#84 Big Tech as Big Brother
Christian Economists don’t want a Big Brother, because we have a Good Father.
The Free Market Forum is a conference supported by Hillsdale College in Michigan. I have attended a few times and always learned something valuable about the interaction of Christianity and Economics.
A couple years ago, there was a fascinating panel discussing the power of Big Tech. Everyone agreed that their monopoly power was a danger. The question centered on how to control that power. At the conclusion, I commented to one of my fellow professors: “It’s a competition between the creative nature and the fallen nature. “ Via the creative nature, creative humans, made in the image of God, will produce competitors who will reduce the monopoly power of Big Tech. Big Tech has a fallen nature and they want to continue their monopoly. We get to watch and see which nature wins: The creative nature or the fallen nature.
I don’t know much about high tech. I rushed into the office of my colleague a few months ago, excited with the news, “Half of American teen-agers are on Tik Tok.” That means the creative nature is working. Maybe my limited knowledge of the industry was showing. Big Tech continues to maintain their monopoly power.
The Fallen Nature
Most economic fallacies grow out of a denial of the fallen nature.
There’s a great example in the news just this week. A Wall Street Journal article titled “Elizabeth Warren’s IRS Entitlement” states,
“President Biden wants to insulate the IRS from the power of the purse. Republicans in Congress cut the IRS budget during the Obama Presidency after the agency targeted conservative nonprofits in the Lois Lerner debacle. Democrats say the cuts have frustrated tax enforcement. Their plan would make sure the IRS doesn’t have to pay a price in the future for politically targeting taxpayers or leaking returns. The potential for abuse would grow since Mr. Biden’s plan would also give the IRS access to bank account inflows and outflows.
the IRS, a tax collection agency shielded from Congressional budget supervision is one definition of tyranny.
But, you see, Democrats are not worried about tyranny, because they believe that Government officials are not fallen. They are very good at seeing the fallen nature of for-profit business people, but they totally deny the fallen nature of government officials.
Back to big tech.
The reason all of us agree that monopoly power is bad, is because we assume the fallen nature. This is more important in my Strategic Management class than it is in my Economics class. We talk a lot about oligopoly and the “rule of three,” which explains how three competitors control many US industries. There are three major phone companies, three US auto companies. Soft drinks, beer, even the batteries in your home appliances are produced by only three companies. The Sherman Antitrust act of 1890 and the Clayton Act of 1914 were supposed to control monopolies. But the fallen nature of companies seems to be winning. I comment to my students, “As the Coke guy is wheeling his product into the convenience store, he winks at his Pepsi competitor.” That wink means, “I’m going to raise my price next week and it would be nice if you would go along with me and raise yours.”
I have long understood how this moves the supply curve left and increases producer surplus, while reducing consumer surplus. What I came to understand during a presentation at the Acton institute recently, was why government favors oligopolies. From his fine little book “The False Promise of Big Government” Patrick Garry explains that governmental entities like power also. If there are 15 competitors in an industry, government can’t control them. But if there are only three, government can. A prime example is President Obama meeting with the heads of five insurance companies in the oval office to influence them relative to Obamacare. Another example is Treasury Secretary Henry Paulsen meeting with five major banks and forcing them to accept government bailouts during the 2008 recession. They also forced the three US auto manufacturers to accept money, even though Ford didn’t want the money.
Oh, the subtitle of Patrick Garry’s book is “How Washington Helps the Rich and Hurts the Poor.” Failure to enforce anti-trust legislation is a classic example. Stockholders and managers of the concentrated companies who control an industry get richer via what economists call “producer surplus.” Consumers get poorer because of reduced “consumer surplus.
The Creative Nature
In my little book Economics and the Christian Worldview, I write, “As long as the fallen nature produces unlimited wants and the creative nature has unlimited creativity, there will be unlimited employment.”
There have been ten recessions since World War II, sometimes called the “modern era of economics.” The lowest point in an economic cycle is called the nadir. Here’s something interesting, each successive nadir is higher than the previous one. We continue to get better and better. Why? Because we continue to build on the ideas that come before. Even in a recession, new ideas and procedures are not discarded for older, worse ones. We continue to get better and better.
But, competing against this creative nature, is the fallen nature mentioned earlier.
Since the market has not solved the antitrust problem of big tech monopolies, government may have to step in. In an article in the Wall Street Journal article titled House Bills Seek to Break up Amazon and other Big Tech Companies, we read about proposed legislation to break up the monopolies “Unregulated tech monopolies have too much power over our economy,” said Rep. David Cicilline (D., R.I.), the top Democrat on the House Antitrust Subcommittee. “They are in a unique position to pick winners and losers, destroy small businesses, raise prices on consumers, and put folks out of work. Our agenda will level the playing field.”
