Author: Ramsi Woodcock

Categories
Antitrust

Forbidden Fruit

As if to remind those who might still be confused about what the antitrust movement against the tech giants is really about, newspapers are now making common cause with app developers to force Apple to delay new privacy protections that would have allowed app users to opt out of targeted advertising.

That’s right, the same newspapers that have been savaging the tech giants for years as evil privacy foes are fighting to stop Apple from making it harder for app developers to exploit your data.

Why? Because newspapers make money from advertising, of course. They are some of the app developers who want to continue to spy on you.

Does newspapers’ double-dealing on privacy suggest that their position on the tech giants more generally is driven by their bottom line rather than the goodness of their hearts?

You bet.

It is an interesting coincidence that newspapers have been busy trashing the tech giants—running articles accusing them not just of privacy violations but everything from monopolization to the addiction of children—just as the tech giants have out-competed them in their principal business line: the distribution of advertising.

Google and Facebook distribute advertising far more effectively than do newspapers because, as the Times itself recently explained:

consumers interact with [Google parent Alphabet] nearly every time they search for information, watch a video, hail a ride, order delivery in an app or see an ad online. Alphabet then improves its products based on the information it gleans from every user interaction, making its technology even more dominant.

Katie Benner & Cecilia Kang, Justice Dept. Plans to File Antitrust Charges Against Google in Coming Week, N.Y. Times, Sept. 3, 2020.

Consumers never will interact with news websites as much as they interact with these platforms, and so the product that newspapers offer to advertisers—ad distribution—will never be as effective as the product that Google and Facebook offer to advertisers. The result has been an exodus of advertising dollars from newspapers—which, along with television, were once almost the only game in ad distribution town—to the tech giants.

What newspapers should have done in response to this tech-driven decline in their ad-based business model was to cut the cord with advertising. For advertising, which is all about manipulating readers into buying products they don’t really want to buy, was always a bad fit for a news industry devoted to providing consumers with the information they need to engage in independent decisionmaking.

Newspapers should therefore have seized the opportunity presented by the decline in their advertising revenues to seek out public funding à la the BBC for what is, after all, a sacred public function.

Instead, the industry has appeared to embark on a campaign to scare the tech giants into paying them a share of their advertising revenues. Consider:

  • The “tech-lash” splashed across newspaper front pages over the past decade. That looks an awful lot like a message from media to big tech: pay up, or we’ll wreck your reputation. Of course, that could just have been driven by newspapers’ concerns about privacy. But newspapers’ opposition to Apple’s privacy safeguards today gives us the answer: not likely.
  • The drumbeat of articles about courageous antitrust scholars daring to take on big tech. (Nevermind that few of them actually are antitrust scholars.) That looks an awful lot like a message from media to big tech too: pay up, or we’ll get the law to break you into pieces. Of course, that could have been driven instead by newspapers’ concerns that there’s too much concentration in America. But the News Media Alliance’s multi-year campaign for an antitrust exemption that would allow newspapers to cartelize gives us the same answer: not likely.
  • The House antitrust investigation into big tech, led by a congressman who has been doing the bidding of the News Media Alliance. That too looks an awful lot like a message.
  • The fawning story in the Times about Tim Sweeney, CEO of Epic games, maker of Fortnite, who is leading an antitrust “crusade” against Apple in search of lower fees. That does look like a message to Apple. (And while I’m on this subject—funny how the article doesn’t mention the Times’ massive conflict of interest in reporting the story. For the Times is publicly supporting Epic, and demanding lower fees for their apps too. But a reader of that article wouldn’t know it.)

It has been a successful campaign so far. If the pen is mightier than the sword, it is perforce mightier than the microchip. The tech giants have already started to open their pocketbooks. It will be interesting to see how badly they cave.

Of course, there are limits to the amount of sympathy one can feel for Google or Facebook. Those companies may be better at what they do than newspapers, but they are better at doing something antisocial: the spying and manipulation that constitute modern commercial advertising. The newspapers’ fight to get cut in on the spoils is ugly, but one set of rogues deserves another.

