On this episode of the Capitalisn’t podcast—part three of a series investigating how digital platforms such as Facebook and Google should be regulated—Tyler Cowen of George Mason University argues to hosts Kate Waldock and Luigi Zingales that more regulation may not be the answer to all our questions about those platforms.

Kate: Hi, I’m Kate Waldock from Georgetown University.

Luigi: And this is Luigi Zingales from the University of Chicago.

Tyler Cowen: Tyler Cowen, George Mason University. I’m the guest, I believe.

Kate: No, you don’t get to talk yet.

Tyler Cowen: Oh, sorry.

Luigi: That’s quite all right.

Tyler Cowen: Do it over again.

Kate: You’re listening to Capitalisn’t, a podcast about what’s working in capitalism today.

Luigi: And, most importantly, what isn’t.

In the past two episodes, we listened to Fiona Scott Morton and Nolan McCarty, who reported about what’s wrong with the digital platforms.

Kate: And on today’s episode we’re going to be talking with Tyler Cowen, who is the Holbert C. Harris chair in the economics department, George Mason University. He’s also the cohost of Marginal Revolution, an economics blog. And he’s written an uncountable number of books, but the most recent of which is called Big Business. Welcome to the show, Tyler.

Tyler Cowen: Happy to be here.

Kate: Tyler, can you give us a broad summary of your book?

Tyler Cowen: My book is called Big Business: A Love Letter to an American Antihero. Several years ago, I noticed that people were villainizing business, and big business in particular, much more in public discourse. We see this in our politics. We see it if we look on the op-ed page of the New York Times. We hear it also from President Trump. We have a president who tweets against CEOs. That is unprecedented. Since we’re treating business more as a scapegoat, I thought I would provide a dispassionate look at the actual facts about big business in America, and I cover big tech and the financial sector, monopolization, and many of the topics that people care about in this context. And the book came out this April.

Luigi: I think that in the book you make a very important point, which is that progress has been great. It has been great in America for the last 200 years, but it’s been great also in the last 20 years, and that a lot of the things that we have today are much better than what we had in the past. Now, the question is not whether we love cars or we don’t love cars. When cars were invented, they were great, but also, we invented traffic lights, and as a result of traffic lights, the number of people killed per miles driven dropped by a factor of 25. I think that the real question is not whether this business is good or not. It is whether we want to intervene.

Tyler Cowen: Well, I think for all businesses, we should enforce laws against fraud much more strongly. A point I make in the book, which a lot of Americans don’t actually know, is that you’re more likely to be defrauded by a small business than by a big business. If you go to McDonald’s or Walmart, there’s a remarkable predictability and regularity to your experience. So, big business tends to be not very popular in opinion polls, but, say, your local TV-repair person is much more likely to rip you off. And you mentioned traffic lights, it’s interesting, but the trend these days is to do away with traffic lights and have traffic circles. So, which works better? It depends. It seems we invested in too many traffic lights, and now we’re relying a bit more on the spontaneous order of traffic flow, like the Dutch do.

Luigi: I think that you very brilliantly dodge the question, and that is, do you see anything that should be done in the sector of big tech?

Tyler Cowen: I think, in general, there is too much crony capitalism in America. I agree with many of your writings on this topic. Sometimes big tech is the recipient of those subsidies. I would do away with those subsidies as much as we possibly can.

I would not break up the big tech companies. I would not stop them from competing effectively abroad. I think they’ve given us high consumer surplus and overall a pretty remarkable deal, often at zero price. I would, in principle, tighten privacy legislation, but I don’t think we’ve figured out very well just yet how to do that.

Kate: I think in your book, Tyler, you say, why are people mad at big businesses? Why are people mad at Facebook and Google in particular? You talk about things like fraud, and you talk about things like monopoly power, but I think people are mad because they feel like they don’t have enough control over their everyday. They feel like, if I go search for a new microwave, then I’m going to be shown pictures of microwaves until I can’t take it anymore, and then I have to buy a microwave. If I want to interact with my friends, I’m forced to interact in a platform where I have to share data with people that I don’t understand. I don’t know them. I don’t know how they’re going to use it. I think people are frustrated with the lack of choices and with an invasion of privacy and with the exploitation of personal biases, behavioral biases that we all have.

