The economics of network effects has turned out to be more complicated than the older theory suggests. Internet companies offer multisided platforms whose network effects are indirect between different kinds of customers say, smartphone users and app developers rather than direct effects between the same kind of customers such as telephone callers.
These multisided platforms face a much more difficult challenge of attracting customers; they are much more likely to fail during their startup period than a telephone company, which is the model of the older theory of network effects.
The new firms also must attend more to attracting the right customers than simply adding customers. Finally, network effects can go in reverse; customers may use multiple platforms and migrate to some of the alternatives. Although a few tech companies dominate some markets, that does not mean these firms can never be displaced. Do alternatives exist for those excluded from social media platforms?
The rapid rise of social media might suggest traditional forums for speech no longer matter, but that is far from true. Traditional public forums continue to exist along with traditional media such as newspapers and television. Such forums are protected, of course, from government censorship. In fact, most people still get most of their news from such sources.
Even speakers excluded from major platforms such as Facebook and YouTube can find a home for their speech somewhere else on the internet. LiveLeak, while less reputable precisely because of its willingness to host graphic content, will deliver video to viewers just as effectively as YouTube.
There are also platforms that are not specifically dedicated to video hosting or sharing but are often used to do so. Not only is it important to recognize that alternatives exist, but that alternatives can continue to come into existence to meet user demand for differing standards of moderation.
For several months, YouTube rules concerning videos containing firearms have shifted repeatedly with little transparency. The operators of gun review channels found their videos repeatedly demonetized, and some were banned for running afoul of opaque rulesets.
A group of firearm enthusiasts decided to start a YouTube competitor, called Full30, which catered to the tastes of gun owners. Several popular firearms channels on YouTube have moved to the site. But even if firms dominate their markets, will government regulation deal with the problem or make it worse? The nation has had experience with similar regulation of communications for similar reasons regarding broadcasting. Such regulation reinforced the market dominance of large firms and threatened freedom of speech.
The federal government claimed control of the broadcasting spectrum in the s. Between and , the FCC allocated a large part of the spectrum for television broadcasting. To use the spectrum for television broadcasting required a license from the FCC. Such restrictions inevitably constrain competition for the benefit of incumbent firms. Those changes, however, came after decades of the FCC restricting competition in broadcasting markets. The effects of FCC regulation on freedom of speech may be summarized briefly.
The equal time would not be reimbursed, which meant the requirement acted as a tax on the original broadcast speech. Such stations could not afford to supply a great deal of free time.
Kennedy operatives arranged for more than 1, letters to be written demanding equal time at these stations, leading to 1, hours of free broadcasting. This effort to suppress speech was deemed a success by the administration and continued in the Johnson years.
Administration officials threatened the local licenses of the networks both publicly and privately, seeking more favorable coverage. The public effort appeared to fail, but Thomas Hazlett has shown that privately network officials were quite compliant with the wishes of the administration. The history of broadcast regulation suggests that increasing state control over social media would have a chilling effect on speech.
Over time, both political parties might be expected to threaten any speech they find abhorrent. The monopoly argument for regulating social media has weaknesses. We have reason to think the current market positions of large social media companies may not persist because network effects operate differently than in the past.
In any case, speakers have alternatives if they are excluded from a specific platform. Finally, it should not be assumed that government regulation will produce more competition in the online marketplace of ideas.
It may simply protect both social media owners and government officials from competition. Consider how political speech works in the world outside the internet. People have views about politics. They associate with others to discuss and perhaps debate those views. Perhaps they seek out others with similar views because Americans do not like conflict and confrontation. Such associations reflected other human failings such as confirmation bias and prejudice.
This tendency no doubt did harm to society: debates were less rich and less probing than they otherwise might have been, and citizens were worse off than they might have been if they had learned the errors of their ways through a fuller debate. Yet few called for the government to compel associations to hear speakers with different views. The internet facilitated the exchange of views about everything, including politics.
