Comment by AnthonyMouse
4 years ago
Government fiat generally makes problems worse because the government is a monopoly and a monopoly has little incentive to do things well because of a lack of consequences for getting it wrong, unlike a business in a competitive market which has to respond to competitive pressure or go bust.
But a monopoly/cartel isn't a competitive market and has the exact same problem.
And antitrust is minimally damaging as long as you restrict the targets to companies that have more than, say, 25% market share. In other words, as long as it places no constraints on upstarts and challengers.
Because at that point, blindly causing harm to the large incumbents is actually good even if it's hamfisted and incompetent, because then the market can fix any damage by transitioning to smaller suppliers not subject to antitrust rules, which is the thing that actually solves the problem. The worst thing they can do is fail to do enough damage to the incumbents to restore competition, which is the same thing that happens if they do nothing.
> Government fiat generally makes problems worse because the government is a monopoly
That's one problem, yes, but not the only one. Good government is a public good, and elementary economics tells us that public goods are underproduced. Or, to put it another way, concentrated special interests have a larger incentive and more concentrated resources to corrupt government, than dispersed individuals have to keep it from being corrupted.
Also, governments aren't quite monopolies as long as people have the right of exit--if you don't like your state's government, you can move to another state, and if you don't like your country's government, you can move to another country. Granted, the transaction costs for such moves are high (particularly for the latter), but many people still do it. That exerts at least some competitive pressure.
> a monopoly/cartel isn't a competitive market
It depends on why it's a monopoly. If it's a monopoly because of special privileges granted by the government (which most monopolies are and have been historically), then yes, it's not exposed to competitive pressure. But if it's a monopoly because it provides better quality and lower prices for its products than any competitors, then it is exposed to competitive pressure--and it's succeeding at dealing with it. That's not a monopoly; that's a win for the free market.
The real problem with a company like Google is that its users are not its customers, so the whole idea of "competitive pressure" in the usual economic sense doesn't even apply. Google has no incentive to provide products that benefit its users, other than the fact that it needs a critical mass of users to be attractive to its actual customers (advertisers and other companies to which it sells data and access to users' eyeballs). What's more, since Google's users do not pay for its products and services, Google has no idea how valuable those products actually are to users, since it has cut off the best source of feedback--what users will pay for.
> the market can fix any damage by transitioning to smaller suppliers not subject to antitrust rules, which is the thing that actually solves the problem
That only solves the problem if the problem is that the smaller suppliers can provide better quality and lower prices to customers. But that's not even the problem with Google; see above. Google's actual customers don't want smaller suppliers, because Google's value to them is precisely its size. Breaking up Google without changing the basic business model would just create huge incentives for its customers to game the system, getting pretty much the same things they are getting now, but just with more maneuvering under the table.
If the government is going to do something hamfisted at all, the obvious thing to do would be to outlaw the ad-supported business model altogether. Make Google, and Facebook, and every other such platform, charge users a fair price for the services they provide, and let users, in a free, competitive market, decide what services are worth their cost. But of course that would be politically insane, because the users themselves don't want to pay for those services; why should they, when they've been conditioned to have them for free for so long? Only weird outliers like me would actually applaud such a move; I'd be happy to pay Google some reasonable fee per month to use search and maps (which are the only Google apps I use) if in exchange my data was no longer sold to third parties. But it doesn't seem to me that most people would agree with that.
Another suggestion I've seen is for the government to force Google, and Facebook, and every other such platform, to open up the APIs for all their services, so anyone could write their own client. That would enable clients to be written that didn't show ads and didn't do all the other tracking that Google's and Facebook's own clients do. But if Google and Facebook are still stuck on the ad-supported business model, again, that just creates huge incentives for them to game the system, creating new hidden back channels for their actual customers to get the data they need while pretending to have a free, open, public API that any client can use. Clients can only hide so much; at the end of the day they still have to make requests to the API, and those requests contain the basic data that the platforms are selling.
> The worst thing they can do is fail to do enough damage to the incumbents to restore competition
No, that's nowhere near the worst case. The worst case is something like locking down the entire Internet, so, for example, a site like this one can no longer even exist.
Right of exit is a false right. You can leave Hati for a country that is the same or worse, just not better.
> Good government is a public good, and elementary economics tells us that public goods are underproduced. Or, to put it another way, concentrated special interests have a larger incentive and more concentrated resources to corrupt government, than dispersed individuals have to keep it from being corrupted.
This is true, but is no reason to abandon the attempt to prevent this, because it's still a matter of degree. More to the point, large companies will engage in regulatory capture and try to use regulation to stifle competition regardless of whether individuals try to exert pressure on governments to preserve competition.
> Also, governments aren't quite monopolies as long as people have the right of exit--if you don't like your state's government, you can move to another state, and if you don't like your country's government, you can move to another country. Granted, the transaction costs for such moves are high (particularly for the latter), but many people still do it. That exerts at least some competitive pressure.
By this definition nothing is really a monopoly. If there is only one grocery store within a 999 mile radius, you could say that it isn't a monopoly because you could go to one which is 1000 miles away. It's a monopoly in practice because the cost of patronizing the "competitor" is too large.
> The real problem with a company like Google is that its users are not its customers, so the whole idea of "competitive pressure" in the usual economic sense doesn't even apply.
Even if you accept the framing then in this context the users who aren't the customers are the "product." They're the suppliers. In exchange for eyeballs they get services. The company is still subject to competitive pressure because if someone else provides better services, they lose the eyeballs. In a competitive market, companies have to compete for supply as well.
> Breaking up Google without changing the basic business model would just create huge incentives for its customers to game the system, getting pretty much the same things they are getting now, but just with more maneuvering under the table.
The "spies on you for advertisers" problem isn't really an antitrust problem, because as you point out, a larger number of smaller companies could do the same thing.
But if there were a larger number of smaller companies, they would have to distinguish themselves. One way to do that is to charge for services instead of using ads, which people like you prefer, and then you could patronize that one. Others would provide the service for free with ads, or with ads but ads based only on the search terms without tracking you all over the internet. And then customers get to choose. Right now there are two search engines and they're both of the "spies on you everywhere you go" variety.
> Another suggestion I've seen is for the government to force Google, and Facebook, and every other such platform, to open up the APIs for all their services, so anyone could write their own client.
This is for services with network effects, like Facebook messenger. But services like that aren't the real problem. It's much easier to convince most of your friends to switch to another messenger than it is to get even one of them to switch to a phone platform which is neither Android nor iOS.
And the solution there isn't APIs, it's breaking up vertically integrated companies. If Google Maps, Android and the Play Store were all separate companies then it would be easier to compete with each of them because they would be less tightly coupled with each other. A competitor could replace one of them without having to replace all of them.
> No, that's nowhere near the worst case. The worst case is something like locking down the entire Internet, so, for example, a site like this one can no longer even exist.
Which is the point of constraining antitrust rules to companies with major market share. None of them would apply to a site like this because it's not big enough. And if there was strong competition then they wouldn't apply to anyone because there would be many independent sites, none of which exceeds the threshold.
Destroying independent sites and apps is the risk of doing nothing, because then two corporations get to decide winners and losers for everyone.
It goes without saying that good antitrust enforcement is better than mediocre antitrust enforcement. But mediocre is the more likely outcome, and that's still better than nothing.