That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place.
Clay Shirky, Newspapers and Thinking the Unthinkable, March 2009
Different people draw different conclusions about law-making from this type of problem. For some, we cannot reasonably hope to understand the consequences of law or regulation in a fast-moving world, so we should avoid trying. (Though those who argue that we be slow to apply the antitrust rules in these areas, may also be the same people who argue for the introduction of software patents. What’s sauce for the goose is often not sauce for the gander.)
At the 2009 Fordham antitrust conference, John Fingleton, the CEO of the UK’s Office of Fair Trading, asked the Commission’s Chief Economist, Damien Neven, whether there was a danger in drawing conclusions about innovative changes to markets on the basis of the marginal evidence that would be all that would be available. The context was a debate about the application of the antitrust laws to vertical restraints that affect online trading: should we be more concerned than we currently are about limitations on online commerce.
Leaving aside the specific question for the moment, the real problem with a simple “stay out of it” line, is that it takes the status quo – both in terms of law and markets – as the default state. That might be fine if breaking the status quo were easy. I suspect it’s not:
We must bear in mind, then, that there is nothing more difficult and dangerous, or more doubtful of success, than an attempt to introduce a new order of things in any state. For the innovator has for enemies all those who derived advantages from the old order of things, whilst those who expect to be benefited by the new institutions will be but lukewarm defenders. This indifference arises in part from fear of their adversaries who were favoured by the existing laws, and partly from the incredulity of men who have no faith in anything new that is not the result of well-established experience. Hence it is that, whenever the opponents of the new order of things have the opportunity to attack it, they will do it with the zeal of partisans, whilst the others defend it but feebly, so that it is dangerous to rely upon the latter.
Machiavelli, The Prince, Chapter VI
An early critique of the Chicago school from Machiavelli.
So what is the best way to look at problems of regulation in technology markets? You have to listen to the market participants, but you have to put that information in context: the existing market players will have a different perspective to those who might enter the market in the future:
There’s a common misconception that people who are in favor of a free market are also in favor of everything that big business does. Nothing could be further from the truth. As a believer in the pursuit of self-interest in a competitive capitalist system, I can’t blame a businessman who goes to Washington and tries to get special privileges for his company. He has been hired by the stockholders to make as much money for them as he can within the rules of the game. And if the rules of the game are that you go to Washington to get a special privilege, I can’t blame him for doing that. Blame the rest of us for being so foolish as to let him get away with it.
Milton Friedman, “Individual, Free Markets and Peace“, Cato Policy Report, March/April 1999, Vol. 21, No. 2 (*)
Listening to, and trying to understand, what business is doing is a first step, but only a first step. Business represents its own best interests, as it should, but those interests are not necessarily the same interests as society, and nor can what today’s business says, adequately represent the interests of tomorrow’s businesses.
(*) Not directly relevant to this post but: Friedman goes on from this to conclude that the antitrust laws do more harm than good, on the basis that their enforcement is due to the special pleading of competitors to competition enforcement agencies. That moves from assuming that people act in their own self interest and complain about the actions of competitors (a relatively uncontroversial claim) to assuming that antitrust enforcement is based on these competitors’ complaints, rather than some more objective measure of legal and economic assessment (a rather more controversial claim), but providing only anecdote rather than evidence for that more controversial claim.