But Apple is different. The company makes most of its money selling products that genuinely make life easier. And as the company has not tired of reminding us, the fact that its business is not mainly advertising means that its interests are more closely aligned with those of consumers when it comes to privacy than are the interests of any other player in this fight.

Which is why the newspapers’ attacks on Apple are a new low.

For a time, not competing with newspapers for advertising seemed to buy Apple some safety from the media’s antitrust crusade. But when the antitrust shakedown seems to be working against companies that wiped out your old-economy advertising business, why not extend it to one that wants to put the screws on your new-economy advertising business, and see if you can extract lower app store fees while you are at it?

Today’s antitrust movement against big tech may be many things to many people, but one thing it’s not is a progressive movement, even if some of its proponents delight in wrapping themselves in the progressive banner.

That should have been obvious to anyone watching the movement attract Trump Administration backing in assaulting what are probably the most progressive corporations ever. (It’s not normal for corporate employees to block management from accepting lucrative military contracts, and then not get fired.)

But at least now it is completely clear. For “when they tasted of the apple their shame was manifest.”

Categories
Antitrust

You Furnish the Briefs

No court has ever, in 130 years of antitrust practice in the United States, taken the position that dominance in and of itself, absent bad conduct, is illegal. But if you were a reader of The New York Times, you could be forgiven for thinking that as a matter of American law big is bad:

Alphabet was an obvious antitrust target. Through YouTube, Google search, Google Maps and a suite of online advertising products, consumers interact with the company nearly every time they search for information, watch a video, hail a ride, order delivery in an app or see an ad online. Alphabet then improves its products based on the information it gleans from every user interaction, making its technology even more dominant.

Katie Benner & Cecilia Kang, Justice Dept. Plans to File Antitrust Charges Against Google in Coming Week, N.Y. Times, Sept. 3, 2020.

Google is an obvious target for the Times, of course, because Google has eaten its lunch in the competition for advertising dollars. But it’s not an obvious target for anyone who knows something about antitrust, which isn’t in the business of smashing firms that win by being better.

But The New York Journal got its war by whipping Americans into a frenzy against an enemy of its choice. Why shouldn’t The New York Times get its antitrust case against Google?

Unlike in 1898, however, the only Americans who have actually been whipped into a frenzy are the elites: surveys show that Americans still love Google and the other tech giants, at least when they’re not being asked leading questions like: should the government “break up tech companies if they control too much of the economy?” (Actually, the best thing about the surveys is that the tech company Americans like least is the one that elites probably like most: Twitter.)

I suppose that it’s only the elites who matter, however, even those who might pretend not to read the Times. AG Barr is so intent on rushing out a case against Google, presumably because he’s been blinkered into thinking it will clinch a win in November for President Trump, that his line attorneys are in open revolt:

Justice Department officials told lawyers involved in the antitrust inquiry into Alphabet . . . to wrap up their work by the end of September[.] Most of the 40-odd lawyers who had been working on the investigation opposed the deadline. Some said they would not sign the complaint, and several of them left the case this summer.

Katie Benner & Cecilia Kang, Justice Dept. Plans to File Antitrust Charges Against Google in Coming Week, N.Y. Times, Sept. 3, 2020.

As PBS tells it: “Remington, who had been sent to Cuba to cover the insurrection, cabled to Hearst that there was no war to cover.” Hearst replied: “You furnish the pictures. I’ll furnish the war.”

Categories
Civilization

Clearly Ruskin Wouldn’t Have Had Trouble Defending a Liberal Arts Education

Taste is not only a part and an index of morality; — it is the only morality. The first, and last, and closest trial question to any living creature is, ‘What do you like?’ Tell me what you like, and I’ll tell you what you are. . . . ‘Nay,’ perhaps you answer; ‘we need rather to ask what these people and children do, than what they like. . . .’ But they only are in a right moral state when they have come to like doing it; and as long as they don’t like it, they are still in a vicious state. The man is not in health of body who is always thinking of the bottle in the cupboard, though he bravely bears his thirst . . . . And the entire object of true education is to make people not merely do the right things, but enjoy the right things: — not merely industrious, but to love industry — not merely learned, but to love knowledge — not merely pure, but to love purity — not merely just, but to hunger and thirst after justice. . . . What we like determines what we are, and is the sign of what we are; and to teach taste is inevitably to form character. . . . [A] nation cannot be affected by any vice, or weakness, without expressing it, legibly, and for ever, either in bad art, or by want of art; and that there is no national virtue, small or great, which is not manifestly expressed in all the art which circumstances enable the people possessing that virtue to produce.