Tyler Cowen: I don’t think people mind ads in their email very much, for the most part. I have a Facebook page. I don’t use it. I have an email system where they don’t send me ads. It’s not hard to get these today. There’s competition. Obviously, the services that can send you ads may give you better terms along some other dimensions, because they’re making money from having you as a user. You know, people sort themselves accordingly. It seems to me there’s really quite a bit of choice as to how you will connect with other people.

Luigi: Wait a second. When you say that there’s a lot of choice, you are forgetting the importance of network externalities. At the conference, you mentioned the fact that you can use your email or even your, whatever you say, Google . . .

Tyler Cowen: You can connect with people using Fortnite, using Pinterest, you can write a blog, you can do it on Twitter, you can call them on the phone, you can text them, you can knock on their door. Believe it or not, you can still write them letters. There are different levels of advertising on all these media, but plenty of them are ad-free, or close to ad-free, and we pick and choose. Most people do a mix of those.

Luigi: But the value of a platform, the value of a medium, is also the number of other people who are there. If I want to reach a large number of my friends, I’m probably on WhatsApp. If I am a student and I want to communicate with my university, they often . . . I have to be on Facebook. If you don’t live in the middle of the jungle and in a completely isolated way, you have to use this stuff. It is an essential utility.

Tyler Cowen: Most of us are on, say, five or six platforms. So, I’m on Linkedin, which I use a tiny bit for some purposes. I use Twitter for very different purposes. If one of those becomes too burdensome, I just stop using it. So, it’s one reason I don’t use Facebook. The page to me is too cluttered, but not even mainly by ads, just by messages from my so-called friends. But for other people, Facebook works great. I much prefer WhatsApp, a totally clean page. So, again, it seems to me there’s a lot of choice, but even when you’re somewhat inconveniently induced to use a network that has more ads than you would like, you have to compare that to the world of network television that existed when I was a kid, where you were just blasted by ads. You watch Mary Tyler Mooreand it’s like 12 minutes of ads in a 30-minute show. That was awful. So, you have a lot more autonomy to control, pick, and choose what ads you get than you used to.

Kate: I don’t think that that’s perfectly fair. I think you are probably the most disciplined person in the world, or you’re among the top few. Even you, Luigi, who’s almost certainly not as disciplined as Tyler, have admitted to looking at Lyft and Uber every time you’re going to go for a ride, and you compare the prices. Most people don’t do that. Most people feel like they’re bound to a platform. I instinctively, when I open my computer, my fingers type F, A, C, because then my browser goes to Facebook and then I check what’s going on in my feed. I see that all my friends are living great lives and have beautiful children. I don’t have those things. I immediately feel bad, but I can’t stop doing this because I'm addicted to it, and I hate it. I’ve tried going off it for a little while. That’s helped to some extent, but I think a lot of people feel like they don’t have choices.

Tyler Cowen: Millions and millions of people have quit Facebook. You can switch to something like Snap, for instance. Very commonly young people think Facebook is where old, square people are. It might be addictive for some people in some way, but again, you see an enormous amount of out-movement from all of these services.

Kate: Great, and Snap is even worse, because it distorts your face to look even more beautiful than you actually are.

Tyler Cowen: But again, you’re getting amazing free things we didn’t have not long ago. You’re not forced to use them. Everything that’s fun has an appealing quality where you might sometimes regret having done too much of it, but all forms of progress are going to have that feature. There are people who read too many novels, listen to too much music, but again, when you evaluate these on the whole . . . there’s one estimate from early last year, the consumer surplus from Facebook for a typical American can be over a thousand dollars a year. How many other companies even come close to that?

Luigi: But look, nobody’s talking about abolishing Facebook. When you’re talking about the fact that they add value, you’re saying something we all agree with. The question is whether we can do better. You mentioned Linkedin, you’re not using Linkedin. Why? Because you’re a tenured professor, you’re not on the labor market, but if you want . . .

Tyler Cowen: To hire people.

