A Blog by Jonathan Low

 

Apr 8, 2018

The Anti-Tech Backlash Finds Focus - But That's Not All Bad

The debate may clarify what is at stake. JL

Greg Ip reports in the Wall Street Journal:

The Supreme Court long ago ruled that antitrust law is meant to protect competition, not competitors. “The integrity of antitrust require that successful firms not be attacked simply because they obtain dominant positions." The Justice Department or Federal Trade Commission could hurt by punishing the most competitive companies, (but) both productivity and innovation would be set back. Politicized regulation would add to the uncertainty that businesses regularly complain deters confidence and investment.
In the libertarian rules-breaking culture of Silicon Valley, Washington is the enemy of progress. The last two weeks seem to confirm that as a wave of regulatory and political backlash hammered the stocks of Tesla Inc., Facebook Inc. and Amazon.com Inc.
But to lump all Washington backlash together is too simplistic. Public scrutiny can be good, bad or downright ugly for technological progress and recent events provide stark examples of all three.
The good: Autonomous vehicles could make transportation cheaper, more efficient and safe. But on March 18 a driverless car operated by Uber Technologies Inc. killed a pedestrian in Tempe, Ariz. Five days later in California a driver died when his Tesla crashed while in semiautonomous mode. Arizona Gov. Doug Ducey suspended Uber’s testing and the National Transportation Safety Board launched investigations of both accidents. Experience suggests these investigations won’t shut down progress but instead could help identify and correct flaws in the technology and thus ease the way to commercialization. State and federal regulators are eager for progress in the technology because its benefits are so tantalizing. On regular cars autonomous features such as collision avoidance and lane-departure warning systems and automatic braking have already reduced accidents. Francesca Favaro, a transportation technology professor at San Jose State University, says states are steadily opening roads to autonomous vehicles. She notes that California, which is typically more demanding in its regulation, has now allowed the public to apply to deploy driverless cars that meet the highest standard of autonomous capability. “I think the technology is here to stay,” she says. Ms. Favaro compares current driving technology to fly-by-wire, which in the 1970s helped computers to control aircraft flight; ad hoc certification of the feature came along later. Even now, with rigorous federal certification requirements, plane mishaps can be aggravated because of flaws in the software or in its interactions with pilots.
But she says it has still helped make flying 10 times safer since the 1970s.
The bad: The uproar over how Facebook user data was used to target political ad campaigns exposes an uncomfortable reality: The collection of such personal information is precisely what makes Facebook so valuable to advertisers and thus shareholders. Until now the conventional wisdom was that this was win-win: in return for sharing their information, users get connections, targeted features and ads, and free services such as photo sharing. “In the space of a few months, we’ve started challenging something that seemed unassailable: the value proposition of the win-win,” says Alessandro Acquisti, an economist specializing in data privacy at Carnegie Mellon University. Lost privacy, political manipulation and social media addiction may not carry a dollar sign, but the cost is nonetheless real. At some point regulators and perhaps Congress may have to enact tougher measures to address these concerns. Some critics propose blocking Facebook from acquisitions that expand its dominance of online advertising; others advocate something similar to the European Union’s General Data Protection Regulation, which takes effect next month. Users must give explicit consent to their data being harvested, can demand that their data be deleted, and be able to move their data to competitors. Violators face heavy fines.
That could come with costs. A study co-authored by Catherine Tucker of the Massachusetts Institute of Technology found that in countries with stricter data protection laws, display web ads became much less effective, especially on news sites. In a separate study, she and her co-authors predicted certain data protection rules would disproportionately hurt small and new firms.
But Mr. Acquisti said the total economic effect is more ambiguous. By constraining Facebook’s monopoly power, data protection may transfer profits to competitors such as traditional publishers, and it may increase confidence in internet content and thus usage, he says.
The ugly: There are reasons to worry about the power of Amazon but President Donald Trump’s Twitter attacks have highlighted the wrong ones. He says Amazon package delivery costs the U.S. Postal Service money, while a former postmaster general said in fact the service benefits from their relationship, and the president says the company pays too little tax, something Mr. Trump once said was a sign of business acumen.
He also reportedly wants an antitrust investigation of Amazon because it has put so many traditional retailers out of business. But this isn’t illegal, it’s what innovators do: attract customers with a superior or cheaper service, as Sears Roebuck Co.’s catalogs and Walmart Inc.’s superstores once did. It’s turned retail into a lonely bright spot in U.S. productivity growth: according to J.P. Morgan, online sales per employee last year averaged $1.4 million, nearly five times the level at brick-and-mortar stores.
The Supreme Court long ago ruled that antitrust law is meant to protect competition, not competitors. “The coherence and integrity of antitrust require that successful firms not be attacked simply because they obtain dominant positions,” Carl Shapiro, an antitrust economist at the University of California at Berkeley, writes in a recent paper.
If the Justice Department or the Federal Trade Commission pursued Amazon, it would raise suspicions of subverting this principle to satisfy Mr. Trump, who holds a grudge against its chief executive Jeff Bezos, who also owns the Washington Post. That could hurt in several ways: by punishing the most competitive companies, both productivity and innovation would be set back. Politicized regulation would add to the uncertainty that businesses regularly complain deters confidence and investment.

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