It is not surprising that Left-liberals are calling for more government power to regulate and break up information technology companies, particularly when, like Franklin Foer, they worked in industries disrupted by those companies. But it is disheartening to find that the some on the Right are joining the interventionist chorus. To be sure, Silicon Valley leans left on everything but government regulation. It is not clear that this exception is just hypocrisy driven by self-interest or reflects the general political truth that people tend to be most conservative on matters on which they are most knowledgeable. But the Right should be grateful that Silicon Valley, unlike Hollywood and the mainstream media, is an ally on one issue.
Arguments that antitrust rules should be changed to apply to dominant tech firms and not just firms engaged in “monopolization”—the term actually used in the Sherman Act—would both weaken our economy and, even worse, allow government to harass firms based on a vague and manipulable standard. Even beyond the statutory language, there are very good reasons that the law requires the government, before it can apply sanctions, to show both that a firm exercises monopoly power and engages in exclusionary conduct unjustified by a substantial business practice.
First, the desire for a monopoly is not itself a bad thing.
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.
Joseph Schumpeter wrote that one cause of the demise of capitalism would be the steady conquest of the private by the public sphere. To judge by the most recent revelations about PRISM, that may be the demise of democracy too. For this is by far its most troubling aspect: not merely the snooping, from which most of us are probably exempt, but the coopting of the vast private space that once stood between individual and state, which means no one any longer is. The blurring of the border between state and society, not merely the loss of privacy itself, may prove to be PRISM’s most enduring legacy.