Aug 29, 2019

We Shouldn’t Demonize Digital Innovation and Expand the Administrative State

Jennifer Huddleston Research Fellow , Adam Thierer Senior Research Fellow

Sen. Josh Hawley (R-MO) doesn’t seem to like the internet very much. In a new Wall Street Journal editorial, he doubles down on his thesis expressed in earlier columns and speeches that America’s tech companies have only given us an “addiction economy.” Sen. Hawley says he wants to see more innovation. Why, then, does he propose a “burn-the-village-to-save-it” solution that would decimate digital innovation by massively expanding the administrative state?

From the start, Hawley underrates the current pace of innovation. “There was a time when innovation meant something grand and technology meant something hopeful, when we dreamed of going to the stars and beyond, of curing diseases and creating new ways to travel and make things,” Hawley writes. As our previous work has pointed out, it still does. 

Today’s innovations have provided new educational opportunities, helped in the wake of natural disasters, opened up entrepreneurial opportunities, decentralized health and medical information, and much more.  There’s also crowdsourced 3D-printed prosthetic limbs and technologies to help shelter animals find homes. Not to mention the advances in autonomous vehicles or private spaceflight with an eye towards Mars. This list could of course go on. 

What are we to make of Hawley’s repeated claim that digital technology companies are not building tools that “enrich lives, strengthen society, create good-paying jobs, and improve productive capacity”?

To the contrary, platforms like Etsy and Facebook have lowered the barriers to entrepreneurship for many, particularly those that might not have been able to launch a traditional brick-and-mortar business due to costs or time constraints. On a larger scale, the internet and social media have added over 9,000 jobs and almost 570 businesses to each metropolitan statistical area. 

When it comes to enriching lives and strengthening society, the internet has also helped build new forms of communities, particularly for those who might have felt otherwise marginalized. Movements like #metoo have used social media to bring conversations that were previously whispers into the mainstream. As the Electronic Frontier Foundation’s Elliot Harman recently pointed out, the liability protections afforded by Section 230 and the diverse array of online communities it guards online is especially helpful for “rural LGBTQ teenagers who depend every day on the safety of their online communities. It’s a gift to activists around the world using the internet to document human rights abuses. It’s a gift to women who rely on dating apps to meet people more safely.” 

Sen. Hawley does point out a real problem when he writes that innovation in physical sectors has lagged behind the digital world. But that is no strike against digital platforms. Rather, it’s a predictable outcome from the fact that older sectors and technologies continue to suffer under the weight of decades worth of archaic, productivity-killing red tape. Regulatory accumulation has become a chronic problem created by Congress's neverending delegation of broad regulatory authority to the administrative state. The administrative state has grown so large—and largely unaccountable to Congress—that it is now referred to as the “Fourth Branch” of American government. 

The internet and digital technology sector was blessed to be “born free,” and largely avoided this mess. The light-touch policy approach initially laid out in the Clinton Administration’s 1997 “Framework for Global Electronic Commerce” stated that “governments should avoid undue restrictions on electronic commerce.” 

America’s embrace of “permissionless innovation” for digital technology allowed US-based informational technology innovators to become global leaders. The 2018 Global Innovation 1000 study revealed that seven of the top ten (and 14 of the top 25) most innovative companies in the world are US firms. These companies and their products are household names across the globe, and they invest massively both in R&D and their workforce. 

While Sen. Hawley belittles it, this is a success story of which Americans can be proud. We all benefit from greatly thanks to this unprecedented access to information, communications, and computing technologies. It’s troubling, therefore, that Sen. Hawley wants to expand the regulation of this sector through a more precautionary approach, demanding government permission slips to innovate at every juncture. 

Ironically, Sen. Hawley seems to want to have it both ways when it comes to administrative regulation. On one hand, he has co-sponsored the “Take Care Act” with Sen. Mike Lee (R-UT) that aims to rein in “massive federal agencies [that] have been regulating our lives and our businesses without any democratic accountability.” At the same time, Sen. Hawley’s legislative proposals for the digital economy would usher in a massive expansion of the administrative state. His proposed regulations include: 

Taken together, Hawley’s ambitious legislative agenda represents a radical, top-down effort to completely remake the internet. His measures would delegate sweeping powers to bureaucrats at the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), and Securities and Exchange Commission (SEC) to sit in judgment of which innovative activities would be allowed going forward. 

For example, his “Internet Censorship Act” would let FTC officials determine what constitutes “politically biased moderation” for purposes of awarding “immunity certifications” to social media providers, who would also need to submit to regular audits to ensure they are moderating content in a government-approved manner. If they didn’t, they would lose their platform liability protections, which could effectively run them out of business.

Sen. Hawley essentially endorses a strange amalgam of the “fairness doctrine” as well as “net neutrality” mandates for social media platforms. This is a peculiar position for a conservative politician to endorse, because rank-and-file conservatives have spent the last two decades lambasting both regulations. 

A generation ago, conservatives were rallying to abolish the FCC and rein in the FTC and SEC. Today, by contrast, Sen. Hawley seeks to expand the powers of the three agencies to create the equivalent of a Federal Internet Commission. We won’t make America great again by hobbling digital innovators, it will just give the next technological moonshot an uphill battle to make it to launch. 

If boosting innovation and productivity in other sectors is the goal, Sen. Hawley should focus his energy on removing the enormous tax and regulatory burdens holding back the entrepreneurial spirit of the American people. Instead, he seems to prefer to tear it all down and start over. But burning the village to save it is never a sound basis for policy reform.

Photo by SpaceX via Getty Images

Support Mercatus

Your support allows us to continue bridging the gap between academic ideas and real-world policy solutions.Donate