Scott Lincicome Author Rss

US Sclerosis

Scott Lincicome — Tue, 23 Nov 2021 04:48:00 +0000

Dear Capitolisters,

President Biden directly assaulted me over the weekend. Okay, right, it wasn't personal, but it's hard not to be a bit irritated when, after writing thousands of words about supply chains in the previous few months, you become a little irritated, you hear the president of the United States tell a press gaggle, “you all write for a living. I haven’t seen any of you explain the supply chain very well.”

Well, harumph to you too, Mr. President.

Anyway, I'm primarily joking when it comes to the angst (mostly). However, Biden's remarks provide us a wonderful chance to revisit the supply chain scenario and ask if the president truly knows what's causing some of these issues, and whether he's up to dealing with them.

His track record implies he isn't.

Supply Chain Update

As you’ll recall, back in September I explained that, while pandemic‐related supply and demand factors were the superficial cause of the current supply chain mess, various trade, labor, and other policies were exacerbating the situation by limiting system‐wide efficiency and flexibility. Since then, we’ve discovered that other policies are also playing a role. At the federal level, for example, the “worker shortage” that experts in the field have routinely cited as hurting U.S. trucking, warehouse, and related industries has been amplified by two federal policies:

First, continued restrictions on immigration have removed at least 1 million potential (and lawful) workers from the U.S. labor market, putting acute pressure on labor‐intensive industries like warehousing. (And backed‐up warehouses make it more difficult to clear containers that are stacked up at various ports.)
Second, the United States has effectively barred Mexican trucking companies from operating on U.S. roads, thus keeping “the largest and closest supply of potential US truck drivers” out of the country and reducing the number of American trucks available for inland work because they’re picking up cargo at the border from Mexican truckers who have to drop it there. (In case you’re wondering, multiple U.S. government pilot programs have found the few Mexican trucks that were allowed to operate here to be safe and clean, in part because they all have to comply with U.S. regulations.) These restrictions have long violated our commitments under the North American Free Trade Agreement, yet President Trump actually tightened them in his NAFTA update, the USMCA.

To add salt to injury, we discover from the same article that Canada has national and provincial measures to assist foreigners in immigrating to the country and working in the trucking business, easing some of the strain there. (They constantly try to take advantage of us when it comes to immigration!)

State and local policies are also taking a toll—especially in California, which is home to the biggest and most important port complex in the country (Los Angeles/Long Beach). Most notably, we learned last month that a key reason why containers were clogging up the LA/LB port (preventing ships from quickly unloading and thus adding to the historic offshore queue) was, as Virginia Postrel noted for Bloomberg, land use restrictions:

It turned out that the main problem wasn’t an absolute space constraint but a local zoning regulation. Long Beach prohibits companies from stacking off‐loaded containers more than two high. The law is not a safety regulation but an aesthetic one. City officials decided that stacks of containers more than eight feet high were too ugly to tolerate.

Local officials have since waived these rules, but only after they drew national attention—weeks, if not months, after the problems started. Even then, moreover, other problematic zoning regulations remain in place, and state law prevents localities from quickly changing them. Thus, one L.A. official recently urged Gov. Gavin Newsom to waive that state rule so that L.A. and other localities might act:

The city has identified several port‐owned plots that could be quickly paved and transformed into storage sites if not for existing red tape, he said. “The lots are quite small. But if you could pull together 10 or 12 lots, and put 40 containers on each of them, that’s 500 containers… That’s some serious relief.”

That state rule seems dumb, but it’s really the original zoning ordinances—which prevent ports from quickly paving their own property!—that are the real problem here.

Finally, various California land‐use and environmental regulations have made building new warehouses exceedingly difficult—a serious problem now that free warehouse space is essentially non‐existent. As Bloomberg notes, for example, “warehouse space is at an all‐time low [but] building new warehouses takes a minimum of two years and as many as nine in parts of California, where the industry says regulations are more strict.” A new Wall Street Journal editorial provides frustrating details in this regard, noting that an e‑commerce‐inspired warehouse construction boom in California caused backlash from environmentalists and “not in my backyard” locals who complained of truck pollution (never mind California’s extra‐tight restrictions on truck emissions!) and noise. As a result, new local ordinances and other regulations have blocked the construction of several new warehouse and truck facilities—space that we sure could’ve used right now.

Meanwhile, the Port of Houston—which is admittedly smaller than LA/LB but is also subject to far more permissive construction regulation—has been building warehouse space like crazy (and is having fewer port backlogs) and thus enticing some retailers to shift to that port during the current crisis. Texas Gov. Greg Abbott even went to Twitter to encourage those moves, but, with so much of the supply chain historically centered on the Golden State (and with the simple time/money cost of using the Panama Canal), there’s only so much that can be done here.

