Video on Tech Giants Breakup




The video of my February talk on the tech giants is available!

A teaser: at 7.50′, I do something heretical.

Tx to my UniSA colleague for a fantastic evening.

Hat tip (literally) to Professors Phil Marsden and Spencer Webber Waller for supplying the necessary equipment.

And my gratitude to Professor Pinar Akman who appeared on a UK TV show and inspired the topic of that talk.

Rule-Based Antitrust & the #DeleteConsumerWelfare Movement

FullSizeRenderThe Consumer Welfare (CW) standard is under attack.

It is criticized as under-inclusive (see this Lina Khan piece).

CW’s focus on short term price-effects (and output) allegedly leaves other economic harms unchallenged (and perhaps even political ones). And tech firms benefit from a regime of unjustified per se immunity because they supply free goods and expand output.

As a result, some voices have suggested to do away with CW in antitrust policy. Matt Stoller – a member of the Open Markets Institute – has even tweeted that CW was an instrument of class domination, invented by Robert Bork “to eliminate constraints on plutocrats“.

All of this betrays a fundamental misunderstanding of what CW is, and of what it is not.

CW is not as much an applied decision-making tool as it is a rule designed to lift (some) discretion from policymakers, and with it to insulate them from political interference, rent seeking and crony capitalism.

This struck me as crystal clear as I was reading First Principles by John Taylor. John is a longtime advocate of a rule-based monetary policy.

Here is what he writes in his book:

In any organisation, a clear, well-specified goal usually results in a consistent and effective strategy for achieving that goal. Too many goals blur responsibility and accountability, causing decision-makers to choose one goal some times, and another goal at other times, in an effort to chart a middle course.

In the case of monetary policy, multiple goals enable politicians to lean on the central bank to do their bidding and thereby deviate from a sound money strategy. There is no justification for an independent agency of government to undertake interventions in those areas. They are best left to Congress and the President to handle through the regular appropriations process.

Last, but not least:

Central bank intervention is a poor substitute for sound fiscal policy and it removes incentives for Congress and the President to do their own jobs well

Notice the parallels with antitrust. All those words apply almost equally well to antitrust policy.

The upshot?

If we throw away CW, we are putting antitrust officials in a tough spot. It is not comfortable to face the demands of politicians. Compromizing is the easy exit. And this just does not happen when clear and predictable rules are in place.

The bottom line?

CW may have some limitations in tech markets. But until the literature advances a substitute devoid of its defects, no case has yet been made to #DeleteConsumerWelfare.


Tech Bulls v Bears


The stock prices of Facebook and Amazon seem to be tanking.

In just over two weeks, Facebook stock price lost 13% on account of (alleged) careless privacy ethics.

And every Amazon-obsessed Trump tweet comes with a significant down on share price.

Stock prices movements are predominantly discussed by asset managers in buy v sell terms.

But asset prices also disguise a question of policy interest: can policymakers forbear in light of financial market correction?

Or put differently: can we socially delegate to financial markets the dirty job of disciplining bad players?

As much as I am a believer in economic freedom and open markets, my answer at this stage is no.

In capital market theory, asset prices are just a reflection of expected cash flows. When asset prices go down, this is because investors anticipate less profits.

If, like me, you dont believe in the success of #DeleteFacebook, the share price decrease of Facebook and Amazon can plausibly be imputed to investors’ expectations of stricter privacy regulation or antitrust intervention.

Remove such threats, and the stock price will go up again.

In brief, a credible threat of regulatory intervention is part of the disciplining (bear) effect of financial markets.

In contrast, an institutionalized policy of forbearance would turn the market in the other sense (bull).


Automated Law Enforcement


I have uploaded on ssrn a new working paper on automated law enforcement.

Admitedly, this work and my previous paper on AI are fairly theoretical.

At a high level, both essays discuss the issue of law creation for emerging technologies with uncertain but potentially terminal consequences. Nicholas Nassim Taleb talks of tail events.

I am looking for comments on this paper and the previous one.

Both are works in progress, and should appear in a book at some point.

A quick and dirty note on FB, competition and individualism


If there was competition, we’d not be stuck with Facebook (FB).

In a competitive market, bad behavior is not left unpunished. Users flee in droves to the next best alternative.

Yet, moving to Instagram (that’s FB btw) or Snap does not even make second best (except perhaps for youngsters). Until now, #DeleteFacebook has not picked up much network effects.

Or perhaps we are looking on the wrong side? A very thorough paper from the Wall Street Journal suggests that there is pushback from upstream advertisers. Query what the end equilibrium will be.

As an aside,  I can’t help but thinking that we are individually as much part of the problem, as of the solution (note to readers: the following may be the byproduct of me being on a sabbatical at the Hoover Institution, though I am always intellectually suspicious of ideology).

For indeed, we’ve built FB as our digital lives repository.

As is well-known, prohibiting drug usage does not starve addiction. Education is key. Yet, the pundits make the case agst FB, w/o ever talking of people’s digital exhibition or of our own lack of curiosity.

We live in a strange world. We’re treated as infants. We’re considered unable of critical thinking and of interest for the other side.

Perhaps, we should think more about what we can individually do, instead of letting States roll out content police and other Orwellian evils.

As far as I know, it’s people who put a ballot in for Trump and Brexit. And until now, there’s been no app for that.

FB’s Privacy SNAFU


4 quick thoughts – with links – on FB’s recent mess.

1/. But for Cambridge Analytica’s fraudulent grab on data – and Russian ads  – it is still  pretense to claim that Donald Trump would not be President. And more generally, all the disorders of the world cannot be blammed on bigtech; the elephant in the room being: do we individually share responsibility here?

2/. There are rogue agents everywhere, not only in bigtech. What we are witnessing here may just be classic lone wolf stuff. Remember Nick Leeson, Bernie Madoff or, more recently, Elizabeth Holmes? (here’s a good story on Theranos BTW). Hopefully, the investigation will cast light on whether we have here a systemic problem, worthy of regulatory attention.

3/. Scale – or size – is a liability, a point often forgotten by tech breakup activists. Large organisations face higher costs detecting opportunistic conduct. But with bigtech, this problem is squared. Surveillance operations must be conducted within the organisation (here is a quite sensational piece on leaks to the press) as well as outside, with users’ communities on all edges of the platform. The decadence of MySpace or – less well-known – Chatroulette – both terminologically and semantically – are good proof of this. Moazed and Johnson show it very convincingly in their book on modern monopolies.

4/. In addition to market (competition), technological (disruptive innovation), and legal (regulation) risks, bigtech faces deadly moral threats. As we can already gather from the stock markets (here and here), carelessness with cultural, ethical or moral issues comes with a price. Query whether this could trigger churn in users, and eventually reverse networks effects.