Back in January I wondered out loud, Was the Internet a Good Idea? To my way of thinking the information technology (IT) revolution of the past 25 years has been a mixed blessing. It both created amazing tools for doing everyday tasks and introduced whole new means of mindless addiction and criminal opportunities.
This IT revolution reflects something more important about our culture than our penchant for finding ever more trivial ways to waste time, become disengaged from other human beings, and separated from the very nature that sustains us. It reflects acceptance of the false economic dogma of market decision making. This idea that markets are the best means of making society’s decisions is most closely associated with Chicago school economists like Gary Becker, Milton Friedman, and George Stigler.
The concept is simple. Markets, through the magic of the “invisible hand,” will serve society well because markets invariably weed out all kinds of bad behavior and reward good behavior. We do not need to worry about worker safety or consumer product safety because markets will punish firms that behave badly. If a company has too many worker accidents or causes too many illnesses the market will punish it by forcing the firm to have to pay higher wages to attract workers. So firms will protect workers to keep wage rates lower. Likewise, firms selling unsafe or defective products are punished in the market because buyers will learn to buy from other firms. One of the candidates for the job of Food and Drug Administration Administrator in the new administration has argued that the FDA should not require firms to prove that new pharmaceuticals are actually effective in treating disease. The drug market will sort that out, penalizing firms with ineffective products and rewarding firms whose products actually do what they are supposed to do. (Thankfully, he did not get the FDA appointment.)
This kind of absolute belief in markets shows up in Maine as well. Remember when we forced electric utilities to get out of the power generation business? Market competition was going to create the incentives such that consumers would have lots of choice of electricity suppliers and lower power costs. How did that work out? We had lots of firms that did not actually generate electricity buy power on spot markets and re-sell it to Maine consumers, often at higher prices. But markets did not produce new power sources or lower prices.
It is not that all market decision making is inherently bad. Markets can be wonderfully efficient social organizations for making complex decisions and mediating among competing interests. But often this happens when the market rules are set by government; rules are what we call regulation. Both markets and governments are capable of colossal failures and elegant successes. It takes great care to make sure we find the right combination of market and government decision making. What economist Joseph Stiglitz says about inequality applies to markets when they function well. Market success is a product of political choices we make, it does not happy spontaneously.
Information technology is the wild West of market orthodoxy, a world where anything goes. Society admires the IT moguls who learn to exercise market powers most effectively. No worry about whether the technologies will contribute to human wellbeing because we can trust that the market will sort all that out.
The Economist magazine recently reported on a new “app” that will “clone voices.” That sounds innocent enough until you delve into what these new technologies do. Given enough recordings of a person’s voice, the technology will take text and convert it into speech that sounds like the person whose speech you are trying to reproduce. And it already works well enough to routinely fool both humans and speech recognition software that is part of security systems. What a boon this will be to the fake news industry or those wishing to use recordings as part of legal proceedings. How is the market going to sort all that out?
Our collective acquiescence to the idea that innovation, mediated through markets, will always give us new things that are good for society is a new phenomenon. As I pointed out in that earlier blog, fifty years ago we were collectively much more willing to question new technologies. We were not content to let markets make all the innovation decisions for us. The U.S. Congress had an Office of Technology Assessment to provide our Senators and Representatives objective information on the social, economic, environmental, and other impacts of new technology. Its role was to identify those things about innovation that markets might not automatically sort out for us. The fundamental ethic was to anticipate the impacts of technology so that society can address problems before they occur. Public policy could then be applied to make sure that technologies were in the public interest as well as the private interests of those wanting to make money from them, regardless of their societal impacts.
Unfortunately, the Office of Technology Assessment was swept away as part of “The Contract With America” led by Newt Gingrich in the 104th Congress. No need for government spending tax dollars to investigate technologies when the markets would do the work for free.
The fact that new technologies favored by markets made Bill Gates, Elon Musk, Mark Zuckerberg, and others fabulously wealthy does not in and of itself mean that the technologies were good for society. In some ways these are examples of how what economists call market power can distort outcomes and lead to socially undesirable technology applications.
Call me a Luddite, fine. But it is time for society to wrest back control of our future by exercising some caution and to expect that we channel innovation to maximize human wellbeing. Markets can succeed and they can fail. What they do not deserve is our slavish reliance on them for sorting out the costs and benefits of new technology.