These policies—along with the ones I noted in September (and surely a few others)—have helped to create a domestic port, logistics, and infrastructure system that just can’t handle the unexpected stress of the pandemic (and related government stimulus). As Flexport’s Ryan Peterson, who first noted the California zoning problems, recently put it:

Consumers are just buying more stuff than ever. … And our infrastructure, frankly, isn’t ready for it. And so we’ve definitely exposed that our infrastructure is going to be a governor on growth. It’s going to prevent us from achieving the kind of recovery and opportunity that the consumers and the economy wants to do right now.

And it’s getting held back by dilapidated port infrastructure, by congestion, traffic of non‐automated ports and sort of bad rail connections to the port. We’re just recognizing the pain of 20 years of not investing in our infrastructure. And we’re feeling all that pain in one year right now.

Or, to quote another wise sage (whom the president clearly doesn’t read), America’s ports problem is decades in the making.

But It’s Not Just the Ports

The port crisis is symptomatic of a bigger disease that has infected large areas of the US economy, a sclerosis exacerbated in no little part by the policies mentioned above. Despite the fact that the policies address a wide variety of concerns, the common thread is the priority of narrow interest group objectives (profits, jobs, property prices, bureaucratic procedures, and so on) above broader productivity, capacity, and flexibility gains. With regard to California zoning, as Postrel explained:

The situation exemplifies why the formerly can‐do state of California has become such a difficult place to build anything, including an upwardly mobile life. In the name of protecting local vistas, a seemingly minor rule got enacted that exacted enormous aggregate costs far beyond the immediate area. The voters in Long Beach gained a modest improvement in the view while the entire national— indeed global— economy suffered from less efficient shipping. (The Port of Los Angeles is two nautical miles from the Port of Long Beach, and the two account for about 40% of U.S. container traffic.)

It’s a classic example of a well‐recognized issue in political economy. The benefits of the policy are concentrated while the costs are dispersed, spread out among tens of thousands of businesses and millions of consumers. Under ordinary circumstances, most of those hurt have no idea what’s happening. Only in a crisis does anyone beyond a few industry insiders recognize the harm.

One can say the same things about politically powerful port unions’ anti‐automation efforts, tariffs on Chinese chassis (and the laws that allow them), much of the environmental regulation (which is often just an excuse for NIMBYism), the Mexican trucking ban (which the Teamsters have long championed), and—of course!—the Jones Act. In almost every case, the insular interests of a politically powerful minority were able to dictate policy to the detriment of the state or nation as a whole—a cost that’s minor and diffuse in the good times, but can become major and acute in the bad ones, especially when these policies all combine, Voltron‐style, to smash delicate supply chains already reeling from a generational, global shock.

And these policies’ effects surely extend beyond just the ports and warehouses, with similar consequences. In a viral essay published early last year, for example, venture capitalist Marc Andreessen issued a call‐to‐arms that “it’s time to build” again, following decades of not doing so in America. He blamed our inaction on “inertia” and “regulatory capture,” but didn’t really elaborate. The best job doing so (that I saw, at least) came from Coin Center’s Jerry Brito, who—echoing Postrel above—explained what makes building stuff so darn tough in America these days:

Our collective will, expressed through our democratic institutions, has decidedly been to slow or prevent innovation and building in all the areas Andreessen singles out: housing, education, transportation, medicine, finance, energy. Those are all regulated sectors of the economy, and as Andreessen hints, the regulatory apparatus has been captured by incumbents who will use it to keep out innovation that threatens their position.

But here’s the important point: those small interest groups, acting through democratic institutions, to prop up their interests at the expense of the greater public’s is not some subversion of the system; it is the democratic expression of society’s will. Entrenched incumbents are not just people who look like the Monopoly Man, incumbents are also public school teachers, coal miners, doctors and hospital administrators, flight attendants, and truckers.

Mancur Olson, one of the greatest thinkers of our time, explained our predicament decades ago in two important books: The Logic of Collective Action and The Rise and Decline of Nations. He showed that, on a given question, small groups (like energy incumbents) are easier to organize than large groups (all Americans who would benefit from nuclear energy) because their direct incentives are greater. Benefits are concentrated and costs are diffused, so acting openly and legitimately through democratic channels interests groups will secure protection even at the expense of the greater public. The result is that “society, acting collectively through its democratic institutions” sends a clear message: “We don’t want these things.”

A stable democracy with the rule of law is a perfect environment for groups to form, grow, and attach themselves to the body politic. Over time interest groups and rules accrete, and after a certain point nations burdened by so much accumulated regulation will become sclerotic and fall into economic decline. And that’s where we are today. That’s why we’re not building.

