims. But the legal system now has become so antagonistic towards people suing for these sorts of patent claims, or to assert their patents, that it has become much, much harder for someone like your son to win a ruling against a company, like Amazon in this case, because of the lobbying that these high-tech companies did in the early s.
So, he sells the patent to Intellectual Ventures. Intellectual Ventures sues for him. They did not invent anything, but in a sense, they pay my son some money under the expectation they can make that patent hold. The existence of these brokers is useful to reward innovation and make sure that the little guys get protected. They claim to be protecting the little guy. But obviously, in some cases, they can take it too far.
Because—maybe the case is too silly, but if I sue for a stick, how long will it take for a judge to dismiss my case? And probably dismiss my case with some notion that I have to pay some costs, some legal costs, because it was preposterous that I was suing about that. I should be punished by the court system. And that would be the best deterrence against patent trolls.
Not to add a special court system in which, basically, the big companies get huge favors, because many of the lawyers involved work constantly for them and then become sort of an arbitrator in this judicial system. Thus, I think that that is to me a very serious distortion. To put some numbers on that, the share of patents granted to small entities, either individuals or small businesses, those used to be greater than 30 percent of all patent grants in And, as of , it was less than 20 percent, and I think that number is continuing to drop.
Is this something that we should worry about? You need to be part of an organization that invests a lot of money to create those products. And so, you see fewer patents produced by individuals. That would be a natural technological explanation, and I would not be worried about that. I think that one of the reasons that this is a difficult issue to address is precisely what you said.
And so, can we really tell whether this is the fault of these strengthened patent courts? Because the only reason we want to have a patent system is because we think that we have more innovation with it rather than without it. Is that the case? That also includes trademarks as well as copyrights. Harris chair in the economics department, George Mason University.
Welcome to the show, Tyler. Several years ago, I noticed that people were villainizing business, and big business in particular, much more in public discourse. We see this in our politics. We hear it also from President Trump. We have a president who tweets against CEOs. That is unprecedented. And the book came out this April. When cars were invented, they were great, but also, we invented traffic lights, and as a result of traffic lights, the number of people killed per miles driven dropped by a factor of I think that the real question is not whether this business is good or not.
It is whether we want to intervene. So, big business tends to be not very popular in opinion polls, but, say, your local TV-repair person is much more likely to rip you off. So, which works better? It depends. I agree with many of your writings on this topic.
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Sometimes big tech is the recipient of those subsidies. I would do away with those subsidies as much as we possibly can. I would not break up the big tech companies. I would not stop them from competing effectively abroad. Why are people mad at Facebook and Google in particular? I think people are frustrated with the lack of choices and with an invasion of privacy and with the exploitation of personal biases, behavioral biases that we all have. I have a Facebook page. You know, people sort themselves accordingly. At the conference, you mentioned the fact that you can use your email or even your, whatever you say, Google.
Believe it or not, you can still write them letters. There are different levels of advertising on all these media, but plenty of them are ad-free, or close to ad-free, and we pick and choose. Most people do a mix of those. If I am a student and I want to communicate with my university, they often. I have to be on Facebook. It is an essential utility. I use Twitter for very different purposes.
If one of those becomes too burdensome, I just stop using it. The page to me is too cluttered, but not even mainly by ads, just by messages from my so-called friends. But for other people, Facebook works great. I much prefer WhatsApp, a totally clean page. That was awful. So, you have a lot more autonomy to control, pick, and choose what ads you get than you used to.
I see that all my friends are living great lives and have beautiful children. You can switch to something like Snap, for instance. Very commonly young people think Facebook is where old, square people are. It might be addictive for some people in some way, but again, you see an enormous amount of out-movement from all of these services. There are people who read too many novels, listen to too much music, but again, when you evaluate these on the whole.
How many other companies even come close to that? The question is whether we can do better. I think Linkedin is the place to be. So, we need to recognize that there is an intrinsic winner-take-all component in digital platforms. Am I thrilled by it? To me, it's a minor problem. I mean, those are by far the biggest problems most of us have. Online life is a kind of sanctuary. I would rather we had greater protections than we have today. Bigger than a game. That, to me, definitely seems like an oligopoly, and you even admitted in your book that when you were starting your blog, I believe, you were advertising on Facebook.
I hope you do. That those are profits that could have translated to lower prices for consumers. That, to me, is progress. You know that a year ago, both Facebook and Google decided to ban ads of cryptocurrencies. Basically, this amounts to private regulation. Now, you have spoken very often against public regulation. Two individuals who are not accountable to anybody.
