Your Data, Your Money, Your Laws
July 11, 2019 7:11 AM   Subscribe

Your data could be at the centre of the fight against big tech (NYT) - "Furman, a Harvard professor advising the British government on tech regulation, said that rather than relying on antitrust law alone, countries should create a dedicated regulator for the tech industry, to match those covering the banking, health and transportation sectors of the economy. He said a watchdog with expertise in the field could better review a company's behavior and use of data on a case-by-case basis."

*The Narrow Corridor: States, Societies, and the Fate of Liberty*, the new Acemoglu and Robinson book - "State institutions have to evolve continuously as the nature of conflicts and needs of society change, and thus society's ability to keep state and rulers accountable must intensify in tandem with the capabilities of the state. This struggle between state and society becomes self-reinforcing, inducing both to develop a richer array of capacities just to keep moving forward along the corridor. Yet this struggle also underscores the fragile nature of liberty. It is built on a fragile balance between state and society, between economic, political, and social elites and citizens, between institutions and norms. One side of the balance gets too strong, and as has often happened in history, liberty begins to wane. Liberty depends on the vigilant mobilization of society. But it also needs state institutions to continuously reinvent themselves in order to meet new economic and social challenges that can close off the corridor to liberty." The Double Standard of Antitrust Law - "How today's antitrust law strengthens top-down corporate control and weakens democratic cooperation."
Antitrust law has come to reinforce the power of large business firms, while preventing workers, small producers, and micro-enterprises from exercising collective power. Markets and economic activity can be coordinated in a variety of ways—in fact, economic coordination of one kind or another is inevitable. Under prevailing legal doctrine, however, the courts have made the large corporation the principal means of economic coordination and excluded other forms, putting aside all considerations of fairness.
A radical legal ideology nurtured our era of economic inequality - "The law and economics movement clothes a particular political and moral vision as a supposedly neutral social science."
Where does economic power come from? Does it exist independently of the law? It seems obvious, even undeniable, that the answer is no. Law creates, defines and enforces property rights. Law enforces private contracts. It charters corporations and shields investors from liability. Law declares illegal certain contracts of economic cooperation between separate individuals – which it calls ‘price-fixing’ – but declares economically equivalent activity legal when it takes place within a business firm or is controlled by one.

Each one of these is a choice made by the law, on behalf of the public as a whole. Each of them creates or maintains someone’s economic power, and often undermines someone else’s. Each also plays a role in maintaining a particular distribution of economic power across society. Yet generations of lawyers and judges educated at law schools in the United States have been taught to ignore this essential role of law in creating and sustaining economic power. Instead, we are taught that the social process of economic competition results in certain outcomes that are ‘efficient’ – and that anything the law does to alter those outcomes is its only intervention.

[...]

Competition law makes the affirmative decision to organise economic coordination primarily through traditional capitalist firms, rather than through alternative forms. These alternatives might include looser forms of producer associations that are more dispersed in ownership and more democratic in decisionmaking. Since the 1970s’ takeover by law and economics, antitrust law and institutions have intensified this preference for hierarchy and concentrated ownership. The unsurprising result is that economic coordination is increasingly accomplished through the mechanism of large, powerful firms, while economic cooperation among smaller players is increasingly disfavoured. These choices are fundamental to the policy prescriptions made by the law-and-economics approach. Again, we find ourselves with a choice that is necessarily moral and political: we can allocate coordination rights in a way that exacerbates imbalances in economic power, or in a way that ameliorates them. What we cannot do is pretend not to make the choice.
Law as the Code of Inequality and Wealth - "Katharina Pistor's new book, The Code of Capital: How the Law Creates Wealth and Inequality, deserves to be the essential text of any movement today that concerns itself with law and political economy. It establishes, as its central topic, how fundamental law is to political economy, in the tradition of classical social theory but with a considerable update in light of contemporary affairs. And, more fully than anything else I know, it vindicates the LPE intuition that legal intellectuals have something essential to bring to the current and ongoing debate about markets and injustice."[2]
This is not because Pistor has detailed prescriptions for an emerging movement for reform of this or that area of law, but rather because she offers such a breakthrough set of theoretically-inflected descriptions of how law serves “capital,” and so often fulfills the interests of the rich rather than the rest. It has always done so, of course, but the current moment of extreme inequality requires a considerable effort to collect and synthesize the workings of law that prior generations already detailed. It also demands careful descriptions of the new forms of legal protection on a global scale that recent generations have failed to offer in one place and as part of a general account. Pistor even claims to offer a novel definition of “capitalism” that makes law central, insofar as law not only has a role to play in the creation of property, but also ensures its durability and convertibility.