Our national sclerosis is perhaps most obvious in (though certainly not limited to) the basic costs of construction here. As Bloomberg’s Justin Fox noted last year, for example, the real cost of building a mile of interstate highway has quadrupled since the late 1950s and early 1960s, and multibillion‐dollar transit projects in New York City are today as much as 10 times the cost of similar projects in continental Europe and Japan. Other studies show similar things:

America’s cost issues extend to real estate too. According to a 2021 global survey of major cities’ commercial and residential construction costs from consultants Turner & Townsend, for example, the United States is home to seven of the top 15 most expensive cities in the world for building midrise office space, shopping centers, warehouse distribution centers, and townhouses: San Francisco (3); New York City (4); Boston (7); L.A. (8); Chicago (10); Seattle (12); and Tampa (14). American cities that we think of as relatively cheap—Austin, Nashville, and Atlanta—are well above‐average and more expensive than “costly” places like Paris, Toronto, Milan, Vancouver, and Singapore. Only lightly zoned (and immigrant‐heavy) Houston is in the middle of the pack, yet building there still costs more than in many modern, developed country cities like Sydney, Australia, even with (per the study) significantly lower construction labor costs. (Chicago and Sydney have about the same labor rates.)

High U.S. construction costs imperil efforts to improve capacity and productivity—in the public and private sector—and experts provide a wide range of reasons for the current problems. However, they tend to come back to the same general thing: a regulatory system that privileges and empowers incumbents and cronies over actually building stuff.

Does Biden Get Any of This?

Does Biden recognize these fierce political dynamics—for the supply chain situation or any other—and is he willing to confront them? I can’t speak to the former question (lest I get yelled at like those poor pool reporters), but the answer to the latter doesn’t look very promising. For example, the White House was out this week promising that the bipartisan infrastructure bill would (eventually) fund various supply chain improvements, but, as I noted in a recent blog post, that same bill contains Buy America and Davis‐Bacon rules that financially benefit certain groups—steelmakers, construction unions, etc.—but have been repeatedly shown to raise costs, lower the quality of work, and delay U.S. construction projects for months or even years. (For more on how Buy America confounds infrastructure projects, go here.) As we’ve discussed, moreover, the Jones Act—which Biden loves—severely limits the ships and workers available to dredge (and thus expand) U.S. ports, thus resulting in “high costs and unnecessarily lengthy timelines for the completion of urgently needed projects.”

The infrastructure bill also pays mere lip service to reforming the National Environmental Policy Act (NEPA), which significantly empowers our national “vetocracy” and increases both the cost and time needed to complete infrastructure projects. Indeed, Biden’s EPA earlier this year issued an “Environmental Justice Primer for Ports,” trumpeting how U.S. port improvements would need to clear NEPA and other regulatory hurdles that require “meaningful engagement” from surrounding communities.

The latest version of Biden’s Build Back Better plan raises additional red flags. For example, billions in additional federal spending on U.S. ports (to reduce air pollution) appear to expressly exclude investment in automation—the lack thereof being one the key reasons that U.S. ports are currently so inefficient! It also provides convoluted bonus subsidies for electric vehicles made by unionized U.S. factories, even though such subsidies are blatant protectionism and several non‐union U.S. factories actually pay more than their unionized counterparts.

Outside the legislative space, things aren’t much better—even in areas directly related to the supply chain. See, for example, a new report from National Review’s Dominc Pino on White House efforts to permanently mandate two‐person crews in freight rail locomotives, even as new technology makes that standard obsolete and as European rail systems use one‐person crews. But the mandate would fulfill a Biden campaign promise and has been pushed by a U.S. rail workers’ union trying to prevent the implementation of new productivity‐enhancing (read: job‐killing) technology. As Pino notes, this might be a political win for Biden, but it also has costs: “Freezing the current level of labor productivity on freight trains is exactly the kind of policy decision that makes the American transportation industry unable to adapt to changing circumstances.”

And then there is the deal Biden just negotiated with the EU on Trump’s tariffs on steel and aluminum, which are contributing to sky‐high prices here and thus harming U.S. manufacturing, construction, and other companies. Instead of simply removing the tariffs, Biden negotiated a complex system of “tariff rate quotas,” under which limited volumes of European imports may enter the United States duty‐free (with anything over those amounts getting hit with tariffs). As my colleague Inu Manak and I explained last week, the system is restrictive and complicated: duty‐free volumes set at only about 65 percent of their pre‐tariff levels, and quotas are divided into 54 separate quotas on steel and 16 on aluminum, allocated among all EU member states on a quarterly basis. That results in, as Georgetown’s Jennifer Hillman helpfully calculated, 5,832 separate limits on steel and 1,728 on aluminum; thus, “it will be very hard for EU exporters to use even 75% of the quotas given how small the allocations are per product and per country once you divide them up.” The convoluted system will also, per the Wall Street Journal, inevitably discriminate against small businesses that lack the resources to track shipments, monitor quotas, handle complex documentation rules, and carefully time their goods’ arrival. As one manufacturer told the Journal, “[g]iant companies are going to have the clout and financial capability where they can go in and place large orders and suck up the quota.” And the little guys will be left paying the tariffs.

