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Digital Technology and the Regulatory State | Podcast Highlights

Blog Post | Communications

Digital Technology and the Regulatory State | Podcast Highlights

Chelsea Follett interviews Jennifer Huddleston about the benefits of digital technologies as well as how we should think about the risks and problems they pose.

Read the full transcript or listen to the podcast here.

We hear so much about the risks and downsides of technology. What are some areas where you believe digital technologies have improved our lives?

There are so many areas that we’ve seen transformed by technology over the last decade. Think about when we were faced with the COVID-19 pandemic, and so much of our lives shifted to our homes. Now imagine if that same thing had happened in 2010. How different would that have been? How much more limited would the options have been to stay connected to friends and family, entertain yourself at home, and continue your education and job?

Because the US has maintained a light-touch regulatory approach to the technology sector, we empowered entrepreneurs to create products that benefit consumers, sometimes in ways that we never could have imagined. I still remember the days when you had to have atlases in your car. And I remember when MapQuest seemed like such a huge deal. Now, if you’re going somewhere new, you often don’t even look it up in advance.

I’m hearing a lot of calls for more regulation of digital technologies. President Biden is saying we need to clamp down on AI, while Nikki Haley has said we must deanonymize social media. What are some of the dangers of over-regulating these technologies?

I’m going to start by asking you a question. How often do you think you use AI?

When it comes to ChatGPT, every few days. But I’m sure that what you’re hinting at is that AI is incorporated into far more than we’re even aware of.

Exactly. Most of us have been using AI for much longer than we realize. Search engines and navigation apps use AI. If you’ve ever tried to do a return and interacted with a chatbot, some of that is possible because of advances in AI. We’ve also benefited from AI in indirect ways. For example, AI can be used to help predict forest fires and to assist in medical research. Because AI is such a general-purpose technology, a lot of the calls for regulation may lead to fewer of those beneficial applications and could even make it harder to use many of the applications we’re already used to.

Oftentimes, people just don’t think about the consequences of regulation. When we think about an issue like anonymous speech, many people immediately jump to their negative experiences with anonymous trolls online. But we should also think about the costs of deanonymizing speech. Think about dissidents trying to communicate with journalists or people trying to alert each other to social problems in authoritarian regimes. Anonymous speech is incredibly valuable to those people, and we have a long-standing tradition of protecting that kind of speech in the US. When we look at creating backdoors or deanonymizing things, that’s not just going to be used for going after the bad guys. It’s also going to be exploited by a whole range of bad actors.

And this country was arguably founded on a tradition of pseudonymous and anonymous speech; think of the Federalist Papers.

Right.

What do you think is driving this distrust of new technologies?

Disruptive new technologies like social media and artificial intelligence are naturally going to make us uncomfortable. They create new ways of doing things and force societal norms to evolve. This is something that happened in the past, for example, with the camera. We’re now used to having cameras everywhere, but we had to develop norms around when, where, and how we can take pictures. With AI, we’re watching that process happen in real-time.

The good news is that we’re adapting to new technologies faster than ever. When you look at the level of adoption of technologies like ChatGPT and the comfort level that younger people have with them, innovations seem to be becoming socially acceptable at a much quicker pace than in the past.

The current technology panics are also not unique to the present. We’ve seen a lot of concern about young people and social media recently, but before that, it was young people and video games, and before that, it was magazines and comic books. We even have articles from back in the day of people complaining that young people were reading too many novels.

There’s also this fear of tech companies having too much market share. Can you walk us through that concern and provide your take on it?

I’m sure you’re talking about Myspace’s natural monopoly on social media. Or maybe you’re talking about how Yahoo won the search wars. These were very real headlines 20 years ago with a different set of technology giants. So, my first point is that innovation is our best competition policy.

My second point is that before we implement competition policy, we need to figure out why big companies are popular. If a company is popular because it’s serving its consumers well, that’s not a problem; that’s something we should be applauding. When we think about incredibly popular products like Amazon’s Prime program, people choose to engage with it because they find it beneficial.

We should really only want to see antitrust or competition policy used if anti-competitive behavior is harming consumers. We don’t want a competition policy that presumes big is bad. And we certainly don’t want to see competition policy that focuses on competitors rather than consumers. We don’t want a world where the government dictates that the Model T can’t put the horseshoe guys out of business.

