Month: March 2019

Facebook wants regulation because it wants to strangle new ideas

There are many motivations for starting a company, but most of them involve having an idea.

It might not be an original one, but that idea is what fuels the company.

That idea is a way of providing a service or a product that will be successful and have demand.

You might have an idea that you know will only make a quick buck. You might have a game changing product that ultimately will influence an entire sector or culture.

You might just think you can do something everyone else is doing, just cheaper, or better.

But while you’re doing it, while your setting up the company and as you start to trade and continue to grow, you aren’t looking for the hardest and most expensive way of doing it.

You maintain your idea, but in the most efficient and value intensive way.

If it costs more than you can sell it for, then you might as well shut up shop, unless you can see a way to reduce those costs through scale, investment and technology.

What you don’t do, is embrace or encourage burdens on your business.

Yet that’s what regulation is.

Regulations are what a start up business has to find a way to fund. They are a direct cost to the business.

You might have raw materials, labour cost and the cost of manufacturing, shipping, marketing etc.

But you also have the regulatory cost. The cost of compliance.

And this is where regulation favours the large business, with its economies of scale and deeper pockets than the plucky start up.

It’s why you’ll never see a small business ask the government to regulate them.

It’s why the founder of Facebook just asked for the government to regulate it.

Look at us, we’re on your side, we are actually asking for rules to play by. We can’t possibly be evil.

Yet if Facebook wanted to protect its users, it could. If it wanted to invest in technology to filter content, it could pump billions of dollars into it.

The plucky little start up social media company can’t afford to do that.

And that’s why Facebook wants it.

They get to “work with governments” and governments get to say they “worked with industry” to set regulation and “protect” us. From whom, who knows.

But the sad irony, the counter intuitive fact of the matter, is that if government regulates Facebook (or rather the entire social media industry) then it has unwittingly done Facebook’s job for it.

It’s put a massive extra cost on being a social media platform, and thus instantly made it billions of dollars more difficult to become one.

Who do we want to challenge the Facebooks of this world? Only other global business leviathans with the means to navigate and pay the costs generated by regulation?

Or do we want real competition.  From new businesses of any size. From those that want to change and pivot quickly.

Facebook just asked to be regulated. Governments will now clamour to do so, when all they are doing is helping sustain and augment a monopoly.

Yet we should want those with new ideas to be able to disrupt.

To challenge.

To innovate.

The best way of coming up with something better than Facebook is to unleash the potential of those new ideas.

Free from constraints.  Free from burdensome regulation that only the large incumbents will push for in order to create barriers for those to challenge them.

Of course Mark Zuckerberg wants new regulation.

The problem is that no one else asks why.

Photo by William Iven on Unsplash

Revealed vs Stated (Including Falsified) Preferences

This week we discuss the difference between stated and revealed preferences. How do economists and politicians use preferences to form policy and should they ignore stated preferences altogether?

We also delve deeply into falsified preferences, a particular type of stated preference, and how we are all threatened by the psychology of this phenomenon and it’s effects on free speech.

Photo by Daniele Levis Pelusi on Unsplash

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Brexit isn’t threatening our constitution, Theresa May is.

It’s easy to say we are going through a constitutional crisis.

The assessment is a lazy one.

But this issue is bigger than Brexit (although that was the trigger) and dare I say it, it’s bigger even than the overturning of the clear democratic mandate of the referendum.

In most people’s eyes Theresa May, or indeed any Prime Minister that were to replace her, has the responsibility to implement the result given.

But there is something, I think, even more sinister happening that threatens our entire system of government, and that’s the overthrow of the executive in favour of the legislature.

In our system, as distinct from the US and others, the executive is appointed from members of the legislature. In particular, the vast majority are members of parliament, rather than members of the house of lords.

So they are each elected by their constituents, part of a political party, and on the winning side before they are then chosen by the Prime Minister to serve in the government.

But what happens if parliament “takes back control”. Well this is what media pundits like to tell you, although I’m not sure in its history it ever actually had the control it is purported to be taking back.

But the point is a serious one and it’s also important to understand who is enabling it.

One Theresa May.

Yes, we have a Speaker who doesn’t respect the office he holds, turning it into a specifically political and therefore ultimately party-political position.  The is dangerous in and of itself.

But it’s May who is continually letting MPs now call the shots.  MPs who lost. MPs who haven’t been chosen to form a government. MPs that’s function is to scrutinize law, not rule.

The Bill has been defeated. That should be it.

She could withdraw it. She could end this parliamentary sitting and reset proceedings.

But instead she enables potential policy outcomes that she says she is against while attempting to prevent the one outcome that is still government policy (just leaving).

In my eyes this now transcends Brexit.

This is about process. And process is important.

Not least of which because we need to hold our elected officials to account, but also because big constitutional change surely needs democratic support. Say… a referendum on what organisations and structures govern us and whether we have sovereignty?

This parliament with the support of Bercow and May, egged on by Anti-Democrats on all sides, is neutering the executive, but without a credible or warranted alternative.

So while Brexit is the catalyst, or at least the trigger of this spasm of protest and sudden flexing of muscles by MPs who five minutes ago were happy to be ruled from Brussels, to me it doesn’t matter that it’s about leaving the EU.

To me, in any circumstance where the executive feels it is being usurped, it should defend itself, and our very system of government, with its checks and balances and separation of powers.

I may not agree with the amount of power our government holds in general, but exchanging one set of useless despots for another is not my idea of liberal reform.

The larger mistake that Theresa May is making, and this is obviously saying something, is letting MPs over rule not only the referendum result, but the government’s control of negotiations with the EU when they have no authority to do so.

And the fact that she blames MPs now publicly for the mess she is in, just shows how delusional she has become and how she’s forgotten what it truly means to hold the office of Prime Minister and defend our constitution.

Photo by Deniz Fuchidzhiev on Unsplash

No deal but no no deal either

It turns out no deal isn’t better than a bad deal even though the commons has certainly expressed its opinion that the Withdrawal Agreement is very bad indeed.

The Irish Backstop is the clincher, and this week the power was firmly in the hands of Geoffrey Cox, the government’s lawyer in chief, who with one decisive blow, single-handedly ensured that the government would be defeated again.

We discuss the events of the day after, when the commons voted on a motion to take “no deal” off the table, and on the Malthouse compromise amendment.

Will members of the Cabinet resign after abstaining? What about those who voted for the Malthouse version of Brexit?

And finally, we discuss the shenanigans in the Labour Party, and how in “normal” times, this would have been big news.

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