No wonder, then, that politically powerful steelmakers and steelworkers unions have cheered the EU deal, even though, as the Journal notes, “[f]ar more companies consume metals than produce them. When the tariffs began, federal data showed there were around 29,000 steel‐consuming firms, compared with only about 900 classified as steel producing and 600 for aluminum”—a number that doesn’t even include the large U.S.-based automakers.

Collective action strikes again.

Summing It All Up

Policies that prioritize and protect narrow political interests over broader, national ones surely didn’t cause the supply chain crisis, but they just as surely exacerbated the situation. Reforming those policies (and others like them) isn’t easy, given the wide range of issues and strong political forces that would surely rise in opposition. But doing so would go a long way toward not only having a supply chain less vulnerable to future shocks but also breaking through the broader American sclerosis. Biden’s team, to their credit, hasn’t been entirely bad when it comes to addressing some of these policies—seeking, for example, to modestly encourage better local zoning policy or to free up U.S. visa backlogs (though neither initiative has made it very far). But the president has thus far shown little interest in confronting any of the policies backed by powerful interest groups and legislators in his own party, and in many cases is actually championing them.

Maybe some journalist can explain that to him.

Let’s Talk about Section 230 and Facebook

Scott Lincicome — Sun, 28 Feb 2021 15:44:00 +0000

Dear Capitolians (I seriously need to retire this dumb gimmick),

I had planned this week to take a break from the wonkery and regale you with stories about nachos (no, seriously, I did), but the whole New York Post debacle has provided too good an opportunity to dig into one of the most misunderstood concepts on the internet (ironic, I know): Section 230 of the Communications Decency Act of 1996 and its relationship with internet companies like Twitter, Facebook and YouTube.

As you may have read here at The Dispatch (or elsewhere, I guess), a firestorm erupted last week when the New York Post published some rather, ahem, interesting and timely emails purportedly from Democratic nominee Joe Biden’s troubled son, Hunter Biden. Given the content of and events surrounding those emails, Twitter and Facebook decided to “moderate” that content—for example blocking the Post story (or websites linking to it) or posting warnings that users would have to click through to visit those same sites—in novel ways that hadn’t been applied to questionable content harming President Trump. Those actions, unsurprisingly, led to a total freakout on the right, including calls from prominent rabble‐rousers and members of Congress that these companies have violated Section 230 and/or should (I kid you not) be “nationalized.” Now, the Federal Communications Commission is investigating whether to “clarify” (read: narrow) Section 230, and the Senate Judiciary Committee plans to make Twitter CEO Jack Dorsey testify later this week. The President, of course, has been his usual, calm self.

The whole thing was and remains a giant mess, and in my opinion the actions of Twitter/Facebook are stupid for myriad reasons (including by actually amplifying the allegations against them!). And I dare not even begin to opine on the veracity of the underlying claims. But I do think it’s good and necessary to spend a moment on a core element of the right’s current and longstanding claims about Section 230, and what would most likely happen if/when it’s repealed—something both the right and left now want.

So that’s what we’ll do today. (Before we go further, I should note that The Dispatch is a participant in Facebook’s fact‐checking program.)

Why Section 230?

For a deeper dive into the origins of Section 230, I recommend this brief from my Cato Institute colleague Matthew Feeney. In short, the law was drafted to resolve a “Moderator’s Dilemma” emerging from 1990s court cases on whether online services can be liable for defamatory content that third parties (e.g., commenters) had posted on the services’ platforms. In one line of cases, CompuServe, which didn’t moderate content, was found to be not liable for alleged defamatory content because it was just a “distributor” of that content (like a public library) instead of a “publisher.” A few years later, Prodigy Services, which did moderate content, was held to be the “publisher” of (and thus was liable for) problematic third party content. Thus arose the “Moderator’s Dilemma”:

Either engage in content moderation and be considered the publisher of third party content or take a hands‐off approach to third party content and be treated like a distributor. Both options are awful for anyone interested in building a website where users can upload content. A hands‐off approach might save an Internet service provider from legal liability, but it also means users may upload pornography, photos of murders, and images of animals being tortured to death. To anyone trying to make a family‐friendly service, such a move has obvious downsides. Taking steps to remove such content may be desirable, but not if it means that your service is considered the publisher of third party content. Such an approach would require review [of] every third party piece of content before it appeared on the service. Needless to say, this effectively prohibits an Internet with useful third party upload functions and services.

If perfect content moderation was difficult in the 1990s, it’s all but impossible today: Facebook, for example, employs both artificial intelligence and around 15,000 humans to moderate “more than 100 billion pieces of content posted each day” to its platform, and it still struggles to screen that content effectively.

What Does Section 230 Actually Do?

Section 230 (47 U.S.C. § 230) solves the moderator’s dilemma by providing websites with both a “sword” and a “shield.”

Shield: Section 230(c)(1) overrules the Prodigy case: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” These are the “26 words that created the internet” by codifying that websites (not just social media) can’t be considered the “publisher” of the vast majority of content that users upload.
Sword: Section 230(c)(2) applies to moderation: “No provider or user of an interactive computer service shall be held liable on account of (A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or (B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1).” Thus, websites can’t be held liable for removing third party content, even if that content is protected by the First Amendment.