John Ruskin, Unto this Last, and Other Writings 234-235 (Clive Wilmer, ed. Penguin Classics 2005) (1862).
Categories
Civilization

Ruskin’s Conservatism

As I was thinking over this, in walking up Fleet Street the other day, my eye caught the title of a book standing open in a bookseller’s window. It was — On the necessity of the diffusion of taste among all classes. ‘Ah,’ I thought to myself, ‘my classifying friend, when you have diffused your taste, where will your classes be? The man who likes what you like, belongs to the same class with you, I think. Inevitably so. You may put him to other work if you choose; but, by the condition you have brought him into, he will dislike the work as much as you would yourself. You get hold of a scavenger or a costermonger, who enjoyed the Newgate Calendar for literature, and ‘Pop goes the Weasel’ for music. You think you can make him like Dante and Beethoven? I wish you joy of your lessons; but if you do, you have made a gentleman of him: — he won’t like to go back to his costermongering.’

John Ruskin, Unto this Last, and Other Writings235 (Clive Wilmer, ed. Penguin Classics 2005) (1862).

In the event, it was tastes that diffused, and diffused up rather than down, and taste that disappeared, instead of classes.

Categories
Antitrust Monopolization Regulation

Antitrust’s Robocall Paradox

Today’s antitrust movement loves to point to the breakup of AT&T as an example of what antitrust enforcers can do when they put their minds to it. The only problem is that the breakup of AT&T was a disaster, and The Wall Street Journal has kindly provided a new example of that today: robocalls.

The breakup of AT&T was a politically-motivated hit, a Nixon-originated project that became the only monopolization case carried through to a conclusion by a Reagan Justice Department that otherwise wanted nothing else to do with antitrust. The target was widely recognized as the standard bearer of progressive managerialism and a leader in progressive labor practices. (Remind you of some other firms that have found themselves in the cross-hairs of an otherwise do-nothing Antitrust Division today?)

The country has little to show for the breakup forty years later. It didn’t eliminate the fundamental bottleneck associated with telephony: the massive last-mile infrastructure required to get calls into consumers’ handsets. That infrastructure is today mostly owned by just three firms, the new AT&T, Verizon, and T-Mobile, because it exhibits great economies of scale.

While the breakup did bring down long-distance rates, that’s a bug, not a feature. The only reason the old AT&T charged high long-distance rates was because the company was engaged in progressive redistribution of wealth, scalping businesses and well-off long-distance powerusers to the end of providing dirt-cheap local phone access and “universal service” to the masses.

Any economist who knows his Ramsey prices will tell you that’s not the most profitable way to set your rates, because long-distance calling is a luxury, but basic phone access is a necessity (911, anyone?). To get the most profit out of the public, you want to charge high prices for the necessity–because people will pay those prices whatever they may be–and low prices for the luxury. The trouble with that from the perspective of distributive justice is that it’s a regressive rate structure: charging the masses high prices and elites low prices.

Which is just what happened after the breakup of Ma Bell.

The court and later Congress forced the Baby Bells that owned the last-mile infrastructure to connect long-distance carriers’ calls, enabling massive entry into the long-distance market and driving down long-distance rates. But consumers don’t just pay for long distance, they also must pay for basic call connection that allows long-distance calls to reach consumers’ handsets.

The price of that went up, for everyone, not just long-distance callers, because the last mile remained a bottleneck, an infrastructure so expensive that few firms can survive in the market. Which is why the Baby Bells, which controlled that infrastructure, never went away.