Rep. Ken Buck (R., Col.), the panel’s top Republican, said he supports the bill because it “breaks up Big Tech’s monopoly power to control what Americans see and say online, and fosters an online market that encourages innovation.”
Everyone who understands the fallen nature agrees: Monopolies must be controlled, either by competition, or government.
Competition is the Solution
The January 2021 edition of Imprimis from Hillsdale College – yes, this is my second mention of Hillsdale in the same podcast – an article is titled “Who is in Control? The Need to Rein in Big Tech” the article is by Allum Bokhari. He cites some absolutely frightening examples of how Big Tech can use search algorithms to influence people relative to consumption patterns, but also political thoughts can be subtly changed.
Even without control of internet information, the book The Power of Habit by Charles Duhigg tells chilling examples of how big gambling houses and even seemingly innocent competitors like Target use private information to influence purchase decisions. But internet information multiplies the power by a huge factor.
Let me take a side trip before explaining his conclusion. In most of Texas, the electricity market has been privatized by dividing it into three segments. There is competition in the production phase, sometimes called “wheeling.” Anyone can “wheel” or make electricity and sell it into the grid. The second phase has not been privatized and there is no competition. That’s the distribution phase. We pay a fee on our retail bill to keep the power lines up and operating. The third phase has been privatized and there is competition. I go to a website called “Power to Choose” and change my retail provider about every year. I can choose from about 12 companies, each of them offering multiple plans.
Bokhari suggest something similar for the Big Tech firms. He says they should be allowed to aggregate information all they want, which is the equivalent of producing electricity. But, he says, there should be a separate distribution phase which is competitive. He writes, “Our ultimate goal should be a marketplace in which third party companies would be free to design filters that could be plugged into services like Twitter, Facebook, Google, and YouTube. In a marketplace like that, users would have the maximum level of choice in determining their online experiences. Big Tech would lose its power to manipulate our thoughts and behaviors and to ban legal content, which is just a more extreme form of filtering.”
Economists like the market, and Christian Economists like it even more. Competition is good as explained in Podcast #7 Competition and the Fallen Nature and #33 Ending Discrimination. It is this lack of competition that has led to the frightening thought control of Big Tech.
Mr. Bokhari adds, “This should be the standard we demand, and it should be industry-wide. The alternative is a kind of digital serfdom. We don’t allow old-fashioned serfdom anymore – individual and businesses have due process – and can’t be evicted because their landlord doesn’t like their politics. Why shouldn’t we also have these rights if our business or livelihood depends on a Facebook page or a Twitter or YouTube account?’’ Serfdom is a meaningful work in Economics because of Freidrich von Hayek’s famous book The Road to Serfdom. Mr. Bokhari is making an important point here about the power of Big Tech over its consumers.
And, yes, that’s Mr. Hayek who’s been looking over my right shoulder during this podcast. If you’re wondering why the Christian economist has a picture of an atheist in his studio, stay tuned, I’ll explain that in a later podcast.
The Christian View
Christians don’t want an earthly “Big Brother.” We believe our great father sent Jesus as a redeeming savior for the fallen world. We believe God is omniscient and omnipotent. Humans are not. Humans who think they are God are explained in my podcast #21 Economic Humanism. That’s an indication that it continues to be a fallen world. Humans don’t know everything. I’ve often drawn a “happy face” on the whiteboard, but replaced the eyes with the letter I to indicate a benevolent social planner would have to have perfect “vision” through two eyes, the letter I’s stand for Information and Intent.
The Big Tech companies are trying to gain perfect information but it’s quite clear they do not have perfect intent. As a matter of fact, they will use the perfect information for ill intent.
I read this stack of books in preparation for writing Biblical Economic Policy with Sergiy Saydometov. I’ve read even more since this picture was taken. In my very subjective opinion the best is Money, Greed & God by Jay Richards. And the most important quote in that most important book is as follows, “The market is, as Hayek said, “probably the most complex structure in the universe.” It deserves our admiration. And yet very few Christian critics have fully understood it. Fewer still have thought of it as a stunning example of God’s providence over a fallen world. It is just what we might expect of a God who, even in a fallen world, can still work all things together for good. He goes on to write, “The great eighteenth-century thinker Adam Smith considered this “invisible hand” of the market, which transcended human limitations, as an expression of God’s benevolent and providential governance of human society, since it created a more harmonious order than we would otherwise expect. Money, Greed, and God by Jay Richards.
The market is the best way to cure monopoly power.
Books Referred Within This Episode:
Biblical Economic Policy https://amzn.to/3zrGano
Economics and the Christian Worldview https://amzn.to/3wbDzMf
The False Promise of Big Government: How Washington Helps the Rich and Hurts the Poor https://amzn.to/2UrIYRo
Money, Greed, and God https://amzn.to/3gUqAIl
The Power of Habit https://amzn.to/3j4c5oe
The Road to Serfdom https://amzn.to/3d1EtTU