Together, these two provisions are widely credited with fueling the growth of not just social media, but essentially all internet businesses. Reason’s Elizabeth Nolan Brown explains why:

Section 230 stipulates, in essence, that digital services or platforms and their users are not one and the same and thus shouldn’t automatically be held legally liable for each other’s speech and conduct.

Which means that practically the entire suite of products we think of as the internet—search engines, social media, online publications with comments sections, Wikis, private message boards, matchmaking apps, job search sites, consumer review tools, digital marketplaces, Airbnb, cloud storage companies, podcast distributors, app stores, GIF clearinghouses, crowdsourced funding platforms, chat tools, email newsletters, online classifieds, video sharing venues, and the vast majority of what makes up our day‐to‐day digital experience—have benefited from the protections offered by Section 230.

Following the passage of Section 230, online business activity exploded. For example, the U.S. Bureau of Economic Analysis shows that the economic value created by “internet publishing” and the broader “ICT‐producing industries” each increased around nine‐fold (in real, inflation‐adjusted terms) following Section 230’s passage in 1996.

For perspective: today the “internet publishing” industry alone is more than three times larger ($293.4 billion in real value‐added in 2019) than the entire U.S. “primary metals” manufacturing industry ($79.3 billion), and “Big Tech” employs far more workers too. Surely, not all of this growth is attributable to Section 230—technology (faster internet speeds, the rise of smartphones, etc.) undoubtedly played a big role—but experts uniformly agree that Section 230 helped. A lot.

What Doesn’t Section 230 Do?

Conservatives and liberals don’t like Section 230 for a host of reasons, but few (if any) of them are accurate. So here’s a list of things that Section 230—contra the critics—doesn’t actually do:

Section 230 doesn’t subsidize Big Tech. First, Section 230’s liability protections in no way match any accepted definition of a subsidy (e.g., a government grant, tax break, low‐interest loan, or free piece of land conditioned on a recipient’s identity or action), and the statute clearly doesn’t apply to only large tech companies. Second, and more importantly, this claim turns any sort of government protection into a “subsidy.” Is police protection a “subsidy” to small businesses? Are libel limitations “subsidies” to the media? What about anti‐SLAPP laws (which protect individuals from frivolous lawsuits intended to silence them via the high cost of litigation)? If you’re a conservative and answering “yes” here, well, then you have bigger issues than Section 230.

Section 230 doesn’t distinguish between “publishers” and “platforms.” The most common form of this popular claim is that a social media company’s use of the content moderation “sword” magically turns it into a “publisher” that cannot utilize the Section 230 liability “shield.” The biggest error? The statute says no such thing (read it yourself). As Feeney notes, “Section 230 merely states that an interactive computer service is not the publisher of most third party content and is free to moderate content.” That’s it. Furthermore, this claim ignores that traditional “publishers”—like, say, the New York Post—also enjoy Section 230 protections when they host and moderate third party content (e.g., comments) online.

Section 230 doesn’t require websites to serve as a neutral “public forum.” This mistake is almost understandable for non‐lawyers, as the “findings of Congress” in Section 230(a)(3) describe the internet and “interactive computer services” as “offer[ing] a forum for a true diversity of political discourse.” However, the mistake is unforgivable for actual lawyers like Senator Ted Cruz who know very well that such language is non‐binding, and that the rest of the statute—including the actual definition of “interactive computer service” in Section 230(f)(2)—contains no such requirement. Furthermore, as TechDirt’s Mike Masnick and many others have noted, government requirements that private businesses remain politically “neutral” would be a blatant violation of their First Amendment rights.

Regardless, it’s also important to note that there’s not much evidence of systematic “censorship” of conservative views on social media. Sure, there are anecdotes or tweets from idiotic employees, but—as AEI’s Jim Pethokoukis’ recent review of the studies on this issue showed—the evidence of systematic bias is virtually non‐existent. Both liberals and conservatives, moreover, clearly profit from and flourish (really) on social media—including by fighting with their online hosts. And, finally, liberals are just as mad about alleged social media bias against them. (Pro tip: when both sides are mad about “systemic bias,” chances are good that both are wrong.)

Section 230 doesn’t extend “special immunity” to social media companies that is denied to other media outlets. This one comes (unfortunately) from Federal Communications Commission Chairman Ajit Pai himself, but that doesn’t improve its quality. First, as already noted, Section 230 protects all internet companies, not just social media. Thus, traditional media outlets have the same Section 230 protections as Twitter and Facebook when it comes to hosting third‐party content on their websites. Second, the statute establishes that internet companies are—just like other “media outlets”—still liable for their own speech; they’re just not liable for the speech of unaffiliated people posting there. Finally, it’s precisely the unique nature of online business in general (e.g., the need/incentive to allow third‐party content, combined with the speed, ease and quantity of such content) and the resulting “moderator’s dilemma”—issues not shared by any other type of media or business—that necessitated Section 230 in the first place. NBC isn’t hosting a live open mic night out in front of 30 Rock anytime soon, and, even if they did, it’s pretty darn easy for them to “moderate” that “content” (same goes for radio or dead‐tree periodicals). By contrast, internet companies (including legacy media ones!) have different needs, incentives, content, and problems. Hence, Section 230.