People of all stripes want to restrict how private companies moderate content. People on the left are concerned about potential misinformation online, while those on the right worry about political bias in content moderation. What’s your take on this issue?

Online content moderation matters for a lot more than social media. We often think about this in the context of, “Did X take down a certain piece of content or leave up a certain piece of content?” But this is actually much bigger. Think about your favorite review site. If you travel and you’re going to a new place and looking for somewhere to stay or go to dinner, you’re probably going to go to your favorite review site rather than read what some famous travel reporter has said.

The review sites allow you to find reviewers with your same needs. Maybe you’re traveling with young children, or you have someone with dietary restrictions. This is something that only user-generated content can provide. But what about bad or unfair reviews? What happens when someone starts trying to get bad reviews taken down? We want these sites to be able to set rules that keep reviews honest, that keep the tool useful, where they’re not being overrun by spam, and they aren’t afraid of a lawsuit from someone who disagrees with a review.

This is one example of why we should be concerned about these online content moderation policies. When it comes to questions of misinformation, I think it’s important to take a step back and think, “Would I want the person I most disagree with to have the power to dictate what was said on this topic?” Because if we give the government the power to label misinformation and moderate content, the government will have that power whether or not the people you agree with are in charge. So not only do we have First Amendment concerns here in the US from a legal point of view, but we should also have some pretty big first principles concerns regarding some of these proposals.

That’s a good segue into another concern a lot of people have with new technology, which is its effect on young people. What do you make of those concerns?

Youth online safety can mean so many different things. Some people are concerned about how much time their child spends online. Some people are concerned about issues related to online predators. Others are just concerned about particular types of content that they don’t want their children exposed to. The good news is we’ve seen the market respond to a lot of these concerns, and there are a lot of tools and choices available to parents.

The first choice is just when you allow your child to use certain technology. That’s going to vary from family to family. But even once you’ve decided to allow your child to have access to a device, you can set time limits or systems that alert you to how the child is using the device. There, we have seen platforms, device makers, and civil society respond with a great deal of tools and resources for parents. To reduce harm to children, we should look to education rather than regulation. We need to empower people to make the choices that work best for them because this isn’t going to be a one-size-fits-all decision, and policy intervention will result in a one-size solution.

Many people are also concerned about privacy. Whenever there is a large gathering of data, that data can be leaked to the government or to bad actors. How should we think about data privacy?

When we talk about privacy, I think it’s important to distinguish between the government and private actors. We need very strong privacy protections against government surveillance, not only for consumers but also for the companies themselves, so that they can protect their consumers and keep the promises they’ve made to consumers regarding data privacy.

When it comes to individual companies, we need to think about the fact that there are a lot of choices when it comes to data privacy, some of which we don’t even think are data privacy choices.

One example is if you go to a website and sign up for a newsletter in order to get a ten percent off coupon, you’re technically exchanging a bit of data, such as your email address, for that 10 percent off coupon. You get a direct benefit in that moment. That’s a privacy choice you make. If we think about privacy as a choice, we start to see that we make these choices every day. Even where we choose to have a conversation is a data privacy choice.

The other element when it comes to data privacy is that an individual’s data, while we deeply care about it, is not actually that valuable. What’s been valuable is how data can be used in the aggregate to improve services. So, when we hear that we should just treat data like any other piece of property, it doesn’t necessarily work because data doesn’t act like other forms of property in many cases. Not only is the value of the data not tied to a single data point, but the data also is often not tied to a single user. This makes regulating data privacy very complicated. If you and I are in a picture together, whose data is that? Is it the person who took the picture’s or people in the picture’s? Or does it belong to the location we were in while taking the picture? Can you invoke a right to be forgotten that removes the picture? And if so, then what does that do to the person who took the picture’s speech rights? These are not easy questions, and they’re often better solved on an individual basis than with a one-size-fits-all approach.

Blog Post | Economic Freedom

The False History of American Capitalism | Podcast Highlights

Economist Donald Boudreaux joins Marian Tupy to discuss important misconceptions about American economic history and why it’s crucial to set the record straight.

Listen to the podcast or read the full transcript here.