One might see this as a tremendous success both in fostering speech and association or in satisfying individual preferences. Our highest aspirations are said to include meeting the demands of citizenship in a deliberative democracy. Sunstein denies that freedom in general means freedom from coercion by the state. Individuals might be free of state coercion yet unfree because they make choices that preclude their own development. Individuals may prefer, for example, to hear only a subset of all views about a political topic.
Indeed, they may prefer to hear little about politics. Sunstein offers an extended argument that people online pursue their own interests to the exclusion of public information and debates. Particularly, they do not come across ideas and arguments they might not seek out. Instead, they form bubbles that filter out opposing views and echo chambers that merely repeat the views already held by the individuals in them.
It is even possible, Sunstein notes, that social stability could be put at risk. But the real problem seems more prosaic and political: If diverse groups are seeing and hearing quite different points of view or focusing on quite different topics, mutual understanding might be difficult and it might be increasingly hard for people to solve problems that society faces together.
By enabling and respecting individual choices, the internet complicates and even undermines both the diversity and the unity needed in a deliberative democracy. More diversity of views would improve the disharmony of the internet enclaves, and more unity across enclaves would militate against social and political fragmentation. We can imagine people choosing to avoid unpleasant people and views while affirming their prior beliefs.
Such choices might be the easiest way forward for them. But the logic of this position does not entail its empirical accuracy. Communications researcher Cristian Vaccari notes that. Whether people use these choice affordances solely to flock to content reinforcing their political preferences and prejudices, filtering out or avoiding content that espouses other viewpoints, is, however, an empirical question—not a destiny inscribed in the way social media and their algorithms function.
For example, several studies published in and earlier indicate that people using the internet and social media are not shielded from news contravening their prior beliefs or attitudes. Did the election change these findings?
Several studies suggest doubts about filter bubbles, polarization, and internet use. Three economists found that polarization has advanced most rapidly among demographic groups least likely to use the internet for political news. The cause internet use was absent from the effect of interest increased polarization. They had panel data and thus could examine how internet usage affected the attitudes of the same people over time. The people who used Facebook for news were more likely to view news that both affirmed and contravened their prior beliefs.
Several recent studies have focused on either the United States and other developed nations or just European nations alone. Perhaps data and conclusions from other developed nations do not transfer to the United States. Even if we put less weight on conclusions from Europe, such results bear more than modest consideration.
In , Vaccari surveyed citizens in France, Germany, and the United Kingdom to test the extent of filter bubbles online. Ideological echo chambers and filter bubbles on social media are the exception, not the norm.
Based on these estimates, between one in five and one in eight social media users report being in ideological echo chambers. However, most social media users experience a rather balanced combination of views they agree and disagree with. If anything, the clash of disagreeing opinions is more common on social media than ideological echo chambers. Another recent study of the United Kingdom found that most people interested in politics who select diverse sources of information tended to avoid echo chambers.
Only about 8 percent of their sample were in an echo chamber. The authors urge us to look more broadly at media and public opinion:. Whatever may be happening on any single social media platform, when we look at the entire media environment, there is little apparent echo chamber.
People regularly encounter things that they disagree with. People check multiple sources. People try to confirm information using search. Possibly most important, people discover things that change their political opinions. For Sunstein, the aggregate of individual choices about political speech and engagement on the internet does not serve well the cause of republicanism.
Sunstein might disagree, and perhaps a maturing literature will support regulations to fight such bubbles. But Sunstein proposes restrained efforts to make internet users better citizens. If the literature cited in this report is correct, there is even less reason to regulate social media in the name of democracy.
Forcing people to read and interact with views they dislike or abhor implicates liberal values such as free speech and individual liberty. On the one hand, we may wish that people were more and better informed about politics; on the other hand, we may doubt the wisdom of forcing people to engage in public matters. If filter bubbles threatened popular government, the case for public action might have improved.
But studies do not support that proposition. Government traditionally protects the homeland from its enemies. A standard textbook explores the complex meaning of national security:. The term national security refers to the safeguarding of a people, territory, and way of life. It includes protection from physical assault and in that sense is similar to the term defense. Our concern here is whether the government should increase its power over internet speech to achieve national security.