To exist at all, and to be insulated and multiplied and transformed, wealth requires law and therefore state power to create it and protect it. Even land, the ur-form of wealth, is valueless except to the extent that law “coded” it, Pistor says, and the same is even more true of successor forms of mobile property down to the fancy inventions of contemporary finance that have successful allocated so much of what there is to own at the top of many societies. But creation is not the end of it. For Pistor, the additional key to understanding how law performs a constant and definitional function in the life of capital lays in tracing the ways that law secures capital’s endurance and allows for its transformation into new asset forms.
An Alternative Economics Summer Reading List, 2019 - "Liberal institutions and laws can often be thought of as a vanguard against worsening inequality. However, in this book, Katharina Pistor shows how legal institutions have served capital owners at the expense of everyone else. She tells a novel account of the problem of inequality and its evolution based on the creation and maintenance of capital and return to capital through law. The book places law at the center of what serves to create and preserve wealth inequality. For instance, law creates the claims over land, and subsequent 'coding' of the laws ensure that the wealth is not short-lived. It tells the story of legal coding of assets on the basis of assets: land, business organization, debt, knowledge and even genetic knowledge." Shame Versus the Free Market - "One of the ways I want to understand the power and dynamics of shame as a social mechanism is by comparing and contrasting how shame works with the other forces that play similar roles but that we are much more aware of. Today I'll start thinking about that with respect to market forces, and more generally the viewpoint of the individual as an economic free agent."
Indeed, shame often works really well to get individuals to act against their self interest in relatively small ways so that the group as a whole works more smoothly and is better off, at least ideally. The idea is, if the norms are reasonable and achievable, then people are shamed into following them for the sake of society.

When norms are unreasonable or unachievable, things can go wrong, and the free market ideology we have been indoctrinated with can make things worse...

Speaking of being a perfect 10, I think the easiest way to access how shame works vis-à-vis free markets is to think about how easily scores and scoring systems evoke in people a deep sense of shame.

Whether it’s an SAT score, a GPA, the ranking of the college you went to or your kid got into, your weight, your BMI, your IQ, or your Twitter followers, people have gotten used to – and to a large extent embraced – the concept of being measured by externally defined, maintained, and verified scoring systems. They have profound effects on society, at least to the extent they people care about them...

Stepping back, I think I’m ready to say that there’s been a massive and largely undescribed conflict between the two systems of powers represented by the informal social mechanism of shame and more formal market mechanisms. They are not consistent with each other, and as individuals and groups, we’re being pushed one way by shame and another way altogether by market incentives.
Plans for a worker-led economy straddle America's political divides - "Most notable among them is Elizabeth Warren, who last week announced her 'plan for economic patriotism'[4]... Marco Rubio — the senator from Florida who wants to be president someday — has come up with what is in some ways a very similar take on Making America Great. In May, he issued a report, in his capacity as chair of the Senate small business committee, on the challenges to capital investment in America, which crossed a number of red lines for Republicans. The report admitted that the US capital markets had become too self-serving and were no longer helping non-financial business, that prioritising shareholders above all should stop, and that public policy could play a role in directing capital to more productive places — away from Wall Street, and towards Main Street."
Republicans are beginning to question the trickle-down orthodoxy. Made in China 2025, Beijing’s manufacturing strategy, has made it clear to politicians on both sides that the US can no longer successfully compete with state-run capitalism unless it figures out how to funnel capital to the most productive places, connecting the dots between job creators and education.

