A reader of my post on the podcast with George Will who listened to the podcast asked how I would answer the podcaster’s question of why Facebook is not a power to be checked just as a branch of government is a power to be checked.
1. Facebook’s power is not established by the Constitution. It is a power that emerged from market activity.
2. What the market gives, the market eventually takes away. Only with government protection are monopolies sustained.
3. The history of using government as a “countervailing power” to the private sector is mixed at best. Probably the most positive example one could give is AT&T, which was a regulated monopoly and eventually broken up by a court case. We don’t know what the alternate history would have been had the government stayed out of the telephone market from the beginning, but consumers were generally happy with their phone service before the breakup, and the breakup helped speed the modern communications revolution.
4. There are other prominent cases of government “going after” leading tech companies whose market positions were being undermined by technological forces. For example, the anti-trust case against IBM was launched at the onset of the personal computer revolution, which diminished the importance of the mainframe computer market that IBM dominated. The anti-trust case against Microsoft was launched just as the central role played by the personal computer operating system was diluted because of the Internet.
I’m going to play devil’s advocate here since I think Kling’s post misses the underlying issue with Facebook and Google: data privacy. The fact that these are giant technology companies is incidental; it is not directly about monopoly, size, nor technology.
Rather than IBM and AT&T, the proper analogies are patent medicine (i.e. truth in advertising) and photo release forms (i.e. consent for a 3rd party to publish your image). The question is where do we draw the line in this new world of digital consumer goods and services and all the questions surrounding enforcement of privacy/truth norms. For libertarians, it is about a tradeoff between economic freedom of the provider vs. the civil liberties of the consumer.
As a concrete example, Internet Providers and Mobile Operators have the technology to use their customer data to provide highly targeted real-time advertising. Laws prevented them from doing so (sorry, I don’t have details/links) without explicit customer consent. Should your grocery store be allowed to use images of your face/car/license-plate and extract identifying data captured on their private property? If the grocery store posted a Terms of Use legal agreement on their door that stated you agree to the terms by passing through, would this suffice as consent?
As long as we are dealing with fully transparent voluntary exchange the market vs. government points apply but when the exchange borders on fraudulent and non-consensual action then I’m not sure how to best address the issue.
Of course my favorite alternate history is if Reagan had won the nomination and Presidency in 1976 is whether he place Judge Bork on the AT&T case in 1978 instead of Judge Greene. And the best part of the AT&T breakup was long term change was mobile technology.
There probably was good reason in the 1920s of letting AT&T have monopoly is phone systems were an uncoordinated mess and it simplified everything for a while. And the Bell Labs did have extraordinary new ideas by the early 1962 as evidence with the below short film. However, most of these ideas were not rolled out until years later as a good monopoly knows how to keep service good enough. (This is reality of a lot of power companies right now.)
https://www.youtube.com/watch?v=liAgTFd9Fo4
Yes, competition prompted the Bell Operating Companies to become less complacent and to begin offering Caller ID and eventually internet services. But the Bell Operating Companies still managed to retain much of their power, and have largely crushed rival competitive landline companies. So why don’t you get service from a Bell Operating Company today? Just as with IBM and Microsoft, the thing that ultimately brought down the monopolist was technological change–specifically, as collin observes, the cell phone.
Thus, I can’t say that we can ALWAYS rely on technological change to solve monopolist problems–but it has had a remarkable record of success, whereas the power of antitrust litigation to achieve structural reforms has been much more modest.
Verizon = Bell Atlantic + GTE
Actually, Verizon = Bell Atlantic [=New Jersey Bell, Bell of Pennsylvania, Diamond State Telephone, and C&P Telephone] + NYNEX [=New York Telephone + New England Telephone] +GTE + Vodaphone.
Bell Atlantic and NYNEX were two of the seven “baby Bells”, regional companies formed as part of the breakup of AT&T. Before they merged, they had gone into the emerging mobile communications market with a joint venture, Bell Atlantic NYNEX Mobile.
Facebook HAS faced tech changes, like Instagram and What’s App. So FB bought them.
Tech can’t change / improve too much if the companies get bought — but it’s the buyout possibility which helps convince VCs to fund new start ups. So far.
Facebook and Google both are more scary because they are so PC and anti-Rep. Damore should have won his suit against Google, but didn’t.
The issue here is not about prices, innovation, or quality. All the usual antitrust arguments and considerations are completely beside the point. Breaking up Facebook into a dozen inter-operable facebooks probably wouldn’t solve the real problem.
This matter is distinguishable from ordinary commercial considerations. Speech is different. Ideas are different. De Tocqueville explicitly identified diversity in the ownership of media as an important contributor to the preservation of a open marketplace of ideas.
The capacity to access and use the utterly-dominant media of information dissemination to communicate unpopular ideas is indispensible to the concept of a free society in the same way as “freedom of the press”, i.e., historically, the freedom to own a press and print what you want and publish it in the method of dissemination and distribution and consumption that is common in one’s society.