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In fact, Mark Zuckerberg controls 60 percent of the voting shares, and Brin and Page control the majority of the voting shares in Google. So, you have three individuals that have more power than any government official. If we take the specific case of not running cryptocurrency ads, there was a general perception, probably true, that quite a high percentage of these ads were just outright fraud. Now, I run a blog, various websites, we used to have ads on the blog.
No more. Probably in this case that was the right private-sector decision. So, I say, great. Now, if you ask, would we be better off in a world where some particular kinds of social media were much more fragmented, would we have a higher or lower quality of ads? I actually suspect the quality of ads would be lower. I mean, look at 4chan or live. So, the issue is not the particular decision, the issue is the principle.
Is it possible that two companies that control 80 percent or 85 percent of the market have the power to regulate you out of existence? If you are a new business, and you want to enter, and they decide you should not enter, basically you cannot enter, because you cannot advertise, you cannot reach your customers.
It is a chokepoint that gives them an enormous amount of power. So, they have the threat point, and they do exercise it. The example of the cryptocurrency shows that they do exercise it, maybe with a well-intended reason, but do we really trust the good intentions of an individual so much? If we ask the general question, the filter of which ads get through today compared to how it was 30 years ago, I much, much, much prefer it today.
No, I would rather we had the current system. The overall configuration of what can be advertised, how many choices, how many options you have, I think has never been better or even remotely as good as it is today. And if Facebook or Google, they make a few bad decisions de-platforming people, that is a shame.
We should be concerned. The ranking of different products by Google tremendously affects the way people buy those products. There are some other experiments done in the political arena that show that the way you rank news, the existing news of candidates, might tremendously impact the way undecided voters would vote. So, basically, you have two people, Brin and Page, who can decide who wins the election in most countries in the world.
The facts are that their ranking distorts choices or affects choices. So, they have this power. Do you want to leave it completely unregulated? There are many significantly positive political effects of Google and social media in poorer countries. There are many cases of propaganda before social media.
Are there cases where social media from the US made foreign propaganda worse? Should we be concerned? You know the difference between average and margin. It is not a dispute. Nobody says we want to go back to the world of the past. The question is, can we do better by regulation? You keep saying that it is better than what it was 20 years ago, which is not answering the question. I think we would be doing much worse.
Even completely honest regulation, the best you can hope for is that things. There are also plenty of search engines. Who is it you want to put in charge of this? Tell me. This is what European antitrust is about. So, are you in favor of blocking Google from entering any other market? So, Alphabet, for instance, is supporting research into driverless cars, correct? These are in the process of becoming products. I favor Alphabet, or earlier it was just Google, being able to do that.
I mean, maybe. But again, in terms of monopoly problems today, that seems really quite remote, and the ability of the internet to help you price-search, including through Google, or just use Amazon to get cheaper stuff, or even just buy online from Walmart, which you can do. It will favor incumbents. It will tend to lead to entry barriers, higher prices, lower quality, right? From an economic point of view, I think there is a case to prohibit Google from entering into businesses in which it is competing in the search component.
Now, you're saying the driverless car. But the moment they have a product, I think they should divest, as they should divest from the shopping network. I think that the case is clear. What does worried mean? Well, yes, you should worry about everything. But if you just prioritize, what are the actual monopoly problems in America? What are the actual unfairness problems?
What are the actual barriers to entry? Something like lack of price transparency in the healthcare sector is, like, literally 50, times a bigger problem. I think it probably is. You know, it has the potential to be part of the solution. Again, I want to flip this and think, how can we change other sectors of our economy so the strengths of Google can be brought to bear on them? I would ask the simple question, how many sources of information are there about driverless cars? Most markets, not all, are pretty competitive. I think that they are in large part responsible for experiencing increases in corporate profits of roughly percent over the past 40 years, whereas real median wages have stayed pretty much stagnant.
And in your book, you talk about how people have good relationships with their employers, have good relationships with corporations, they provide them with food and with meaningful interpersonal interactions. But at the end of the day, corporations haven't provided. To me, the question is, how can we get more businesses in that position? I think if you want to be critical of the American economy, some of this, but not all of the blame falling on business. Look at our stagnant-productivity service sector, at least some parts of it. American business is often too bureaucratic, but I think it needs to be more businessy in a sense, more dynamic, more innovative.
In the medium term, especially in the long term, wages do match to productivity. We need to get productivity higher. It has not all been a big, huge success. But big business for the most part actually has been. I know this literature. Problem number two, since you are in love with all big business. We covered in this podcast, the issue of opioid epidemics, where we have seen business bribing doctors to prescribe drugs.
Our healthcare sector is very bad. In healthcare there are a lot of problems. I very much strongly agree we should enforce laws against fraud much more strongly. That would include not being allowed to pay doctors to prescribe what is, in essence, poison to patients, right? This is a criminal activity. These were drugs cleared by regulators typically, correct? Trump did. It is one reason why he won. We were asleep collectively. But I agree, business is partly at fault for this.