Luigi: I understand, but as a user, if you had to put yourself out there in order to actually get a job, you don’t have a lot of choices outside Linkedin. I think Linkedin is the place to be. So, we need to recognize that there is an intrinsic winner-take-all component in digital platforms. We need to think about, because these tend to be monopolies, whether we need to regulate, because I think you agree that a private monopoly is a terrible thing, don’t you?

Tyler Cowen: Monopoly is a tricky word in the context of platform goods. I don’t think we should add regulations to Linkedin, if that’s what you’re asking specifically.

Luigi: Should we add any regulation to Facebook?

Tyler Cowen: I do think general privacy regulation we can improve, and it’s likely that regulation would cover Facebook, but I readily admit that I don’t have the answer as to how we should best do that.

Luigi: Aren’t you a bit offended by the fact that even if you de-register from Facebook, Facebook keeps following you and getting information about what sites you visit and keeps basically surveilling you on every action you make?

Tyler Cowen: On the list of my offenses, it’s not in the top 2,000. Am I thrilled by it? No. To me, it's a minor problem.

Luigi: Can you give us the first three offenses on your list?

Tyler Cowen: Well, it’s how people treat me in real life. I mean, those are by far the biggest problems most of us have. Online life is a kind of sanctuary. It does get funded, it gets funded by some things we don’t consider ideal. It’s a package deal. I’m really not worried about Facebook somehow selling what they have on me to my supposed enemies, who then somehow do me in. I just don’t think it’s a big practical problem. I would rather we had greater protections than we have today.

Kate: But when you talk about digital platforms being monopolies, you give examples of, oh, I can go on Snapchat, I can go on Pinterest, I can go on Fortnite. Isn’t that a video game?

Tyler Cowen: Yeah.

Kate: In any case.

Tyler Cowen: Big game. Bigger than a game.

Kate: Right. Yes. I don’t do the whole Twitch gamer chat thing, but I know a lot of people do that. But to me that’s a bit of a red herring, because the monopoly issue isn’t on the consumer side. It’s on the advertiser side, and on the advertiser side, we do know that Google and Facebook combined control, what, 85 percent of the online digital marketplace in the United States. That, to me, definitely seems like an oligopoly, and you even admitted in your book that when you were starting your blog, I believe, you were advertising on Facebook. When we have thought about advertising for this podcast, which we haven’t done much of, I immediately thought Facebook, maybe Twitter.

Tyler Cowen: You should. I hope you do.

Kate: But I didn't think that there’s that many options, and that’s why we see Google and Facebook earning billions of dollars of profit every year. That those are profits that could have translated to lower prices for consumers.

Tyler Cowen: When there’s large market share because it’s superior service and much—and I mean much—lower prices than the status quo ex ante, I am not worried about that. That, to me, is progress.

Luigi: Wait a second, you like cryptocurrencies, and at some point . . .

Tyler Cowen: Well, I don’t own any, and I’m somewhat of a skeptic, but I like people experimenting with them, is a better way to put it.

Luigi: OK. You know that a year ago, both Facebook and Google decided to ban ads of cryptocurrencies. Basically, this amounts to private regulation. When you have 80, 85 percent of the market share, you’re basically a private regulator. Now, you have spoken very often against public regulation. I think that there’s only one thing worse than public regulation, and that is private regulation. Two individuals who are not accountable to anybody. In fact, Mark Zuckerberg controls 60 percent of the voting shares, and Brin and Page control the majority of the voting shares in Google. So, you have three individuals that have more power than any government official.

Tyler Cowen: Again, you’re mixing in specific and general claims. If we take the specific case of not running cryptocurrency ads, there was a general perception, probably true, that quite a high percentage of these ads were just outright fraud. Now, I run a blog, various websites, we used to have ads on the blog. No more. I didn’t want fraudulent ads. I think that’s a good thing if I exercise that self-regulation. Probably in this case that was the right private-sector decision. So, I say, great.

Now, if you ask, would we be better off in a world where some particular kinds of social media were much more fragmented, would we have a higher or lower quality of ads? I actually suspect the quality of ads would be lower. So, I’m not looking to split up Facebook hoping there’ll be all these little services, and somehow they will have better ads. I think you’ll have less monitoring, less scrutiny, less capitalization, less accountability, and there are plenty of fragmented social networks today. I mean, look at 4chan or live.ly, my goodness, and you think what gets on those is much more disturbing than what you might object to on Facebook or YouTube.