What Curtailing or Repealing Section 230 Might Do

As noted above, politicians on the right and the left, including both Biden and Trump, want Section 230 changed. Senator Josh Hawley, for example, wants 230 protections to be provided only to websites that are certified as “politically unbiased” by four of five Federal Trade Commission members. Others simply want it repealed. Not all of the proposed reforms are as draconian as these, but they all carry similar risks, including:

Putting the government more in charge of online speech. Whether it’s through the courts or through new administrative “certifications,” limiting or repealing Section 230 would inevitably result in more government regulation of speech, as subjective terms like “political neutrality” are applied or adjudicated by state actors. It’s frankly hard to see how this would be a win for conservatives in the long term.

Lawsuits. Lots and lots of lawsuits. AEI’s Jim Harper explains why:

It is very difficult at scale to review all the writings, pictures, videos, and links that millions or billions of users post. Stalkers, trolls, and other social maladaptives are incredibly wily and motivated, so a forgiving rule of liability for platforms seems best. If content is self‐evidently wrongful or illegal—say, child porn that has already been algorithmically identified—legal responsibility for taking it down may lie with platforms. But if it takes interpretation or adjudication, responsibility for moderation could easily swamp a platform in potential liability.

Of course, the vast majority of internet speech isn’t “self‐evidently wrongful or illegal,” and there’s an obvious risk of questionable lawsuits from questionable plaintiffs seeking cash from deep‐pocketed tech companies.

A newly empowered plaintiffs bar for internet speech? What could go wrong?!

Reducing speech overall. Of course, the aforementioned litigation risks would inevitably affect internet companies’ behavior. As a Brookings Institution report recently explained, “proposals that seek to force platforms to engage in more monitoring—especially analysis before content is publicly available—will push internet firms to favor removing challenged content over keeping it. That’s precisely the chilling effect that Section 230 was intended to avoid.” Instead of more monitoring, internet companies might just close down comment sections altogether—precisely what Reddit and Craigslist did to certain at‐risk pages in response to the 2017 Stop Enabling Sex Trafficking Act (SESTA), which eliminated certain Section 230 protections.

Long delays in, or strict internal regulation of, website commentary would also discourage use (who wants to wait a day to post a Tweet?), thus further chilling online speech. Maybe, having seen some of the nonsense regularly posted on Twitter (not by me, of course), you think less speech might actually be a good thing (I don’t), but recall that such policies would also apply to Amazon or Yelp reviews, or your silly birthday wishes on Facebook, or legitimate news and protest activity—all strangled by risk‐averse companies now liable for any content that might possibly attract litigation. New restrictions on internet speech would also hinder benign efforts to use social media data for scientific and commercial initiatives, such as improving economic forecasting. All of this makes us worse off on balance.

Hurting consumers and small businesses (while helping Big Business). Regulation often hurts consumers and helps deep‐pocketed incumbents at the expense of smaller upstarts, and Section 230 reform/repeal would likely be no exception. Brookings again:

Additional procedures, such as appeals for complaints and requirements to track posts, will increase costs for platforms. Right now, most popular internet sites do not charge their users; instead, they earn revenues through advertising. If costs increase enough, some platforms would need to charge consumers an admissions fee. The ticket price might not be high, but it would affect people with less disposable income. … Even if Twitter earns enough money to keep its service free, the regulatory cost of these proposals could make it harder for start‐up companies to compete with established internet companies.

Rising costs would only worsen the antitrust and competition concerns that the Department of Justice and state attorneys general are already investigating. And there is no guarantee that reforms would justify their expense. Spam e‐mail didn’t dry up when the United States adopted anti‐spam legislation in 2003; it simply moved its base of operations abroad, where it is harder for American law enforcement to operate.

Small companies would also be hurt by increased litigation costs. A recent survey found, for example, that fully litigating a single lawsuit can cost a company anywhere from $130,000 to $730,000 (or more!) in lawyer fees. Google and Twitter have in‐house legal teams and can absorb these costs; new companies certainly can’t.

Empowering legacy media. As Reason’s Robby Soave explains, “[t]he demise of social media would limit the ability of people to express themselves on the internet, a venue where right‐leaning speech has actually flourished: Facebook posts by Ben Shapiro, Fox News, Breitbart, and others are routinely the most‐read content on the site. It is Trump’s great enemy, the mainstream media, which would benefit most directly from the collapse of these spaces for disseminating information.” Big win for the #FakeNews.