My book does not say everything businesses have. It says there are many instances where people blame business where business in fact has been perfectly fine. So, I absolutely agree that on opioids, alcohol for that matter, cigarettes would be another example, business bears a big part of the blame. And I say as such. I want to ask you a slightly more friendly question, which is also more of a thought question. Say, hypothetically, we do have a monopoly in the US. What do you do in a situation like that? What should the government do? My best guess to date is that it will not work out for the better.
Lawyers in many ways tend to end up either running a company or controlling its culture, and I do think, say, that would hurt the ability of Amazon to compete against Alibaba in other parts of the world. At least traditionally, we think about media and newspapers in a different way. Do you see any concern on that front? I think they will be replaced in some way. I think there are plenty of other ways in which state and local governments have become more transparent. Some of that is social media. There can be rumors which circulate. I think local news will make some sort of comeback.
We are waiting to see what that will look like. Opening more competition by making the social graph portable or by making these closed networks open is definitely capitalism. Will it come to breaking them up? You cannot have searches from letter A to M in one place and from M to Z in the other.
I think that that would probably increase the competition in the market and would overall be a positive thing. We talked a long time ago about House Party, I think, being destroyed or crushed by Facebook. The Facebook-Instagram acquisition is another example. I think that we should be worried about competition from abroad. Companies like Google and Facebook do innovate a lot. They do create great products for us, and we should be careful about overstepping our bounds and not suppressing that creative spirit.
So, I agree with you on this. But in many of these instances, the law has not been broken. The consumer harm is not there, and I would stress the negative secondary consequences of regulation. Luigi, a moment ago, mentioned making the social graph portable, out of Facebook. Well, portable into what?
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It will limit innovation. We all agree? Thanks to you both. Nolan was the head of the political economy subcommittee. Welcome, Nolan. Thank you. Glad to be here. But a second reason, and one that I think is much more important, is that these platforms and the corporations that run them have themselves become very important political actors.
And so what our subcommittee tried to do was try to bring those two issues together and analyze them jointly. They have lots of economic resources. Those economic resources are things that politicians tend to defer to. Politicians, to get reelected, need economic growth and good performance. Secondly, large corporations are often quite politically active. This is certainly true of the major digital media platforms. They engage in lobbying. Why would Facebook and Google care about these sorts of issues? And so, anything that might affect their business models related to advertising would also come under their umbrella.
They too have very large agendas. A very large number of issues are covered by these firms. In fact, if you just look at statistics provided by Opensecrets. A second issue is that they play a role as kind of a quasi-media outlet. So, they have certain First Amendment claims that they might be able to exploit to avoid regulating the content on their platforms. They also are involved in very complex activities — artificial intelligence, data — all of which is fairly nontransparent and opaque, which also makes it less likely to face public scrutiny and accountability.
Unlike most corporations, they have a direct connection with their users and consumers on a daily basis. While Coca-Cola has millions of consumers, their ability to communicate, mobilize, and engage those consumers on political issues is somewhat limited. In a lot of ways, these platform companies are less like corporate lobbyists than like big, major membership organizations such as the National Rifle Association or the American Association of Retired Persons.
Those are claims that these firms often make when lobbying in pursuit of their corporate goals. This is the first time in human history that corporations have all these powers together. Am I right? Perhaps the East India Company in Britain or something like that, maybe. Is there anything that I should have been concerned about? And, if so, what could I have done about it? The printing press is a technological innovation, which had a profound political impact, but its scale was small.
It deconcentrated it.
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Here we have the opposite situation, where we have new technology with a lot of potential to disrupt politics, to dictate the ways in which elections and political discussions take place. Yet at the same time, a power is concentrated into a few hands such that the analogy might be one in which you have a printing press, but with a single entity with the ability to turn off and turn on that press at will. Now, everybody has access to Facebook. Everybody has access to Google. Everybody has access to Twitter.
Why is this necessarily bad? The political effects of social media platforms are both positive and negative. Social media has the potential to be a tool for mobilizing. This has been especially important in authoritarian countries where activists are trying to undertake democratic reforms. Social media allows individual citizens to communicate with one another with very little interference from authorities. People can be mobilized in hate campaigns.
They can be mobilized to engage in ethnic conflict. They can engage in hate speech and rhetoric. They fight very aggressively against this definition, but at the end of the day, Facebook edits the news that they feed in our profile. In fact, it edits them for a very specific purpose, to maximize the time and attention we spend on the platform.
Google does the same with YouTube. This objective is reached by feeding customers more and more extreme news. In feeding this news, Facebook and Google take no responsibility for the content of the news. In Section of that act, there is a special exemption for digital platforms about their responsibility as editors. What do you think about this particular law, and what can be done to fix this problem?