If in 1790 it turned out there was one giant printing press monopoly, but they wouldn’t sell or license printing presses to, say, abolitionists, then what kind of freedom is that? It’s a Fake Freedom. (Remember, the distinction between Real and Fake will pop up a lot in future rhetoric). In Associated Press v. US (1945), SCOTUS upheld overturning limits imposed by AP by specifically referencing the risk it posed to access to ideas. Half a century later, in the Turner Broadcasting case, SCOTUS upheld “must carry” rules.
So, the point is about discrimination and censorship. The fact that the market has created a power not based in the Constitution but in natural conditions predisposed to monopoly (e.g., network effects, increasing returns to scale), is no different than a natural monopoly for electric companies, which is usually taken to justify some form of regulation.
If one had to choose between antitrust actions on the one hand, and antidiscrimination / common carrier regulation on the other, it seems to me that the latter approach is much more conducive to both healthy commercial incentives and market functioning that the former, and in addition, helps to ensure that the Bay Area ideological monopoly doesn’t abuse its power to put an air-tight muffler on minority opinions.
The problem is not so much with Facebook but with the comparative political advantage that Facebook gets under the campaign finance laws which stifle other corporations ability to advocate their interests. The answer is not to go after Facebook but to deregulate politics so that everyone is competing on a level field. Many more democratic countries have no campaign finance laws and therefore are not only freer than the USA but also less corrupt.
What the market gives, the market eventually takes away. Only with government protection are monopolies sustained.
I doubt this is still true. I can’t really think of any significant innovation from Microsoft in the last decade, but everybody still uses MS Office because everyone else uses it (even though LibreOffice is both free and less annoying). Network effects seem to produce solid monopolies, and that’s certainly relevant to the case of Facebook.
Well I can think of several uncharacteristic innovations from Microsoft recently (Visual Studio Code, TypeScript, SQL Server on Linux, CosmosDB, Office on iOS) and I have nothing but admiration for Microsoft’s strategy and execution since Satya Nadella took over from Steve Ballmer.
Microsoft is now quite competitive with the GAFA giants (Google, Amazon, Facebook, and Apple) and what seems to distinguish GAFA from other Fortune 50 size businesses, both past and present, is an incredible ability to innovate/execute/strategize.
Both Google and Facebook show strong network effects which is somewhat ironic since both were new entrants in what at the time were considered mature markets in Search and Social. Network effects didn’t come into play with Amazon’s Cloud business which faces stiff fast-follower competition from Google and Microsoft but it has continued to out-innovate both. The same seems to be true for each company with its respective leadership product/service. First-mover advantage and dominant platform doesn’t predict success as demonstrated by Apple’s Siri being eclipsed by Amazon’s Alexa products/services.
Unearned leadership does not seem to be an issue in the Web/Mobile/Cloud economy and with Microsoft, GAFA, and the Chinese BATs (Baidu, Alibaba, and Tencent), competent and well capitalized fast-followers are never far behind the leaders. We seem to be in a time of natural monopolies/gorillas in undistorted markets. I think Kling’s claims about the countervailing power of markets is more true than ever.
I agree. Just saw this heading today re: Microsoft
Microsoft doesn’t think Windows is important anymore
Last I checked, Facebook cannot threaten you with prison to take your money or get you to do something. Facebook does not threaten anyone’s liberty. People seem to forget why monopolies are considered “bad”: monopolies produce less than socially-optimal quantities of their product at higher then socially optimal prices. That’s it. Even if Facebook were an enduring monopoly, the result would be that advertisers would pay higher rates relative to a competitive market and, thus, would buy fewer ads. Having fewer ads than socially optimal, while perhaps economically inefficient, is not really a loss of liberty.
The same could be said about Hollywood yet their influence has always been considered potentially dangerous.
Hollywood does not need to be “checked” in the same sense that government power needs to be checked either.
Here’s the issue.
1. Facebook’s current rise occurs under the veil of a particular legal edifice.
2. Different legal edifices lead to different Facebooks.
3. Debating “the Facebook monopoly” is therefore actually a debate over which legal edifices are optimal for the market and society.
4. So why shouldn’t we have this debate?
Your assumption about the importance of legal edifices (as does the Stirner Says assumption about campaign finance law) implies that we should see drastic differences in Facebook’s impact on different populations/nations based on quantifiable properties. I’d be very surprised the numbers back this assumption.
Taking a stab at answering the podcast question:
“Above all, we want to be able to grow into the future, adapting to the times. Since gov’t is the biggest power, we need to continually trim its growth back, lest it dominate and crush all that we want to grow. We let people do what they will because each set of actions is an experiment that reveals a bit more of the future.”
Pinning the argument to growth seems better than the wrong-tool argument as
the latter requires an unspoken efficiency calculus which will fail in extremis: when the non-gov’t power is too powerful, the cost of not using gov’t to make it smaller is greater than the inefficiency losses of using gov’t.
At best, the wrong-tool argument seems to be a front. It seems to require some further statement or analysis of power and threats.