Luigi: But wait a second, you might agree with this particular decision. I actually don’t disagree that many of the cryptocurrencies were fraud. So, the issue is not the particular decision, the issue is the principle. Is it possible that two companies that control 80 percent or 85 percent of the market have the power to regulate you out of existence? If you are a new business, and you want to enter, and they decide you should not enter, basically you cannot enter, because you cannot advertise, you cannot reach your customers. It is a chokepoint that gives them an enormous amount of power.

Tyler Cowen: But the actual fact of the situation is that Facebook has used this so-called power, if we are to call it that, to allow millions and millions of more businesses to advertise than ever could do so before, right?

Luigi: I’m not disagreeing with that. I’m worried that they have the power to actually regulate business out of existence and even if you don't exercise . . .

Tyler Cowen: But they don’t do that.

Luigi: Even if you don’t exercise the threat point, you know in economics the threat point is good enough to scare people and deter people. So, they have the threat point, and they do exercise it. The example of the cryptocurrency shows that they do exercise it, maybe with a well-intended reason, but do we really trust the good intentions of an individual so much?

Tyler Cowen: Look, every system has imperfections. If we ask the general question, the filter of which ads get through today compared to how it was 30 years ago, I much, much, much prefer it today. Would I entrust a regulator with perhaps the head of the agency appointed by Donald Trump and accountable to Trump and/or Congress with those decisions, and then that becomes to me a potential free speech violation? No, I would rather we had the current system. The overall configuration of what can be advertised, how many choices, how many options you have, I think has never been better or even remotely as good as it is today. And if Facebook or Google, they make a few bad decisions de-platforming people, that is a shame. We should be concerned. But again, compared to the de-platforming that existed in the old days, where you never even got close to a platform, I think it’s a far, far exaggerated worry.

Luigi: We know that Google has an enormous power in rank and use. The ranking of different products by Google tremendously affects the way people buy those products. There are some other experiments done in the political arena that show that the way you rank news, the existing news of candidates, might tremendously impact the way undecided voters would vote. So, basically, you have two people, Brin and Page, who can decide who wins the election in most countries in the world. And I’m not saying . . .

Tyler Cowen: That’s not true.

Luigi: I’m not saying they’ve done it so far.

Tyler Cowen: Did they support Donald Trump? I don’t know, but I don’t think so.

Luigi: I’m not saying that they have done it. I’m saying that they could do it. I’m not so worried for the United States because I think that there’s more visibility, but there are a lot of countries in the world. The facts are that their ranking distorts choices or affects choices. So, they have this power. Do you want to leave it completely unregulated?

Tyler Cowen: There are many countries in the world, I can’t speak to all of them, but I do know in Africa, if you poll Africans, the general view is they face a lot of state-run media, which is massive and extreme propaganda, and the use of Google and other Western services to get them to better news is quite significant, and they think it is overall improving their news quality. So, I wouldn’t just dismiss other countries as somehow Google-run, crazy, electing tyrants. There are many significantly positive political effects of Google and social media in poorer countries. There are many cases of propaganda before social media. Are there cases where social media from the US made foreign propaganda worse? Probably. Should we be concerned? Yes. But let’s not overlook the positive side of the picture.

Luigi: But Tyler, you are an economist. You know the difference between average and margin. You keep answering that, on average, we’re better off, which I agree. It is not a dispute. Nobody says we want to go back to the world of the past. The question is, can we do better by regulation? You keep saying that it is better than what it was 20 years ago, which is not answering the question.

Tyler Cowen: I don’t want our government to regulate Google search rankings. No. I don’t think we can do better. I think we would be doing much worse. Even completely honest regulation, the best you can hope for is that things . . . you can just rank them by price, and then you have a lot of low-quality options which rise to the top, because the price is lowest, and consumers end up seeing too many low-price, low-quality options, and that’s the case where regulation is perfectly honest.