Liberated from a dominating headquarters weaned on a New Deal politics that demanded the sacrifice of profits in favor of progressive pricing, the Baby Bells now charged whatever they wanted. At last they could enjoy whatever cream they might be able to skim from a public that needs phone service and has nowhere to go. The fact that they dominated regional markets, but not long-distance, gave them the political cover that hulking monopoly Ma Bell never had.

Free to grow fat, they matured into the tri-opoly we have today, one that has distinguished itself in its adherence to the maxim that the greatest reward of monopoly is a quiet life by supplying America with slower mobile internet service than almost any country in the developed world.

But at least we got competition in long distance, right? Now anyone with $10,000 in working capital and a closet to store some routers can be a long-distance provider. Isn’t that a win for local self-reliance?

More like a win for fraud and robocallers, according to the Journal, in a story about the “dozens of little-known carriers that serve as key conduits in America’s telecom system,” connecting robocalls that “in total bilked U.S. consumers out of at least $38 million in 2019.”

The Journal treads lightly here–after all it’s got as much to gain as any newspaper from the current antitrust campaign against the tech giants that have out-competed the paper for advertising revenue in recent years–but it’s hard to disguise the culprit:

These small carriers took hold in the decades following the 1984 breakup of AT&T’s phone system monopoly, which was designed to lower the costs of long-distance calls. They mushroomed during the introduction of internet-based calling services in the 2000s.

The emergence of these small phone companies was in many ways a positive development for consumers who now pay less for long-distance calls. The downside is that the system wasn’t designed to discern between legitimate and illegitimate calls, which are sometimes mixed together as they are passed along. U.S. regulators generally didn’t require these carriers to block calls and in some cases forbade them from doing so as a way of limiting anticompetitive behavior. Some telecommunications experts say that opened the door for smaller carriers to hustle business from robocallers, or simply turn a blind eye to suspect traffic.

Ryan Tracy & Sarah Krause, Where Robocalls Hide: the House Next Door, Wall Street Journal, August 15, 2020.

Would there have been robocalls if we still had Ma Bell? Unlikely for a company that was so obsessed with control over its network that it famously stamped “BELL SYSTEM PROPERTY – NOT FOR SALE” on every handset in America.

(I do have to admit, however, that another communications monopoly still with us today provides something of a counterexample. The largest category of mail delivered by the U.S. Postal Service is advertising.)

Categories
Miscellany

The Just Price and Discounts for Online Education

Students forced to learn online are demanding tuition reductions. That is a sign that we still believe that there is such a thing as a just price.

The argument for discounts seems to be that the value of the educational product is less when delivered online, so the price should fall. The implication is that product quality, not market forces, ought to determine price.

Economics rejected just price theory when the world rejected God back at the end of the 19th century. In economics, disillusionment was expressed in the realization that price is determined by supply and demand, not value. Think of a diamond whatever you will. But if supply increases, price will fall. And if demand increases, price will rise. Like everything in a world without God, price is relative.

So the economic question posed by the switch to online education is: what’s become of the supply and demand for education in the pandemic?

As an armchair matter, the answer would seem to be: not much.

While some students might choose to forgo school because they believe the quality of online education to be poor, the poor job market suggests that many others will be choosing to return to school. And even if one grants that online teaching is poor in quality, it is more accessible, allowing students who might not have gone to school due to geographic or temporal constraints now to do so. So demand is likely unchanged.

And supply is likely unchanged as well. The poor economy may shutter some schools that were dependent on sports or housing revenues. But the online format allows others to enroll more students from distant markets.

Which suggests that price–tuition–is unlikely to be driven upward or downward by market forces, at least at the industry level.

One complicating factor is competition. The online format could potentially give students more options. It is easier to transfer from a school in California to a school in New York when all that is required is to click on a different Zoom link.

Competition tends to drive prices down. But less so in markets in which the product is highly differentiated. And product differentiation is a huge factor in education, only in education it’s called “reputation.” Students identify with an institution based on legacy status, geographic or sports affiliation, prestige, career networks, and so on, weakening their sensitivity to price in making enrollment choices. The availability of cheap financing (student loans at historically-low interest rates) further reduces the sensitivity to price.

