This week in political economy.
- Still mired in the Cambridge Analytica scandal, Facebook’s terrible month became worse this week after BuzzFeed published a 2016 memo written by a top Facebook executive in which the executive argued that all the company’s actions—regardless of their consequences, even if people die “in a terrorist attack coordinated on our tools”—are justified because of the company’s rapid growth. The controversial memo’s author, Andrew “Boz” Bosworth, who oversaw Facebook’s advertising business at the time, has since disavowed it, as did Facebook CEO Mark Zuckerberg.
- The revelations over Facebook’s privacy practices continue to pile up: Facebook has been collecting call records and SMS data from Android devices for years, Ars Technica and The Verge reported, after users who downloaded their Facebook data were shocked to find months or years’ worth of call and SMS history data. The Android revelations have already led to a class-action lawsuit, and the FTC confirmed this week that it is investigating Facebook over its privacy practices.
- In an attempt to mitigate the scandal, Facebook announced this week that it will stop providing data from brokers to advertisers, along with a number of other changes to its privacy settings. Zuckerberg has agreed to testify before Congress, following repeated calls to for him do so.
- Even as it apologizes, however, Facebook and other Internet giants like Google are already bracing for regulation: Facebook has gone on a hiring spree in Washington, bulking up its ranks of lobbyists, Bloomberg reports. The New York Times reports that “Silicon Valley warms to Trump after a chilly start.” And in California, reports the journalism NGO CALmatters, Facebook donated $200,000 to fight a data privacy initiative. Google, meanwhile, is lobbying hard against new privacy laws, according to a report in The Register.
- Despite a near-consensus that has quickly formed around the idea that digital platforms like Facebook and Google should be regulated, the Washington Post’s former publisher Donald E. Graham (who also spent six years on Facebook’s board) argues that Facebook should not be regulated.
- The controversy over Facebook’s business model, however, persists. In Bloomberg, Zeke Faux writes about how “Facebook helps shady advertisers pollute the Internet.” In The Atlantic, Ethan Zuckerman explains why the Cambridge Analytica story is much bigger than Facebook. Data misuse, he writes, is not a “bad actor” problem, but a “known bug,” one which digital platforms “won’t fix … on their own, not without external pressure.” And in BuzzFeed, Charlie Warzel opines that Cambridge Analytica is not like previous privacy scandals, and just might be the spark that “forces us, collectively, to step back and think about what we sacrificed for a more convenient and connected world.”
- In the Harvard Business Review, Maurice Stucke explains why data-opolies like Facebook “pose tremendous risks, for consumers, workers, competition, and the overall health of our democracy.” In case you missed it, Stucke and his longtime coauthor Ariel Ezrachi wrote about this for ProMarket as well this week.
- In Europe, EU competition chief Margrethe Vestager turns to academics to help her tackle the challenge of Big Tech, and refuses to rule out the option of breaking up Google.
- With his fellow tech CEOs under siege, LinkedIn co-founder Reid Hoffman is using his fortune and network of Silicon Valley venture capitalists and executives to take on Donald Trump and the Democratic Party, reports ReCode.
- How has the world changed in the 10 years following the financial crisis? An illuminating and graphics-heavy investigation in Wall Street Journal tracks the US economy’s rough road to recovery. The WSJ story inspired a controversy of its own this week, after staff members accused a senior editor of trying to suppress it because it was “too liberal,” according to Politico.
- Since becoming head of the Environmental Protection Agency, Scott Pruitt has been no stranger to controversy, and this week was no different, with reports that Pruitt has been renting a room near Capitol Hill in an apartment that belongs to the wife of an energy lobbyist for the price of $50. Following reports on Pruitt’s unconventional sleeping arrangement, the EPA’s ethics counsel weighed in and said the arrangement does not constitute “a prohibited gift at all” and was “a routine business transaction and permissible even if from a personal friend.” The White House is reportedly “exasperated” with Pruitt’s conduct.
- Former French president Nicolas Sarkozy is facing another trial after being charged with corruption and influence-peddling related to alleged attempts to illegally obtain confidential information regarding an inquiry into his 2007 election campaign. Sarkozy is already facing trial on charges related to alleged illegal campaign funding of his unsuccessful 2012 reelection campaign. It’s worth mentioning that the Sarkozy scandal was broken by the investigative news site Mediapart, which we covered before in a Stigler Center case study and in this blog.
- New story from Stigler Center Journalist Avi Asher-Schapiro in The Intercept: The Justice Department is helping Uber fight efforts to unionize drivers.
Chatter from the Ivory Tower
- The Roosevelt Institute published a new report on market power in the US. Titled “Powerless: How Lax Antitrust and Concentrated Market Power Rig the Economy Against American Workers, Consumers, and Communities,” the report details a growing body of evidence that shows that the US economy has a market power problem that “affects and distorts economic outcomes to the detriment of all stakeholders aside from the very powerful.”
Stigler Center Goings-on
- In the latest episode of the Capitalisn’t podcast, Luigi Zingales and Kate Waldock talk to former Commodity Futures Trading Commissioner Sharon Bowen, who tells them how she helped bring transparency to the market after the 2008 financial crisis and visited a few grain silos along the way. This episode took Capitalisn’t over the 100,000 downloads milestone—less than three months after its launch.
- On April 19 and 20, 2018, the Stigler Center will dedicate its annual Antitrust and Competition conference to the topic of “Digital Platforms and Concentration.” The invitation-only conference will bring together economists, law scholars, intellectuals, venture capitalists, and business people for two days of discussion, with keynote speakers Makan Delrahim, assistant attorney general of the Department of Justice’s Antitrust Division, Alvin Roth, the 2012 Nobel laureate in economics, and Jean Tirole, the 2014 Nobel laureate in economics. More details here.
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