It’s a hornet’s nest. It’s going to violate free speech. There are also plenty of search engines. Google provides superior service by, for the most part, trying to be objective, and no, I don’t think we can do better. Who is it you want to put in charge of this? Tell me.

Luigi: First of all, I would like to avoid Google having other businesses, because when they favor the other businesses, they are distorting the marketplace. This is what European antitrust is about. So, are you in favor of blocking Google from entering any other market?

Tyler Cowen: It depends what you mean by any other market, and there’s also an Alphabet/Google distinction here. So, Alphabet, for instance, is supporting research into driverless cars, correct? These are in the process of becoming products. I favor Alphabet, or earlier it was just Google, being able to do that. You know, might there be a problem in 13 years’ time that if you search to buy a driverless car, the ones sponsored by Alphabet will come up first? I mean, maybe. But again, in terms of monopoly problems today, that seems really quite remote, and the ability of the internet to help you price-search, including through Google, or just use Amazon to get cheaper stuff, or even just buy online from Walmart, which you can do. I don’t really see how the government will improve on their now really quite strong incentives for lower prices, better selection.

Luigi: But in Europe . . .

Tyler Cowen: And you know all about crony capitalism, right? You should be worried at least as much as I am, that if the government is controlling search services, it won’t be fair, objective. It will favor incumbents. It will tend to lead to entry barriers, higher prices, lower quality, right? It’s a common pattern you've written about, more eloquently perhaps than anyone, and all of a sudden regulation of Google search is supposed to come along and just be customer-friendly? I don’t think so.

Luigi: I don’t think that we necessarily want government regulation, but I am worried about the political and economic consequences. From an economic point of view, I think there is a case to prohibit Google from entering into businesses in which it is competing in the search component. Now, you're saying the driverless car . . . there is not a product, so there’s no search for the product. But the moment they have a product, I think they should divest, as they should divest from the shopping network. I think that the case is clear. On the political side, I’m not claiming I have a solution, but I think I’m very worried. You don’t even seem to be worried.

Tyler Cowen: Well, look. What does worried mean? You used the word “could” a lot, like, should I be worried? Well, yes, you should worry about everything. But if you just prioritize, what are the actual monopoly problems in America? What are the actual unfairness problems? What are the actual barriers to entry? I think the issues you’re raising, they’re not just far from the top. I think they’re far from the median. Something like lack of price transparency in the healthcare sector is, like, literally 50,000 times a bigger problem. And I know we’re not solving that problem now, but if you ask, is Google likely to be part of that solution? I think it probably is. It’s not part of the problem. You know, it has the potential to be part of the solution.

Again, I want to flip this and think, how can we change other sectors of our economy so the strengths of Google can be brought to bear on them? And maybe we can do that, but it’s a very different emphasis. I’m not that worried about Google somehow directing me to the wrong vacation or if we have driverless cars in the future. I would ask the simple question, how many sources of information are there about driverless cars? If there’s 20 different sources, I’m not too worried about the Google ranking. People don’t just spend more money because they feel like it, right? Most markets, not all, are pretty competitive.

Kate: I think that the biggest problems in today’s economy are wage stagnation and inequality, and maybe that’s not Google's fault, maybe it’s not Facebook’s fault, but I do think that those are the faults of big business. I think that they are in large part responsible for experiencing increases in corporate profits of roughly 400 percent over the past 40 years, whereas real median wages have stayed pretty much stagnant. And in your book, you talk about how people have good relationships with their employers, have good relationships with corporations, they provide them with food and with meaningful interpersonal interactions. But at the end of the day, corporations haven't provided . . . they haven’t shared any of the gains with their employees.

Tyler Cowen: I agree that wage stagnation is our biggest problem. I’ll note that if you have a four-year college degree and work for a big business, your wages probably have been doing fine, never better, robust income growth for those individuals. To me, the question is, how can we get more businesses in that position? I think if you want to be critical of the American economy, some of this, but not all of the blame falling on business. Look at our stagnant-productivity service sector, at least some parts of it. American business is often too bureaucratic, but I think it needs to be more businessy in a sense, more dynamic, more innovative. In the medium term, especially in the long term, wages do match to productivity. We need to get productivity higher. It has not all been a big, huge success. But big business for the most part actually has been.