This is one of the most controversial issues that we encountered, was platform liability. They act a lot like media companies, so they should be subject perhaps to defamation laws and all of the sorts of liabilities that go with news publication. Social media platforms may be just too aggressive in moderating speech. If, say, Facebook and Google become too vigilant in terms of policing speech, then that speech will just move to less public, less accountable forums such as certain chat rooms on Reddit, et cetera. However, remember Section simply removes the liability.
It does not remove the editorial power. They still remain in power to edit. They edit what kind of advertising they release. They can decide what is appropriate or not. At some point, they decided that using the logo of Facebook in Facebook ads was bad. As a result, the ad of Elizabeth Warren was edited out. That seems like the worst possible outcome. I think the debate centers upon those who want the maximal amount of free expression and worry that removing liability will be much more restrictive in those people who think that most of what goes on in Facebook and Google should receive more moderation.
You know, the point about monopoly simply is that we would only have the liability and the courts to define proper moderation. I should clarify that. So getting the balance right is very important on these things. But, as you point out, there have been some terrible things that happened with respect to social media. I think the consensus at the committee was that changing the liability laws would not do it, but perhaps other forms of government supervision, regulation, increased transparency might have a much more direct effect without hampering free expression on the platforms in the same way.
We endorsed the idea of creating a digital regulator, a digital authority that would be somewhat empowered to supervise and write rules, facilitate transparency and disclosure within the social media environment. Designing a regulator in such a way that we could balance the concerns that a powerful industry such as social media platforms would have undue influence among the digital regulator and perhaps not regulate enough, not go far enough, with the notion that the digital authority, digital regulator would have to be democratically accountable.
We put forward some principles for designing such an agency. But the main thing that we stressed, and I think this is consistent with the other groups in the conference, was that the digital authority should collect data in real time, should make that data available both to researchers within the government and outside the government, in ways that we can actually better understand how social media platforms generate the political consequences that they do.
The idea that antitrust law as well as enforcers should consider political economy concerns in addition to just the consumer welfare, the traditional economic approach to what makes a monopoly. Does this mean that you disagree with the New Brandeisians? The difficulty we face on the political side is that the research on the political impacts of social media is relatively nascent. I think the first step really is to have the digital authority open the data vaults, make them available to independent researchers, so independent researchers can study these questions, with the goal of perhaps coming up with quantifiable standards for when we might expect additional concentration to have negative political consequences.
I mean, not perfectly, but at least data can be brought to the table. But we lack the methodologies and the data to evaluate those. This should be something that the digital authority should look into. Use its research and facilitate independent research toward the goal of being able to study the question of the extent to which social media concentration negatively impacts political outcomes. Then, once we know that answer, then it can be brought into public policy more readily. But, to be fair, the media subcommittee did look at the aspect of media concentration, and there, there is more of a tradition.
In fact, in the UK, when they look at concentration of media, the antitrust authority brought in some form of citizen welfare, as an alternative to consumer welfare, in thinking about the effect of a merger, and said that even if the merger does not have an impact on price and quality, but it does have an impact on the diversity of information or the potential diversity of information sources, I think that must be considered anticompetitive. Do you have a view on this citizen welfare as an alternative or as a complement, I would say, to consumer welfare as an antitrust criterion?
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If we knew for certain that a particular merger would lead to say more misinformation, more manipulation of elections and deteriorate the quality of democratic governance, that certainly is a merger that should at least receive extra scrutiny. So, the principle is one I subscribe to. But let me take another issue. We can get situations in which clusters of users group themselves into liberal online communities and conservative online communities and communities associated with this group or that group.
But from a social perspective, that might be destructive. So, the question is, before we regulate, we ought to really know how socially destructive this behavior is. If we do decide that such things are destructive, then maybe we do want to force platforms to develop architectures that force people to engage with people that they disagree with.
I guess my view is before we intervene in something as basic as the freedom of association online, we really ought to know how big the social consequences are. Another thing is to limit the power of Facebook and Google to feed you the most extreme stuff to maximize their profits. To some extent, what is new, because people have sorted in ideological communities since the beginning of humankind? What is new?
One thing is the scale, of course. But the other part is how much these communities are fed with the worst and worst because this keeps them attached to their smartphones. But I think as a scholar, we have a responsibility not to leap to those conclusions but to document them as well as we can empirically, to justify regulatory actions that prevent YouTube from engaging in those activities. Why and how donors should use donor-advised funds to invest in innovation toward achieving the UN Sustainable Development Goals. By Andrew Lapin. Journalism corps program Report for America pairs working journalists with resource-strapped local news organizations for a yearlong employment contract.
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