Slowing economic growth and innovation. Beyond the aforementioned new regulatory costs for consumers and small businesses, there’s also solid evidence of just how much Section 230 has benefited the U.S. economy over the last two‐plus decades. For consumers, a 2019 study from Stanford’s Erik Brynjolfsson and others found substantial consumer benefits for free apps like Instagram, Snapchat, Facebook and LinkedIn, and that including the hidden welfare gains of Facebook alone would increase U.S. Gross Domestic Product by tens of billions of dollars each year. A separate Brynjolfsson study found that consumers place enormous value on digital goods in general (calculated by asking people how much money it would take for them to give up the service for a year):

Other studies have found similar welfare gains. Certainly, not all of these services would disappear without Section 230, but it’s impossible to think that their value to consumers—and that of any new services we haven’t considered—wouldn’t be reduced.

For companies and workers, a 2017 study found that eliminating liability protections for internet companies could kill $44 billion in U.S. GDP and 425,000 jobs each year, while discouraging investment in high‐growth startups (due to the legal risks). A 2019 report compared the U.S. and (more restrictive) EU regulatory regimes, and found that due to Section 230 a U.S. internet company is “5 times as likely to secure investment over $10 million and nearly 10 times as likely to receive investments over $100 million, as compared to Internet companies in the EU.” Finally, a 2015 study found that stronger liability protections like Section 230 are associated with increased start‐up success rates and profitability.

While some of these harms might not materialize if Section 230 were significantly curtailed or repealed (the First Amendment, for example, would still cover content moderation), it’s still essential to understand the risks before making major changes.

Summing it All Up

Obviously, I think Section 230 has been good law and oppose major changes to it. But here are few final thoughts for your consideration:

First, it strikes me that “Big Tech” is in a pretty unwinnable position here: on the one hand, their customers (e.g., ad buyers), users, and regulators demand that they moderate content (be it nudity, lies and deepfakes, hacked/stolen information, or whatever) and threaten to leave or regulate if the companies don’t take action; on the other hand, those same groups also threaten to leave/regulate when the same companies police content in a way the customers/users/regulators don’t like. Personally, I’d love for the companies to tell everyone to pound sand and regulate nothing except objectively illegal material, but I don’t have a business to run. And, given the unthinkable magnitude of information posted every minute online—along with the sketchy incentives for people (especially criminals and politicians) to abuse whatever “objective” system is in place—there seems to be no realistic solution to content moderation that’s going to keep these companies out of trouble.

That said, I see little evidence that reform, particularly related to Section 230, is needed. Leaving aside the absurdity of calling unaffiliated competitors Twitter and Facebook a censorious “monopoly”—especially when doing so on their platforms!—there actually are plenty of options for online expression: Reddit (430 million users), Discord (250 million), LinkedIn (700 million), TikTok (800 million—well, until recently), Snapchat (300 million), etc. Then there are the legacy media websites (several of which are top internet traffic generators); the millions of podcasts and (ahem) newsletters; and, of course, “old school” TV, radio and newspapers. All of these companies (including Twitter) respond to market pressures, for better or worse, and can disappear as quickly as they arrive (headline from 2007: “Will MySpace ever lose its monopoly?”). Just look for yourself:

And, again, eliminating or reforming Section 230 would more likely strengthen the biggest internet players, rather than hobble them.

Finally, it strikes me as pretty nutty that the Party of Free Markets, Limited Government, and Economic Growth—one whose media ecosystem exploded upon the repeal of the Fairness Doctrine and one convinced of a #DeepState conspiracy against its Very Online leader (who routinely uses social media to bypass the #DeepState and the #FakeNews and has even relied on Section 230 to defend such behavior)—is now working to create a Fairness Doctrine for the internet and thereby hobble a thriving U.S. industry, stifle speech, grow government, and empower its mortal enemies because Twitter, Facebook and YouTube occasionally do stupid things.

But maybe that’s just me.

Chart of The Week:

Farm subsidies are a global problem (except in New Zealand):

Ignoring the Recent History of 'Buy American'

Scott Lincicome — Tue, 16 Feb 2021 15:11:00 +0000

Democratic Presidential nominee — and current 2020 front‐runner — Joe Biden yesterday released a “Made In All of America” plan heavy on “Buy American” mandates, pursuant to which $400 billion in new federal energy and infrastructure projects must use only “American products, materials, and services.” Biden’s plan, it should be noted, is hardly novel: Buy American laws have been around for almost a century, and similar types of procurement restrictions are now quite en vogue among politicians and wonks on both the left and the right. As Cato scholars have argued for decades, however, Buy American requirements are bad law, bad economics, bad trade policy, and bad politics (well, for most Americans at least).

Yet one needn’t pore over reams of wonkery to understand the problems that Buy American restrictions cause for U.S. companies, workers, taxpayers, and public works projects. Instead, a quick review of what happened the last time these rules were injected into a massive U.S. infrastructure law — way back in 2009 when Biden himself was in the White House and managing the law’s implementation — may suffice.