Luigi: Actually, first of all, it is not true that in the last 10 or 15 years, wages have matched productivity in the United States.

Tyler Cowen: It is true if you use the same deflators. I know this literature . . .

Luigi: In my book, I show that even if you adjust for the deflator you cover most of it, but not all of it.

Tyler Cowen: You cover . . .

Kate: It’s whose deflator is correct.

Luigi: Especially in the last period, the last part, I think that there is this divergence. I think that that’s probably number one. Problem number two, since you are in love with all big business.

Tyler Cowen: No, not all big business.

Luigi: Let’s look at what big business has done to middle America. We covered in this podcast, the issue of opioid epidemics, where we have seen business bribing doctors to prescribe drugs. That’s a criminal activity. And they’ve done it in large quantities. You know that more people died from 2000 to today of opioid epidemics than all American casualties in World War I and World War II put together. That’s basically a massacre, and this was caused by business.

Tyler Cowen: I agree. Our healthcare sector is very bad.

Luigi: No, this is not the healthcare sector, this is criminal business. It’s different. It’s not healthcare. In healthcare there are a lot of problems . . .

Tyler Cowen: This depends on the regulatory framework, and we have had a regulatory framework where often that is allowed or encouraged. I very much strongly agree we should enforce laws against fraud much more strongly. That would include not being allowed to pay doctors to prescribe what is, in essence, poison to patients, right?

Luigi: No, but they were not paying doctors directly. They were inviting doctors to conferences, they were fake conferences, paying $1 million to present at a fake conference in order to reward the fact you prescribe a lot of fentanyl to your patients. This is a criminal activity.

Tyler Cowen: Keep in mind, at the time, most of America was asleep about this problem. These were drugs cleared by regulators typically, correct?

Luigi: Captured by the very business.

Tyler Cowen: No, we didn't understand how bad a problem it was.

Luigi: Come on, opioids . . .

Tyler Cowen: The Democratic Party . . .

Luigi: We understood opioids were a problem since the Opioid War in 1842.

Tyler Cowen: If you look at politics right before the election of Donald Trump, most people in this country did not understand the scope of this problem. Trump did. It is one reason why he won. We were asleep collectively. But I agree, business is partly at fault for this. It’s a terrible series of events. My book does not say everything businesses have . . . that everything business has done is correct. It says there are many instances where people blame business where business in fact has been perfectly fine. So, I absolutely agree that on opioids, alcohol for that matter, cigarettes would be another example, business bears a big part of the blame. Absolutely. And I say as such.

Kate: I . . .

Tyler Cowen: That doesn’t mean Facebook is to blame. It doesn’t mean that the airlines are all monopolies . . .

Kate: . . . they are to blame for making me addicted to them, me and my friends and everyone else in my generation. Anyway. I want to ask you a slightly more friendly question, which is also more of a thought question. Say, hypothetically, we do have a monopoly in the US. Let’s say it’s limiting quantities and it’s charging prices that are too high

Tyler Cowen: Like many hospitals.

Kate: OK, well, hospitals aren’t a great example, because what I'm going to segue this into is, let’s say another country has a similar monopoly.

Tyler Cowen: OK.

Kate: And both of these countries, the US and this other country, are kind of supporting these businesses or these industries as their national champions. What do you do in a situation like that? What should the government do?

Tyler Cowen: I mean, I really think it’s context-specific. As you know, right now our president is waging a trade war against China because they support their state-owned enterprises in many ways, some of them sneaky, and we’re demanding they stop, and if they don’t stop, we’re going to slap tariffs on them. I don’t know how that will work out. I would say I’m agnostic. My best guess to date is that it will not work out for the better. I do think there’s some logic to using the strategic power of the United States in many situations, but in this particular case, I don’t think we’ve strengthened our alliances and done our groundwork well enough for this to work out for the better. So, I really do think it’s case by case.

Kate: I think most economists would agree, though, that tariffs and protectionism aren’t necessarily good for two countries, but in the specific context of a monopoly, let’s say Google, for example, Google versus Alibaba, do you think that it could hurt the US competitive position if we overregulate here?

