Is it possible to keep federal government regulators’ hands off the technology sector?
We’re in the middle of president Donald Trump’s second “100 Days,” and there were a number of executive actions aimed at rolling back “job-killing regulations” during the first 100. Congress still needs to act to make permanent changes, but the slowdown in regulation is unprecedented.
If it can’t get its act together on making permanent the rollback of regulations, the priority for Congress should be keeping regulatory bureaucrats’ hands off the future.
That is, frontier sectors (and the jobs and profound wealth they stand to generate) that can “make America great” are not yet regulated. Nor has Congress authorized agencies to regulate them, in large part.
But, regulate they will, unless the administrative state agencies are affirmatively stopped from doing so, by Congress. Trump cannot do this alone.
As it stands, many major sectors like telecommunications and electricity remain heavily regulated. Competing, overlapping networks characterized their founding (phone calls could even traverse barbed wire), but clever invocation of “market failure” and “natural monopoly” led to public utility regulation (that is, a monopoly provider and the outlawing of competition).
Then as now, political failures were often largely ignored. Regulation lingers even when the potential for competition is obvious and the replacement of political management desirable.
Trump’s new Federal Communications Commissioner Ajit Pai is a prominent exception, seeking to block proponents of Internet neutrality regulation who’d turn the Internet into the latest public utility. We communicate and enjoy free speech in spite of government regulations, not because of them; but activists today still want Internet neutrality regulations to control access, pricing and content online.
The mire of the public utility model similarly awaits emergent sectors like drones (oops, national governments control airspace); autonomous vehicles, as well as the communications protocols between them and infrastructure (oops, governments own the roads); and the commercialization of outer space. Aggressive federally driven infrastructure campaigns without proper attention to decentralization occupy the mix too. This all could cost tomorrow’s economy trillions.
AI, or artificial intelligence, is already being used as a justification for global government (Stephen Hawking) and for expanding the social welfare state with a Universal Basic Income, or UBI.
What does it take for the body of private human endeavor subject to future regulation and top-down authority to decline rather than increase? Few Washington policymakers seem to be working on that problem fundamentally.
One hears deserved praise of “permissionless innovation,” the case for a light regulatory touch and a rejection of over-precaution.
But there exists too little vocabulary among 21st century policymakers for legitimizing large-scale or complex free enterprise in the technology sector, for articulating the reasons for casting off entrenched administrators perpetually looking for new realms to rule.
This vacuum, and the resultant negative initial conditions being created for permissionless innovation, has derailed the prospects for light touch regulation. In its most important cutting edge technologies, America is being painted America into a hyper-regulatory corner without anyone even fully realizing how it happened.
Complex sectors like networked communications technology, robotics, autonomous vehicles and exo-transportation (airborne drones and low-earth orbit) and commercial space stand on the threshold of inextricably snug, irreversible regulation at precisely the time these very technologies eliminate the market failures that rationalized old-school regulation of access, efficiency, safety and other concerns in the first place.
The primary engines for these threats to the tech sector are the thousands of pre-existing regulators, whose once-convincing justifications for their supposed impartial oversight no longer apply (allowing that they ever, properly, did).
The public may have little idea how thoroughly such regulators occupy the driver’s seat today, regulating even with “guidance” rather than real rules subject to public notice and comment. A law from Congress? Who needs them?
While laissez-faire did not happen automatically for heavy industries and technologies after our Industrial Revolution, the point here is that it still hasn’t materialized for them. The “smokestack” stage of industrial free enterprise brought the contemporaneous public utility era, which created artificial regulatory monopolies against which competition was outlawed, coinciding with the progressive era “rule by experts” of regulatory bureaucracies. This latter is what matters now.
The failure to extend liberal economic institutions of complex property rights, of contract and risk management into infrastructure, airsheds, watersheds, spectrum, and roads in the 20th century, gets compounded by things like a 21st century failure to entertain the privatization of commercial flight airspace. These realms remain largely controlled by governments; such laws as the Antiquities Act govern still more, as do such international agreements as the Law of the Sea Treaty and the Outer Space Treaty.
Given this precedent and context, a regulatory heatshield, a HOT Act (“Hands Off Technology”), seems in order. Rather than the default to preexisting administrative state agencies propped up by outdated notions of “market failure” (and with heads ever-buried in the sands over political failure), Congress should undertake to explore and defend private and collaborative institutions that replace 19th and 20th century central-bureaucratic oversight of endeavors that should largely be let alone.
The 115th Congress under Trump should be exploring prerequisites for eliminating agencies, as it once promised in the Contract With America era. It should enact Article I-enshrining legislation requiring votes on every costly agency rule that would affect complex frontier technologies and sectors.
Congress should at minimum prohibit agencies from issuing new rules and guidance regarding frontier technologies where (1) Congress has not enacted law to authorize (the prime example today is Internet “net neutrality”); or (2) has unwisely enacted such authorizing law prematurely.
Otherwise the administrative state is going to rule the tech sector, simple as that.
A related threat is cronyism, from government funding of science and technology that widely displaces private funding, to executives with hands outstretched for federal subsidies and favors at the expense of others.
A corollary for permissionless innovation is the presupposition that one innovates, not that one extracts others’ resources or curries high-tech political favor. Other citizens have aspirations of their own that may not involve paying for corporate welfare transfers.
Recipients pay for subsidies by accepting regulation in exchange, of course. One cannot expect such individuals or entities to be advocates of laissez-faire or for pursing reductions in governmental roles. Quite the contrary, they become proponents of keeping the regulation (which keeps competitors out). That will make future liberalization harder, just as prior regulatory captures have created a sub-optimal present day.
This all makes tech subsidies and favors in one sense mere wealth transfers, rather than the innovation-enhancing boosts they might appear to be. This doesn’t merely hurt recipients and their industry (even if they don’t see it). It affects all of society. Cronyism’s impacts can be particularly severe in frontier sectors like commercial space development where entire industry structures are being upended and the roles of the regulator and perhaps even some incumbent firms, in reality, require total reassessment.
Technology pulls America’s economic wagon, but the wrong early interventions can mean stagnation that propagates for decades — or centuries. Making such avoidable errors today, when the stakes are immensely higher than in previous eras, would be incalculably costly. Many regulatory steps will be backward; others will veer into a cul-de-sac inducing a reduction in frontier production possibilities, in wealth expansion, and in well-being and advancements in safety.
Unfortunately the regulatory state is already here: In frontier technologies, market liberal institutions are too easily pre-empted by the pre-existing bureaucratic impulse to expand and create centrally managed models for everything big, new and game-changing. As new technologies tee up and the critical choice is made between freedom and coercion, we can be certain that policymakers are not pondering liberalizing alternatives that reduce their power.
Therefore policymakers should make explicit that they endorse the principle of separation of technology and state. Regulation in advanced technology beyond the absolute minimum necessary is worse than government merely picking winners and losers (alas, governments often pick only losers); regulation effectively chooses among business models as such, imposing rigid frameworks.
Trump’s regulatory reform agenda would do the most for tomorrow’s America by undertaking a fundamental challenge to the administrative state’s intrusions upon the technology sector.
However, Congress has to make such changes permanent.
Originally posted to Forbes.com.