Today, I have with me Don Boudreaux, a professor of economics at George Mason University. He has a new book out, co-authored with the former senator from Texas, Phil Gramm, called The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. It’s a fantastic read, full of information and killer arguments.

We’re going to discuss that book today. But first, Don, why is the study of economic history important?

What we think we know about the past determines how we assess the present.

For example, if we think that in the past, a certain monetary policy did this or did that, that’s going to affect how we think monetary policy should be conducted today. So, in order to make good decisions in the present, we have to do our best to understand how various policies worked out in the past. That’s what we try to do in the book.

Let’s jump in and tackle trusts, or as we call them today, monopolies. We often hear about the power of monopolies in today’s America, but let’s go back to the 19th century. What was the trust problem, and what was the solution meant to address?

Some of the first original research I did as a young scholar was looking into the Sherman Antitrust Act of 1890. I had a colleague, Tom DiLorenzo, who, in 1985, published a wonderful paper on the origins of the Sherman Act, 95 years after its enactment. Astonishingly, no one in that near century-long period had ever bothered to check what had actually happened to the prices and outputs of the industries that were supposedly monopolized. So, Tom looked at these data and adjusted them for deflation—there was a deflationary period from the end of the Civil War until the early 20th century—and found that in the decade leading up to the Sherman Antitrust Act, the prices of the outputs of these allegedly monopolized industries fell faster than prices in the economy as a whole. Likewise, the outputs of these industries rose faster, and in most cases, multiple times faster than the output of the overall economy.

This is inconsistent with the monopoly story. Monopolies are supposed to raise prices, not cut prices. In reality, there was no monopoly problem in the 1880s; there was a competition problem. We had, for the first time, a fully transcontinental economy, thanks to the railroads and the telegraph, and soon thereafter, the telephone. So, a lot of firms could now take advantage of economies of scale. John D. Rockefeller in petroleum refining, Gustavus Swift in meat slaughtering, James Buchanan in tobacco manufacturing, and so on. And these firms did grow large, but “large” is not an appropriate definition of a monopoly. A monopoly is a firm that can suppress competition, raise prices, and suppress output. These firms did the opposite. They grew big, but they grew big precisely by being so efficient that they could lower their prices and expand their output.

Now, whenever this happens, other producers complain. And in the 19th century, the complaints came disproportionately from local butchers and local cattle raisers. Before the railroad and refrigeration, slaughtering took place locally. So, when the first meat packers set up shop in Chicago and began centrally slaughtering livestock and shipping the meat out across the nation by refrigerated railroad car, they destroyed an age-old line of work. These local butchers and independent cattlemen raised hell, and local politicians listened to them, villainized these firms, and attacked them with antitrust statutes.

Frankly, these early antitrust statutes, and the subsequent ones, were not intended to address what was truly perceived as a problem of monopoly. They were aimed at placating disgruntled producers who had been outcompeted by larger, more efficient, and more entrepreneurial rivals.

You mentioned the D word, “destruction.” The destruction of local butchers by big, centralized butchers. Is that a good thing?

Well, economic growth requires that resources move from where they are less productive to where they are more productive, so change is inevitable if you want economic growth.

Some people might naively say, “Well, look, we’ve had enough growth, let’s just stop now,” and try to freeze everything in place. Now, I’m sure almost everyone alive today is very happy that our ancestors did not settle for the level of economic activity that existed when they were alive. You and I would not be talking over Zoom, and web designers would have eight legs.

However, even if we all agreed to settle for our current level of prosperity, we would still need to allow economic change, because some things are beyond human control. Supplies of raw materials can dry up. Natural disasters can destroy factories. So, we always need people to be able to adjust to the facts on the ground. That flexibility, that entrepreneurial alertness and creativity, is inseparable from capitalism. If you try to freeze our economy in its current pattern, you’ll collapse it. We can either continue to move forward and embrace creative destruction, or we can collapse into destitution.

Yeah, that’s fundamental. There are, in Donald Rumsfeld’s famous words, “unknown unknowns,” and we want to be as rich and as technologically sophisticated as possible when those challenges arise.

Okay, on to the big one, the granddaddy of them all, the Great Depression. Can you steelman the anti-market position about what happened in 1929? What went wrong?

