In his column "Robber Baron Recessions" Paul Krugman argued this Monday that American companies have been investing less because of greater market concentration in their industries. Exhibit A for Krugman is Verizon: he contends that it has not sufficiently invested in Fios, a fiber optic system that would accelerate internet speeds. He thus wants more government intervention to police monopoly power and decrease economic concentration. Both Krugman’s claim and his remedy are dubious. Let’s begin with alternate explanations for low corporate investment. The most obvious is government regulation. The Obama administration has been one of the most aggressive regulators in history.…
Yesterday The European Union sued Google under its competition law. This lawsuit shows either that the European Union understands nothing about the way technological acceleration affects competition or that the EU is biased against American companies or both.
The complaint is that Google has monopoly power in search and that it abuses this power by favoring its own services, like its own travel reservation business, in the links it provides to queries. But with a few taps on a keyboard or a click of a mouse, consumers can easily switch from one search engine to another, casting doubt on the EU’s claim that Google has monopoly power. More importantly, technological acceleration makes it very unlikely that Google could maintain an entrenched monopoly in search over the long haul. As people spend more time on their smart phones and less time at their computer, Google’s form of search is increasingly displaced by apps. Another threat to Google is Facebook, which uses the connections of its social network to customize search and advertisements.
The difficulty of maintaining entrenched monopoly in accelerating technologies is not unique to Google.
The latest news from the world of technology suggests that advances in computation may disrupt the legal profession sooner and more broadly than I had thought. Students at the University of Toronto recently designed a new legal search tool, winning a competition for the best use of IBM’s newest computational resource, Watson. Specially designed and programmed, Watson challenged the best Jeopardy players in the world in 2011 – and won. IBM, however, was not aiming at world Jeopardy domination but at making money by invading other more lucrative domains. And it has already spun off a division to exploit Watson’s technology in fields as varied as medical diagnostics and aerospace engineering.
Wisely, IBM has also begun university competitions to interest students in designing new uses for Watson. The result from Canada is Ross, an application expressly designed for legal research. Computerized legal research is itself nothing new, having begun over forty years ago. Today, Lexis/Nexis and Westlaw are better known than any single law firm. But Ross has two advantages over the kind of computerized legal search most of us have known.