That’s industrial policy, of course — it’s been a dirty word in the US for decades now. But it wasn’t always. As Cornell professor and legal scholar Robert Hockett, who has advised several presidential hopefuls, puts it: “All this represents a return to our own Hamiltonian development model, in which the public sector played a crucial coordinating role, empowering the private sector, and enabling its efforts not to be scattered, haphazard or wasted.”

Alexander Hamilton supported the creation of a national bank, and started a public-private partnership to provide cheap water-power and financial capital to investors in the early Republic. Subsequent administrations, from Lincoln to Roosevelt, Eisenhower and Kennedy, took pages out of his book.[5]
Rethinking Wealth, From Birthright Capital to Big Spender Taxes - "Americans have about $100 trillion of wealth. If that was divided evenly across the population, each individual would have a net worth of $300,000. At a 5% rate of return, this money would deliver to every person $15,000 annually in investment income. Poverty would be eliminated, inequality would be slashed, and the power of concentrated wealth would be neutralized."
If this sounds like a socialist fantasy, it is: Some 20th-century Marxist economists argued that it should be possible to bring a country’s assets into collective ownership and pay everyone a universal dividend. But part of that socialist idea—that millions of people could own a country’s capital together—has, in a way, already happened. Look at the rise of index funds, such as those run by BlackRock Inc. and Vanguard Group Inc. These companies now manage trillions of dollars for tens of millions of clients and are major investors in many public companies.

The bulk of these assets are held by the wealthy, but it’s not hard to see how a socialist society could build on this design. A huge, government-operated mutual fund—in which each citizen owned an equal, nontransferable share—could work just as well as index funds do today. The government could create an investment fund, use wealth taxes to gradually fill it up with return-generating assets, and then pay out an annual dividend to every American based on the fund’s return. Alaska’s Permanent Fund, which pays a dividend to state residents, and Norway’s Government Pension Fund Global have proved that such portfolios can work not just in theory, but also in practice.[7]
  • How a lawsuit could reveal secrets about Silicon Valley's favorite philanthropic loophole - "Today's 'working robber barons' have used a tax break to create a $110 billion charity stockpile, called donor-advised funds. It isn't getting any smaller."
  • The Real Reason Stock Buybacks Are a Problem - "This argument is a corollary of the fact that the preferential taxation of capital does not seem to deliver on the policy goals with which it is rationalized... that preferential taxation of capital no longer leads to the intended policy effects of job creation and increasing capital investment in plant, property and equipment but rather is a bought-and-paid-for scam perpetrated by the financier class."
Full Faith & Credit - "Ten autumns ago came two watershed moments in the history of money. In September 2008, the bankruptcy of Lehman Brothers triggered a financial meltdown from which the world has yet to fully recover. The following month, someone using the name Satoshi Nakamoto introduced BitCoin, the first cryptocurrency. Before our eyes, the very architecture of money was evolving — potentially changing the world in the process. In this hour, On the Media looks at the story of money, from its uncertain origins to its digital reinvention in the form of cryptocurrency."

Universal Basic Income: An Introduction - "The idea for such a scheme in the United States is quite old and an early mention can be traced all the way back to Thomas Paine's 1795 pamphlet on 'Agrarian Justice.' Proponents over the years have come from all over the political and ideological spectrum, ranging from Milton Friedman to Martin Luther King Jr."[8]
In my book World After Capital,[9] I refer to it as “Economic Freedom.” Why? Because UBI massively increases individual freedom. It provides a walk away option from a bad job, a bad spouse or relationship, even from a bad city. As such it also provides new found bargaining power in the labor market for the roughly 40% of Americans who are part of the precariat. At its most fundamental, UBI makes people free in how they allocate their time. They can choose to work and make more money or they can choose not to and instead spend their time on friends and family, or art, or science, or politics, or the environment, or any of the millions of things humans do outside of the labor market.