Yes. In the 1920s, a fundamental contradiction of capitalism reached its peak. The rich were getting richer relative to the poor, and rich people spend a smaller portion of their incomes than poorer people. By the late 1920s, you had an increasingly unequal distribution of income, and a smaller portion of that income was being spent. As a result, America’s factories were producing more than America’s factories could sell, and a terrible spiral took place. The factories started laying off workers, which further reduced the income of factory workers, who responded by reducing their spending, which further reduced economic output and employment.

All of this happened when Herbert Hoover was president. And as everyone knows, Hoover was a staunch advocate of laissez-faire. He was a do-nothing president. The Depression happened, and Herbert Hoover just sat in the White House and twiddled his thumbs, hoping this recession would go away. Then, of course, it got worse. By 1932 and 1933, unemployment in America hit 25 percent. Fortunately, the American people elected Franklin Roosevelt, who came to office with a whole bunch of really good ideas and smart advisors. They developed the New Deal, a system of relief programs, and we were able to start recovering. Finally, World War II comes along, there’s more government spending, and we get out of the Depression. That’s the myth.

That’s what a lot of American kids learn at school. But I suspect that you don’t quite agree with that interpretation of the Great Depression.

No, I don’t. Let’s start with the easy one: Hoover was not a do-nothing president or an advocate of laissez-faire. Hoover was the president who signed the Smoot-Hawley Tariff Act. He created the Reconstruction Finance Corporation. Hoover spent at a deficit during every year of his administration. In fact, one of Franklin Roosevelt’s campaign platforms was that Hoover was too big a spender. Hoover’s administration was the first time, really, that any sitting American president did much to combat an economic downturn. So that’s a complete fallacy.

There are other problems too. In the 1920s—and this is from research done by Simon Kuznets, a Nobel Prize-winning, very respectable economist—the distribution of income did not grow more heavily toward upper-income Americans. In fact, it became a little bit flatter in the 1920s. In terms of spending, the mythical theory says that there just wasn’t enough spending to buy what the factories were producing. But if you look at the data on consumer spending in the 1920s, it was off the charts. It was a boom time for Americans.

What actually happened, and here I’m quite conventional, was bad monetary policy. The Fed was created in 1913 to serve as a lender of last resort. Before the Fed was created, whenever banking crises would happen, they had private arrangements where bank clearing houses would get together and channel liquidity to the parts of the banking system that needed money. And these panics, as they were called, were quickly undone. But after the panic of 1907, people said, “Well, we can’t have this. Let’s get the government to take over this process.” And they created the Federal Reserve.

When the downturn began in August of 1929, the Fed should have stepped in to prevent the money supply from contracting. But the Fed just stood by, and from 1929 to 1933, the money supply contracted by over 30 percent. That is huge. Then, on top of that, you have the hyperactive Hoover, who administered a historically unique level of economic intervention. And then it gets worse under FDR.

The big problem was what the economic historian Bob Higgs calls regime uncertainty. Hoover and Roosevelt became increasingly hostile to businesses and investors throughout the 1930s. Basically, they scared investors off. Well, if you want economic recovery, you can’t scare investors off. You can’t threaten their property rights. You can’t threaten to tax away their earnings. You can’t threaten to control prices. All of this was being done. Roosevelt became a little more friendly to businesses when he needed them to cooperate in the war effort, but there was still concern that after the war, Roosevelt would return to his increasingly anti-capitalist stance. But of course, Roosevelt died in April of 1945, and Truman, for all of his imperfections, was a businessman, and he was perceived, quite rightly, as much less radical than Roosevelt.

Higgs dates the end of the Great Depression as immediately after the war, 1946 or 1947. The war years, we can’t say much about. You’re conscripting people into a military, so unemployment looks low, but that’s not the result of an improved market economy. Prices are controlled. Wages are controlled. Certainly, the standard of living of ordinary Americans back home was falling. So, if you define the end of the Depression as a return to high and rising living standards for ordinary people, you don’t get any evidence of that until the years immediately following the end of World War II. So, the New Deal didn’t cure the Great Depression. If anything, it extended the Great Depression throughout the 1930s. If we’re going to actually rely on data, we must say that the Depression only ended after the end of World War II.