So while competition may put some downward pressure on prices, I wonder if the effect will be large. Schools will likely be able to continue to charge the same tuition rates, despite moving online, because so few students will bail out in response that profits will remain higher than they would be were schools to discount. Indeed, the fact that students are complaining, rather than voting with their feet, suggests that the absence of discounting is not really a dealbreaker for students. It’s more a matter of justice.

But the story does not need to end with market forces. Anger creates social pressure, and that pressure is real.

Although we don’t believe anymore that there is an objectively-verifiable just price, we can still moralize about prices, using the language of progressive law and economics. We can think of the bargaining that takes place between schools and students over tuition as representing a struggle to determine how the two groups share the gains generated by education. To the extent that online education reduces quality, those gains have shrunk. (They have not shrunk at the margin, which is why price is not likely to change much. But they have shrunk inframarginally, reducing the size of the pie.)

In demanding a discount, students are arguing that their share of the gains ought to remain constant. That is, they are arguing that it is not fair to ask them to bear all of the losses associated with constraints placed on the quality of education by the global pandemic, even if market forces dictate that they should.

Schools may reply that their costs have gone up, perhaps because state funding has shrunk, and so they too are suffering losses, leaving students’ share of the gains roughly constant, and therefore just.

So the situation might look something like this:

A.O. Hirschman argued long ago that voice is as powerful a bargaining tool as is exit. Let’s see if that turns out to be true here.

Categories
Regulation

Ruskin on Regulation and Fuller on Choice

Government and co-operation are in all things the Laws of Life; Anarchy and competition the Laws of Death.

John Ruskin, Unto this Last, and Other Writings 202 (Clive Wilmer, ed. Penguin Classics 2005) (1862).

Anarchy and competition are Nature.

Government and cooperation are Civilization.

One can make out the difference in the data, which describes rather nicely why the former is Death (see the part of the plot up to -2000) and the latter is Life (see the part of the plot starting from -2000, when civilization started to take off).

Source: The Longest-Run Shape of the Global Economy: PRELIMINARY AND INCOMPLETE: The Honest Broker for the Week of June 14, 2014, Grasping Reality with Both Hands: The Weblog of Brad Delong, June 8, 2014.

Ruskin also makes of regulation an axiom. He writes:

The word “righteousness” properly refers to the justice of rule, or right, as distinguished from “equity” which refers to the justice of balance. More broadly, Righteousness is King’s justice; and Equity Judge’s justice; the King guiding or ruling all, the Judge dividing or discerning between opposites (therefore, the double question, “Man, who made me a ruler . . . or a divider . . . over you?”) Thus with respect to the Justice of Choice (selection, the feebler and passive justice), we have from lego, -lex, legal, loi, and loyal; and with respect to the Justice of Rule (direction, the stronger and active justice), we have from rego, -rex, regal, roi, and royal.

John Ruskin, Unto this Last, and Other Writings 191 (Clive Wilmer, ed. Penguin Classics 2005) (1862) (emphasis mine).

To which one might append: regulation.

Thus there are two kinds of governance, that which strives only to prevent discrimination, but which otherwise is laissez faire. It is ultimately juridical in nature, directed at fairness. And then there is regulation, governance as guidance.

The implication is that good government must both equalize and guide. It must not only ensure that each member of a particular fare class has an equal chance of getting the middle seat (lex), but also command that the seat be clean, and wide, and pleasantly lit (rex).

Little wonder that a nation founded by lawyers in revolt against a king would have no concept of regulation and a burning enthusiasm for law. (That’s true across the political spectrum: the urge to “break ’em up” is bipartisan.)

The more so in light of some very bad Twentieth Century run-ins with guidance.

And yet a governance without rex does seem highly problematic, even impossible. For we do always need guidance. Here is a remarkable passage, from Lon Fuller, of all people:

When the idea of freedom from choice is introduced into a philosophic discussion it tends to carry with it overtones of morbidity, escape and totalitarianism. Yet when we encounter it in everyday life we do not view it that way; often it is welcome indeed. There is surely nothing morbid or escapist about the sense of freedom and release that a lawyer experiences when he finds a good secretary capable of taking over the hundred small decisions or choices that have to be made in managing an office and in handling routine correspondence.