There is another crucial distinction between the defensive, mitigation framing and the offensive, freedom framing of UBI. The former implies that we are stuck in the Industrial Age, whereas the latter carries the possibility of a new age, which I call the “Knowledge Age” in my book. The defining characteristic of the Industrial Age isn’t “industry” – as in manufacturing – rather it is the job loop: people sell their labor and use their income to buy “stuff” (goods and services), which in turn is made by people selling their labor.

Employment in agriculture declined from 90% of all jobs in 1780 to below 3% today. This change is often taken to show that we successfully replaced agricultural jobs with other jobs and that we can and should do so again now: automate existing jobs only to replace them with new and different jobs and thus stay in the job loop of Industrial Age. But that reading shows a lack of imagination. A different interpretation is that something that once occupied the bulk of human attention, producing enough food to feed the population, has been reduced to an afterthought.

Well, what occupies the bulk of our attention today? The job loop. Paid labor. If we succeed in enabling automation to its fullest extent, if we succeed in transitioning into the Knowledge Age, then 100 years from now we will have done to paid labor what we did to agriculture. A reduction from something that occupies 80 percent or more of human attention today, to something that’s barely noticeable.

It is crucial that we free up human attention now because too many important problems are going unsolved. The market based system has been so successful that it has solved the problems it can solve, leaving us with the ones it cannot. Prices do not and cannot exist for events that are rare or extreme. There is no price for a human finding their purpose. There is no price for preventing an asteroid impact. There is no price for averting a climate catastrophe. Because we are relying on the market to allocate attention, we are paying far too little attention to these crucial issues and far too much attention to making money and spending it on stuff.
The fracturing of the global economic consensus - "A three-way tussle between free markets, state capitalism and the tech giants is brewing."
Call the trio the Washington consensus, the Beijing consensus and what I will dub the Zuckerberg consensus after the Facebook founder. Corporate leaders know the first is under threat, and that much of the world blames big business for its demise. They agree that they must help come up with a more inclusive form of free-market capitalism if they want their way of life to survive...

CEOs agreed that we will not return to the open markets of the 1990s. They see the US-China trade conflict as the beginning of a clash of civilisations that will last for decades and divide the world. Beijing’s state-run model was the object of both envy and scepticism. Many western CEOs expressed the former, contrasting China’s long view with the pressures they faced due to quarterly earnings reports and increasing pressure from activist shareholders.

But some executives from developing countries worried about the price they would pay for dependence on mercantilist Beijing. CEOs from Asia were split. Some felt China’s increasingly repressive surveillance state would prove too brittle, while others believed that its Belt and Road infrastructure programme would be the foundation of an entirely new and benign order benefiting east and west alike...

One participant, pointing out that liberal democratic governments simply can’t move fast enough to keep pace with technology, wondered whether “technology platforms might be the new Westphalian states”. In the middle of this session, the person sitting next to me passed me a slide on the “geopolitics of platforms” showing a regional breakdown of the equity market share of tech platforms — 70 per cent in the US, 27 per cent in Asia, and 3 per cent in Europe. Looked at in this way, perhaps the US still has more power relative to China than one might think. But as another participant put it, “countries are only relevant if they can tax companies”.

Platforms, of course, are not easy to tax. This is one of the issues that public policymakers throughout the developed world are wrestling with. It is also one that underscores the inexorable rise of corporate power over the past 40-odd years.[10]
posted by kliuless (6 comments total) 15 users marked this as a favorite
 
I don't want a "tech regulator", because that's just feeding into the "tech is a special snowflake that needs special rules" mentality that is one of the root causes of all the problems with the tech industry.

Also, it's worth pointing out that part of why antitrust law is broken today (at least in the US) is because the Reagan Administration intentionally broke it, creating a "customer-centric" basis that enables corporations.
posted by NoxAeternum at 7:40 AM on July 11 [4 favorites]


I want a tech regulator because that's the pipeline through which everything flows. Regulate how personal data is stored by tech companies (and governments) and you have solved a huge problem.
posted by pracowity at 9:01 AM on July 11


Regulate how personal data is stored by tech companies (and governments) and you have solved a huge problem.