Now on to the final topic, the Great Recession.

The mainstream explanation is that financial deregulation created the housing crisis. Greedy, mustache-twisting bankers lent money to people who they knew couldn’t repay the mortgage loans, which anybody with common sense would know is not a good banking strategy.

In fact, what happened is that starting in the early 1990s, the government became intent on increasing the rate of home ownership. So, the government wanted banks to extend mortgage lending to people that they otherwise wouldn’t lend to, but the banks didn’t want to lend money to people who were unlikely to pay them back. So, the federal government said, look, Fannie and Freddie, increasingly large shares of your portfolio have to be made up of subprime mortgages, or we’re going to do all kinds of nasty things to you.

Say you’re a bank in Omaha, Nebraska, and someone comes to you to borrow money to buy a house. In the past, you’d say, “Sorry, you don’t have 20 percent to put down, and you don’t have a high enough income. I’m not going to lend you the money.” But now, Freddie comes by and says, “I really want to buy some subprime loans from you, so if you make some subprime loans, I’ll buy them from you and relieve you of the risk.” So, when that same borrower comes back, you lend them the money and sell the mortgage to a government-backed firm. Now you’re off the hook, but that bad loan is still out there. The result was that increasingly large numbers of house mortgages were held by people who couldn’t afford to repay them, and so any decline in economic activity, and certainly any decline in housing prices, would put a lot of the homeowners under water, and that is what eventually happened. The house of cards collapsed.

One final question: Why don’t bad ideas die?

There are at least two reasons.

First, if you show me a bad economic idea, I will show you a special interest group that benefits from it. This is what Bruce Yandle called the “Bootleggers and Baptists” idea: when you have a sincere but mistaken belief backed by venal interest groups who stand to gain materially by the maintenance of those beliefs, those beliefs become entrenched.

The second reason is that bad ideas are usually easier to grasp than good ideas. Good ideas tend to involve one or two steps of reasoning beyond the bad idea. And so, to push out bad ideas and replace them with good ideas requires good education. So, all the things that we’re doing, all the blogging and podcasting and tweeting.

It’s a struggle to present good ideas, but we have no choice. We have to keep doing it. And history shows that, if you’re effective at it, you can sometimes push bad ideas aside and replace them with good ideas. But it’s a never-ending battle. It’s not like the bad idea is defeated and then it goes away forever. It’ll always lurk. So, we always have to be at the ready to challenge it with good ideas. And we have to be very patient.

The Human Progress Podcast | Ep. 64

Donald Boudreaux: The False History of American Capitalism

Economist Donald Boudreaux joins Marian Tupy to discuss important misconceptions about American economic history and why it’s crucial to set the record straight.

Wall Street Journal | Housing

California Ditches Environmental Law to Tackle Housing Crisis

“California lawmakers on Monday night rolled back one of the most stringent environmental laws in the country, after Gov. Gavin Newsom muscled through the effort in a dramatic move to combat the state’s affordability crisis.

The Democratic governor—widely viewed as a 2028 presidential contender—made passage of two bills addressing an acute housing shortage a condition of his signing the 2025-2026 budget. A cornerstone of the legislation reins in the California Environmental Quality Act, which for more than a half-century has been used by opponents to block almost any kind of development project…

The California Environmental Quality Act was signed into law in 1970 by then-Gov. Ronald Reagan, at a time when Republicans were at the forefront of the nation’s burgeoning green movement. President Richard Nixon also signed groundbreaking protections, including the Endangered Species Act.

CEQA, as it is known, requires state and local agencies to review environmental impacts of planned projects and to take action to avoid or lower any negative effects. Opponents of projects have used the law to delay them by years.”

From Wall Street Journal.

Axios | Infrastructure

NC Bill to Eliminate Parking Minimums Passes House

“The North Carolina House passed a bill unanimously Wednesday [6/26/25] that would block local governments from forcing developers to build parking.

Why it matters: An issue that has been controversial in Charlotte received bipartisan support in Raleigh.

The big picture: With a starting price tag of about $5,000 per space, parking mandates add to the rising costs of new construction. Those expenses are then passed on to residents and businesses as higher rent.”

From Axios.