That question inevitably concerns the relationship of speech to violence. But internet speech may involve other aspects of national security. The clearest example of a threat to national security would be attacks on or occupation of the homeland or its citizens.
Terrorist groups … use the Internet to disseminate their ideology, to recruit new members, and to take credit for attacks around the world. In addition, some people who are not members of these groups may view this content and could begin to sympathize with or to adhere to the violent philosophies these groups advocate.
They might even act on these beliefs. Some have argued for stricter limits on terrorist speech. Posner concedes that his proposed law violates the First Amendment under current doctrine. However, he is hopeful that the current war on terror will permit new restrictions on speech that would have been held invalid in less demanding times. In the past, he remarks, war has supported such restrictions. Posner seems concerned about two harms caused by speech that favors terrorism: the harm done to vulnerable individuals who end up being punished for materially supporting terrorism and the mayhem caused by the speech.
Liberal governments generally do not protect people from the consequences of their beliefs; however, they do protect other people from those consequences if they are directly related to speech. Hence Posner rightly worries about violence caused by terrorist speech, a concern that informs the incitement exception in First Amendment doctrine. But his example, which is that U. There is little doubt they might cause harm in the future, but we have no evidence they have done so because of hearing speech.
Courts have consistently refused to hold social media platforms liable for terrorist acts. Plaintiffs allege no connection between the shooter, Abu Zaid, and Twitter. More broadly, any standard of liability that might implicate Twitter in terrorist attacks would also capture transport providers, restaurateurs, and cellular networks. All these services are frequently used by terrorists, though they cannot be seen as uniquely instrumental in the realization of terrorist plots.
A Twitter account is not an unalloyed boon to terrorists. A public social media presence provides opportunities for counterspeech and intelligence gathering. In some cases, state security services have asked social media platforms to refrain from removing terrorist accounts, as they provide valuable information concerning the aims, priorities, and sometimes the locations of terrorist actors. As Posner notes, social media platforms have policies against terrorist speech.
We do not permit terrorist organizations to use YouTube for any purpose, including recruitment. YouTube also strictly prohibits content related to terrorism, such as content that promotes terrorist acts, incites violence, or celebrates terrorist attacks. Facebook and Twitter have similar policies, though they attempt to limit the subjectivity of terrorism by tying it to violence against civilians. You may not make specific threats of violence. You also may not affiliate with organizations that—whether by their own statements or activity both on and off the platform—use or promote violence against civilians to further their causes.
Social media moderation may be more effective than the increases in government power desired by Posner. But that effectiveness may have been acquired by narrowing the kinds of speech heard on those platforms. However one assesses that narrowing, the case for more government power here remains at best unproven. Electoral Integrity. Many believe that protecting national security also means preventing foreign powers from influencing American elections.
In February , Robert S. Mueller III, a special counsel to the U. Department of Justice, indicted 13 Russians for intervening in the U.
Of course, this was speech by foreign agents, which presumably makes all the difference. But should it? The First Amendment does not refer to speakers but rather to speech , which is protected from government abridgment. It might be assumed that foreign agents seek to do harm to the United States through speech. Lastly, social media users may have a right to receive materials from foreign speakers.
Such a right would belong to a reader or listener rather than the speaker; the Russian speakers in this case have no right. In , the Supreme Court invalidated a law requiring readers to sign at the Post Office to receive communist publications. The act of signing chilled a presumed right to receive a publication from abroad. It is true that the First Amendment contains no specific guarantee of access to publications.
However, the protection of the Bill of Rights goes beyond the specific guarantees to protect from congressional abridgment those equally fundamental personal rights necessary to make the express guarantees fully meaningful … I think the right to receive publications is such a fundamental right.
The dissemination of ideas can accomplish nothing if otherwise willing addressees are not free to receive and consider them. It would be a barren marketplace of ideas that had only sellers and no buyers. The Peking Daily was printed on paper; Russian speech appeared online. In this case, national security seems to have outweighed freedom of speech. But that conclusion is somewhat misleading. In fact, the United States both censors some foreign speech and permits other speech with disclosure of the source.