There is, in fact, nothing more appalling than the thought of having to choose everything. Anyone who has read an exposition of philosophic anarchism knows what a sense of oppression comes from thinking of society’s being so organized (or unorganized) that nothing is decided in advance for the individual, so that he has to carve his own way through life without the guidance of institutions, or traditions, or legal compulsions. For the man who has to choose everything the burden of choice becomes so unbearable that choice itself loses its meaning.

The apparent contradiction between freedom to choose and freedom from choice is removed when we observe that of the two the first is primary and original, while the second is derivative and dependent for its significance on the first. Freedom from choice is meaningless if choice itself does not exist. If we feel free when we are relieved from choice, it is because we can then exercise choice in a field of our preference where we consider it important that we should decide things for ourselves.

The problem of freedom, then, is the problem of allocating choice.

Lon L. Fuller, Some Reflections on Legal and Economic Freedoms–A Review of Robert L. Hale’s Freedom through Law, 54 Colum. L. Rev. 70, 72 (1954).

The allocator, of course, is the regulator. And so there is no question whether to have rex, anymore than it is possible for each of us to choose which of a thousand components should be included in our iPhones. The inescapable question is: how to ensure that the guidance is wise?

Confucius’s reply has always sounded pretty good to me:

道 之以德、齊之以禮、有恥且格。

Confucius, Analects bk. 2 ch. 3.
Categories
Miscellany

The Reification of Price

Once upon a time, we believed that the law is a real thing in the world, which is why a court could say that a corporation is in Delaware and not in New York.

So too we believed that

the worth of the work may not be easily known; but it has a worth, just as fixed and real as the specific gravity of a substance . . . .

John Ruskin, Unto this Last, and Other Writings 197 (Clive Wilmer, ed. Penguin Classics 2005) (1862).

Categories
Inframarginalism Miscellany

Ruskin on Personalized Pricing

There are few bargains in which the buyer can ascertain with anything like precision that the seller would have taken no less; — or the seller acquire more than a comfortable faith that the purchaser would have given no more. This impossibility of precise knowledge prevents neither from striving to attain the desired point of greatest vexation and injury to the other, nor from accepting it for a scientific principle that he is to buy for the least and sell for the most possible, though what the real least or most may be he cannot tell.

John Ruskin, Unto this Last, and Other Writings 197 (Clive Wilmer, ed. Penguin Classics 2005) (1862).
Categories
Meta

Is the Law Still Enchanted?

[A]ll fields of specialized knowledge or practice like law . . . depend on their internal perspective. The internal discourse of a field represents the language in which the insiders to the field explain or persuade other insiders. In law, the internal perspective may use concepts like precedent, analogy, or doctrine to explain or justify an outcome that a historian might ascribe, for example, to the power of the groups being represented by the parties. So one should not have been surprised to realize that the externalist perspective of [Horwitz’s The] Transformation [of American Law 1780-1860] cheered most historians and brought criticism from the lawyers. But the passionate tone of the criticism uncovered another dimension that did come as a surprise–the extent to which many legal scholars were still deeply invested in a picture of law as the expression of neutral principles.

I had supposed that the lessons of legal realism had seeped into the consciousness of the legal academy. Still, it was becoming increasingly apparent to me that so much of the legitimacy of legal discourse continued to depend on assuming a sharp separation between law and politics. Most conceptions of the rule of law have been built on the possibility of identifying a clear line between the two. Thus, much of legal scholarship is perennially threatened by an external perspective that is skeptical of the claimed boundaries between law and politics.

Morton J. Horwitz, 28 Law & Social Inquiry 1157, 1158 (2003).

I know that in many, many quarters the legitimacy of legal discourse still did depend on assuming a sharp separation between law and politics when Horwitz wrote this in 2003.

But does it still today?

Who today defends the notion that the language of the law alone determines outcomes?

Who today would gladly die on Plain Meaning Hill or Laugh-Test Field?

Who would stake it all on the notion that there are some interpretations of the law so obvious to every American as to make them binding?

As with all disillusionments, the sky has not fallen.

Or has it?