February 28, 2018 | Should Google and Facebook be regulated? That was the question that Ran Harnevo - CEO of Homeis and former President of Video at AOL—asked a business school class at the University of Chicago. For ninety minutes, Ran had explained that this digital duopoly have become too large and that their size was beginning to have negative social implications. But most of the class was not convinced. Of course, it’s hardly surprising that the first reaction of a class of business school students at the University of Chicago—many of whom ardently believe in the beneficence of the crucible of capitalism—would be to eschew regulation. After all, the University of Chicago was the intellectual playground of Milton Friedman, whose dogmatic belief in free markets was such that he once opined that “the government solution to a problem is usually as bad as the problem”.

This anti-government attitude has persisted since the Reagan Revolution. The Gipper’s assertion that “the nine most terrifying words in the English language are ‘I’m from the government and I’m here to help’” still appears to resonate with many Americans today such that deregulation is often viewed through an aspirational lens. But such an approach neglects the fact that there are instances where regulation may be beneficial. Also, just as regulation may have unintended consequences, the same is true of deregulation.

Consider the FCC’s Fairness Doctrine—established in 1949 and abolished under Reagan in 1987. This regulation required holders of broadcast licenses to present controversial issues of public importance and do so in a manner that was honest, equitable and balanced. Without the removal of the Fairness Doctrine, content on Fox News Channel or MSNBC would not have featured such brazenly one-sided programming. With no requirement to present a balanced view, cable news channels have pursued a profit maximising strategy: trading in anger and outrage.

Fox News has leveraged this strategy to a particularly devastating effect by serving stories that cocooned viewers into an echo chamber long before Facebook emerged. Over time these echoes have grown loud enough such that Fox News viewers have come to think of their favorite news channel as an objective news outlet.

As a result, Fox News viewers believe in a reality that does not exist. In this reality a harmless fist-bump between Barack and Michelle Obama was a “terrorist fist jab”, Jesus and Santa are white and Americans aren't "pure" like Swedes because they keep marrying "other species and other ethnics." When half the population hold beliefs that hold no basis in fact, it becomes difficult to move forward as a country. With a poisoned public discourse, two factions, which occupy two different spheres of truth and each view the other side as a threat to the country, have emerged.

Regulation is not the answer to all economic ills but done right serves a key tenet of capitalism: competitive markets. More specifically, a stronger regulatory system in the U.S. could have prevented the repeal of the Fairness Doctrine and challenged many mergers which have had anti-consumer outcomes. For example, American Airlines’ 2013 takeover of U.S. Airways has resulted in many more monopoly routes (e.g. Dallas to Aspen which is priced at $700 round-trip for a weekend during ski season).

Businesses clearly perform an important role in society, employing many people and investing in their communities. However, a lack of effective regulation has had an adverse impact on economic outcomes and public discourse. Effective regulation could stem this trend. But as long as Americans remain preternaturally predisposed to think of government as incompetent, it’s hard to imagine an environment where regulators will have the mettle to take on corporate behemoths.

Al Abedi is pursuing an MBA at the University of Chicago Booth School of Business and is a graduate of the University of Warwick in the U.K.

The views expressed in this piece do not necessarily reflect the views of other Arbitror contributors or of Arbitror itself.

Photo by Greg Skidmore with a CC BY-SA 2.0 license for Flickr.