Censorship and Harm to Consumers | So Good News
The litmus test for nongovernment action has been Robert Bork’s consumer welfare standard: If combined market forces do not raise prices, consumers are not harmed, and there is no need for government action. In this scenario, Big Tech is out of control. The prices are low, sometimes free.
This view is too narrow. For one thing, digital networks with monopoly power can charge higher prices for ads, which are passed on to consumers.
Tech companies are also abusing market power in search of content, thus reducing the quality of content. To say that people are not worse off because of foreclosed opportunities is to accept the paternalistic views that oppose America’s liberal and economic systems, which take the interests of consumers as given rather than the way they are created.
Social media sites like Facebook and Twitter highlighted news about the origin of the Covid-19 virus that discussed the possibility that it came from a laboratory in China. For months, users were unable to share or read these articles on those platforms. Undoubtedly, the quality of the platform decreased when users could not read scientific articles related to important social and medical developments in recent years.
Economists understand that changes in quality reduce prices: This is the concept of “hedonic adjustment” in the calculation of inflation. For example, consumer prices consider television prices to have fallen over the years, as today’s sets are much better than those in 1982, the year of the measurement.
In contrast, technology platforms effectively raise prices through censorship, acting as a monopoly and reducing consumer welfare. This equates to the fixed cost of the cable plan rising as the service provider removes the option.
Also actions to limit consumer choice are limited to analysis. Operating systems are often inseparable from hardware. Software must be installed from an authorized source, and the decisions of software developers and their investments are more complicated than the profit of the store user. If the buyer goes around many of the manufacturer’s restrictions, it usually voids the warranty.
Big Tech avatars among activists and academics say there is no reason why consumers should be harmed by the economic power these companies gain, while trying to limit the amount of consumer expectations from their purchases. Yet a closer look at what consumers do with technology products reveals the real harm, and provides as good an economic justification for the government to intervene in Big Tech as it would anyone else.
Mr. Faulkender is a professor of economics at the University of Maryland. Mr. Miran is co-founder of Amberwave Partners. He served, respectively, as assistant secretary of the Treasury for Economic Policy (2019-21) and as senior economic adviser to the Treasury (2020-21).
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Available on October 12, 2022, published.