Tyler Cowen: If you’re comparing, say, Alibaba and Amazon, who are competing to do online commerce and shipping. If you bring an antitrust suit against a major company, it’s a big, major distraction for senior management. Lawyers in many ways tend to end up either running a company or controlling its culture, and I do think, say, that would hurt the ability of Amazon to compete against Alibaba in other parts of the world. It’s one reason not to do it.

Luigi: One of the things that emerged at the conference is the decimation of local newspapers. At least traditionally, we think about media and newspapers in a different way. They’re not just any business, but they are a business that is crucial for our democratic process. Do you see any concern on that front?

Tyler Cowen: I do. I think they will be replaced in some way. I don’t think we’ve seen the new business model yet. I think there are plenty of other ways in which state and local governments have become more transparent. Some of that is social media. It’s not even always for the better, right? There can be rumors which circulate. I wouldn’t equate local news with information about state and local government, but I do agree that’s a problem. I think local news will make some sort of comeback. We are waiting to see what that will look like.

Kate: OK, Luigi, so we’ve been talking for three episodes about digital platforms and antitrust. Regulating Google and Facebook, is that a capital-is or capitalisn’t?

Luigi: It depends on how you regulate them and what is the outcome. Opening more competition by making the social graph portable or by making these closed networks open is definitely capitalism. If you were to impose a regulator that decides what they can publish or not publish, that would be terrible, but I don’t think that anybody proposes that. Will it come to breaking them up? I think that at the conference, everybody was saying breaking up Google doesn’t make any sense. You cannot have searches from letter A to M in one place and from M to Z in the other. But, for example, I don’t see the big damage of breaking up Facebook from Instagram. I think that that would probably increase the competition in the market and would overall be a positive thing.

Kate: I think that there are reasons people are unhappy about these companies that are legitimate. I think that there are abuses of privacy and I think that there’s too much exploitation of behavioral bias. I don’t think that these should necessarily be addressed with antitrust. Some of the proposals that have come up in the conference, either creating a new digital authority or giving more powers to the existing authorities to address some of these areas, could be useful, but from the strict antitrust perspective, I do think that Google and Facebook are oligopolies in the online advertising space, and I also think that they’ve engaged in practices that are anticompetitive.

We talked a long time ago about House Party, I think, being destroyed or crushed by Facebook. The Facebook-Instagram acquisition is another example. But, Tyler, I also think that you’ve raised some really great points. I think that we should be worried about competition from abroad. I also think that obviously, at the end of the day, no one’s trying to say that we’re getting rid of capitalism, right? Companies like Google and Facebook do innovate a lot. They do create great products for us, and we should be careful about overstepping our bounds and not suppressing that creative spirit. And also, you’ve raised a great point that some of what we’ve been talking about, where are the big antitrust issues? They’re not necessarily in the digital platform space. Maybe they’re more in the healthcare space. So, I agree with you on this.

Tyler Cowen: And most of the criticisms I hear of big tech, I think consumer harm is not demonstrated. There’s just a general sense that bigness is bad. But in many of these instances, the law has not been broken. The consumer harm is not there, and I would stress the negative secondary consequences of regulation.

Luigi, a moment ago, mentioned making the social graph portable, out of Facebook. Well, portable into what? That’s going to mean some regulator ends up deciding what is a legitimate social network and what is not, and that to me is a very dangerous step. It’s an entry barrier. It’s an opportunity for rent-seeking. It will limit innovation. What if you do something totally different with 5G and it’s so complex you don’t have importability, exportability with Facebook? Well, then you’re possibly in violation of the law. When you think through a lot of the remedies, they’re not nearly as attractive as they sound at first, and I think we’ve been seeing a sector that, in terms of benefiting this nation and American consumers, actually has been pretty extraordinary.

Kate: All right, well, it sounds like even though we’ve had three episodes on this, the debate is not over yet. We all agree?

Luigi: Yes, the debate continues. Thank you, Tyler, for . . .

Kate: Tyler, thanks for joining us.

Tyler Cowen: My pleasure. Thanks to you both.