That's not a tech problem, that's a data problem - which is why the answer isn’t a tech regulator, it's HIPAA For Everything.
posted by NoxAeternum at 9:03 AM on July 11 [3 favorites]


Silly me, I thought it was called the FCC.
posted by symbioid at 10:28 AM on July 11 [1 favorite]


I think potential to limit data access is limited, what might be more relevant is an organisation that tries to capture value of the data for the individual. This becomes more necessary as elements of data from an individual becoming increasingly available and are joined up in private databases to generate more value.
posted by biffa at 8:41 AM on July 12


How much is a data gold mine worth? - "The benefits of the data that companies are accumulating may potentially be large indeed, but the costs of storing those hoards securely are rising too."
Economists would usually think about the value of an asset by looking at its market price, and there are indeed markets for data. But there are two problems. One is that the data-driven digital advertising market is opaque and uncompetitive, as the Competition and Markets Authority pointed out while announcing an investigation into it. The other is that data has characteristics that make it significantly different from the kinds of goods whose prices are a worthy indication of their economic value.

For example, in technical terms, data is a public good in that it is non-rival: only one of us can eat an apple or wear a pair of shoes, but we can both use the same data without depleting it. As every economics student learns, public goods tend to be underprovided by the market because this characteristic makes it easy for people to free ride without paying for their provision. There is a prima facie reason not to expect markets for data to work well, and not to expect all the data that could create value to be produced and used. Policymakers should be thinking not only about how to make private markets based on data competitive but also about the wider role of the public sector.

There are other challenges in working out the economic potential of data, including the circumstances in which accumulating more adds value and those in which diminishing or even negative returns set in. Or the negative and positive spillovers from combining different data sources — privacy-invading surveillance or marketing in the first case, untapped benefits from improved, personalised services in the latter.

There are urgent policy questions to be considered. When a hospital does a deal with a software provider involving patient data, or local government buys in “smart city” services gathering data from sensors as people go about their business, how do they know whether the terms are reasonable? When public bodies digitise their data and think about commercialising it, what should they charge, and what should they provide for free so new services and businesses can be built on those public, taxpayer-funded assets? Is there missing data the public sector should be creating, if the stuff is so valuable? Nobody has the answers, although many are starting to think about it.
Why management by numbers doesn't add up - "I have long wondered if management by numbers — popularised in the 19th-century in America by Frederick Winslow Taylor, a mechanical engineer who used to stand over factory workers with a stopwatch to make sure they were doing each task as efficiently as possible — wasn't the ultimate in penny-wise, pound-foolish thinking."
In fact, my book Makers and Takers examined the rise of management by numbers, a trend put on steroids from the 1980s onwards, thanks to the theory of “shareholder value”. This preaches that executives should worry about nothing so much as the share price of their companies, which is, of course, always boosted by the same cost cutting that can end up being so pricey in the long run.

One could argue that we are at a turning point. The rise of socially responsible investing; more focus on corporate governance; younger consumers who care about the values of the companies that make the products they buy; the rise of emerging market corporate giants that don’t have the pressures of quarterly capitalism; all run counter to management by numbers trend.

And yet I fear that the era of Big Data could exacerbate the situation. There are so many things that can be measured these days — the number of readers that have reached this point in my column, for one example — which makes it easier than ever to focus on metrics rather than value judgments (in this case, was it good journalism?).

The two measurements aren’t always in opposition, of course. But in a data-driven world, we seem to build our arguments according to the former, and if the most recent corporate crises are any indication, that’s generally to the detriment of the latter.

I suspect the focus on bean counting will only grow as equity returns and profit margins tighten, which they surely must in the next year or two. But even in the face of such pressure, wise chief executives and board members should think hard before they look to financial engineering to save them. Management by numbers is, ultimately, a shell game. The costs — real, reputation, and moral — aren’t worth it.
posted by kliuless at 1:23 AM on July 16


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