Government regulations. From the Interstate Commercial Commission after the Civil War to the Freedom of Information Act, government has issued regulations to protect and stabilize markets and businesses. And for as long as there have been regulations, there have been businesses complaining that excessive regulations have cramped their profits, ruined the market, and even destroyed freedom.
Some regulatory costs can be justified by their clear reductions in illnesses, deaths and associated medical costs. Other regulations maintain fairness in employment and among businesses. Still others seek to bring about quality environmental protection and yield various monetary and health-related benefits. Not only that, but U. These are environmental benefits which, in economic terms, may far outweigh the regulatory impositions on businesses.
Other regulations on industries can bring about new jobs. It also provides grants, advice, training, and management counseling. The Commerce Department helps small and medium-sized businesses increase overseas sales of their products. An often overlooked service that the government provides all businesses is the rule of law. The U. Patent and Trademark Office offers protection of inventions and specific products from illegal infringement by competitors, thus encouraging innovation and creativity.
Patent and trademark violations are punishable by hefty fines and subject to civil actions that can be costly if the defendant loses. On top of all of this, the government occasionally takes extraordinary steps to protect businesses in dire economic conditions. Other economists insist that the government should not have intervened and that free markets should have been allowed to weed out business failures.
No matter which side you agree with, there is little doubt that the corporate world would look very different without these programs.
The government can be a friend of business, providing it with financial, advisory, and other services. It can also be a friend of the public, creating and enforcing consumer-protection, worker-safety, and other laws.
Unfortunately, governments also have a long history of trapping nations into patterns of long-term decline through overregulation.
This conflict will probably never be completely resolved because there will always be disputes between different segments in any society. As technological breakthroughs continue, the dual nature of the government's relation to businesses may become increasingly regulatory and collaborative at the same time.
The key to success may be preserving the government's role as a neutral referee even as the rules of the game keep changing. Federal Trade Commission. Government Accountability Office. Environmental Protection Agency. Securities and Exchange Commission. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
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Just because CBA of government regulation is difficult and complex does not mean we should not do the best we can to make comparisons. But in the case of regulation, thorough CBA is rare. The result is that the proponents of government regulation often receive a free pass, a kind of benefit of the doubt in their advocacy for more laws and rules. The burden of proof falls on the opponents and critics of government regulations to muster the case against.
However, from an economic point of view, this is exactly backwards. The onus of proof, and the duty to clearly demonstrate that benefits exceed costs, should fall squarely on the shoulders of those who propose new regulations, and it should be incumbent upon them to answer the arguments of opponents in the public forum.
Otherwise, the special interest demand for more regulation will be virtually infinite, since regulation advocates will not be forced to bear the cost of producing sound supporting evidence in the form of rigorous CBA.
The result is the continued stifling and throttling of market competition and marketplace efficiency, to the benefit of only a few narrow interests.
They act as hidden taxes that drive up prices for consumers, create barriers to entry that suppress competition and innovation, serve as protection from competition for established firms and the politically influential, are redundant on the self-regulating forces of the marketplace, violate property rights and the rule of law, lead to confusion and uncertainty in business investment and entrepreneurship, and their costs will tend to exceed their benefits unless subjected to rigorous cost-benefit analysis and a thorough vetting process.
Tom Lehman. May 19, Share This. What are some of the economic arguments against government regulation? The only differences between a tax and a regulatory cost are: a the tax at least generates some revenue for government, and b the tax is typically more transparent and easier to measure relative to regulatory cost burdens, which tend to be hidden; the higher prices paid by consumers are not as easily traced back to their regulatory source.
So, for all these reasons, government regulations pose serious threats from undetected costs and adverse consequences. More From Capitalism. Don't Be an Entrepreneur. It'll Suck the Life Out of You. Introducing The Grind. All Rights Reserved. Privacy Policy.
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