From the Wall Street Journal in September 2009:

On paper, Tom Pokorsky would seem to be a clear beneficiary of the government’s $787 billion economic‐stimulus package.

Mr. Pokorsky runs Aquarius Technologies Inc., a company in Port Washington, Wis., that makes equipment to treat sewage. The stimulus plan earmarks some $6 billion for municipal wastewater projects that are right in his company’s sweet spot.

But the bill’s Buy American provisions — meant to give U.S. companies a leg up on foreign competition — are causing Aquarius and other U.S. companies a lot of grief with both suppliers and clients in Canada.

Now that grief has boiled over into a major diplomatic row with the largest U.S. trading partner. Canadian communities angered by perceived American chauvinism have started a Buy Canadian campaign to exclude U.S. bidders from municipal contracts.

“If that sticks, well, there goes 25% of my business,” said Mr. Pokorsky. “To me, Ontario may as well be Indiana.”

Halton Hills, a town of 50,000 people about 25 miles west of Toronto, is one of about a dozen Canadian communities forging ahead with plans to amend their procurement policies to freeze out American companies. “We won’t be taking any products from any country that is discriminating against us,” said Mayor Rick Bonnette.

Officials in Washington and Ottawa are scrambling to avoid an all‐out trade war. Even so, Buy American guidelines are complicating life for American companies, muddling municipal bidding procedures and blunting the overall effect of the stimulus.

To date, the Environmental Protection Agency has disbursed just $77 million of the $5.9 billion it has for municipal wastewater projects, in part because of Buy American provisions. Overall, the government has either spent or committed about $210 billion in stimulus finds, leaving $370 billion still to be doled out. (The rest of the stimulus is made up of tax cuts.)

The WSJ story also shows that the Buy American rules’ problems weren’t just limited to bureaucratic delays or foreign retaliation — they also raised costs for U.S. companies and consumers (in this case, U.S. taxpayers) and were often just plain incompatible with the realities of multinational investment and 21st century global supply chains:

Aquarius gets a lot of its parts from abroad, particularly from Canada. Such integration became even tighter after the North American Free Trade Agreement in 1994 joined the U.S., Canada and Mexico in a free flow of goods and services.

Trojan Technologies Inc. of Ontario, North America’s dominant maker of ultraviolet disinfection equipment for treating sewage, is a key supplier to Aquarius and other companies.

Because of the Buy American provisions, Trojan has had to shift production to a plant in Valencia, Calif., a move that has resulted in delays and additional costs being passed on to customers, said Trojan executive Christian Williamson.

Trojan is a subsidiary of Danaher Corp., a U.S. conglomerate based in Washington.

While some companies have the flexibility to shift production to the U.S., others don’t. General Electric Co. assembles complex wastewater‐treatment systems in Canada with parts from Europe.…

Bob Weese, a spokesman for GE Canada, said the group’s wastewater‐treatment business was having a tough time bidding for contracts with U.S. municipal governments because of the procurement rules.

“The supply chains are so integrated, it is crazy to try to impose a Buy American provision,” he said. “Some components cross the border four or five times” before they are completed.

Buy American rules are gumming up the plans of Frederick County, Md., to get $6 million of stimulus money for a $100 million wastewater‐treatment plant. Long after the project bids and contracts had been signed, the county found itself on the wrong side of the Buy American provisions because their system uses certain membranes made by a GE subsidiary in Canada.

Kevin Demosky, a county utility official, is applying to the EPA for a waiver to use the GE parts. “The [Buy American] rules affect a small part of the project but are like a virus infecting the whole thing,” he said. “It’s like they want us to go back in time.”

The Biden plan, it should be noted, actually wants to “crack down” on Buy American waivers, ensuring even less flexibility for American companies, even higher costs for American taxpayers, and even more problems for American infrastructure projects — projects that, let’s face it, aren’t exactly models of efficiency already.

At least, as the Financial Times noted in June 2009, one group of Americans clearly benefited from the Stimulus Bill’s Buy American rules:

Confusion reins. For fear of missing out on contracts, many companies are demanding that all their suppliers are Buy American‐compliant regardless of any exemptions.

“Those companies that can comply are of course thrilled and are trumpeting that in their marketing. Those that cannot are in agony and are losing business and cutting workers,” says David Ralston, a government procurement lawyer at Foley & Lardner. “The many companies that find themselves in the gray areas are calling their lawyers.”

Stimulus, indeed!

Libertarians and other free marketers are frequently accused of impractical “fundamentalism” when we express opposition to things like Buy American rules and other types of protectionism and industrial policy. The short history lesson above (which you’d think the Biden Team knows, given the Vice President’s involvement) hopefully shows that, while Biden’s Buy American plan might be good politics, it’s not the free marketers untethered from reality.