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The US is the economic leader in tech because network effects in tech strongly favors monopolies, and the US does not do antitrust enforcement anymore. The US

The US is the economic leader in tech because network effects in tech strongly favors monopolies, and the US does not do antitrust enforcement anymore. The US tech sector makes money hand over fist not because of its technology but because the various tech firms have been allowed to monopolize their respective market areas. See e.g.: https://www.hup.harvard.edu/catalog.php?isbn=9780674237544 https://www.hup.harvard.edu/catalog.php?isbn=9780674237544 https://johnquiggin.com/2020/08/03/intangibles-monopoly/ https://johnquiggin.com/2020/08/03/intangibles-monopoly/

andrewjl 6y ago
You are absolutely correct in that antitrust enforcement in the US is broken. I think it's also clear that most big tech is monopolistic in nature. However that's not the cause of its leadership, if anything it's an obstacle. Most money earned by big tech is spent on share buybacks, and not R&D. Meanwhile many potential market entrants fail, and their often superior tech never sees the light of day. It's true that monopolies can do loss making R&D for a while, but the benefits tend to be front loaded. Eventually a form of organizational sclerosis sets in, and the supposedly beneficial R&D output disappears. See The Gervais Principle for a deeper look at this. It would be a tremendous boost to US competitiveness if these monopolies went away. However it would make a certain cross-section of society actually work for a living, so of course they will do all they can to prevent such a conversation from happening in the public sphere. Edit: The book you linked to discusses regulatory capture, a very subtle way that companies exercise monopolistic power, often under the guise of "safety", etc. I referenced that tactic elsewhere in the thread re privacy and user data laws. The correct solution to this, counter-intuitively, is to reduce regulation. And make operating a larger company more expensive, while doing the opposite for small businesses.
- bleepblorp 6y ago
  I'm not convinced that reducing regulations is the way to get rid of monopolies. The first major experience with monopolies in America was before the great depression, when regulations on most businesses were virtually non-existent. Economic history is fairly clear that unregulated markets consolidate into monopolies without regulations to ensure ongoing competition. While there are certain cases where regulatory capture has created regulations that enforce monopolies, this isn't the case for the entire tech sector in general. Regulatory monopolies protect telephone, cable, and Internet providers. In some areas it is simply illegal to construct competing communications infrastructure. Under Trump, the national security process is also now being used to protect market incumbents; the TikTok confiscation--that Zuk----rg lobbied for--coming just as Facebook is planning to roll out a TikTok competitor likely isn't a coincidence. Removing these regulations would help competition in these areas, and should be done. However, outside of these cases, the tech sector in general exists to make a legal revenue stream from loopholes and lack of enforcement in the regulatory regime. Platforms like Uber are only viable businesses because they've been allowed to circumvent both minimum wage laws and regulations surrounding the taxi industry. AirBnB is, fundamentally, an unlicensed franchise hotel operator, and is only viable as long as regulators refuse to require it to abide by the same rules as the rest of the hotel industry. Much of the contemporary video gaming sector is based on evading regulations on gambling. Finally, adtech firms, like Facebook and Google, are only viable because the US has no consumer privacy laws. Taking away what little enforced regulations cover these firms would not benefit consumers or market competition. Quite frankly, so much of the tech sector was built on the monetization of socially destructive behavior, legal-but-predatory business practices, "regulatory arbitrage", and outright illegality, that large parts of it should be outlawed entirely.

andrewjl 6y ago

You are absolutely correct in that antitrust enforcement in the US is broken. I think it's also clear that most big tech is monopolistic in nature. However that's not the cause of its leadership, if anything it's an obstacle. Most money earned by big tech is spent on share buybacks, and not R&D. Meanwhile many potential market entrants fail, and their often superior tech never sees the light of day. It's true that monopolies can do loss making R&D for a while, but the benefits tend to be front loaded. Eventually a form of organizational sclerosis sets in, and the supposedly beneficial R&D output disappears. See The Gervais Principle for a deeper look at this. It would be a tremendous boost to US competitiveness if these monopolies went away. However it would make a certain cross-section of society actually work for a living, so of course they will do all they can to prevent such a conversation from happening in the public sphere. Edit: The book you linked to discusses regulatory capture, a very subtle way that companies exercise monopolistic power, often under the guise of "safety", etc. I referenced that tactic elsewhere in the thread re privacy and user data laws. The correct solution to this, counter-intuitively, is to reduce regulation. And make operating a larger company more expensive, while doing the opposite for small businesses.

bleepblorp 6y ago
I'm not convinced that reducing regulations is the way to get rid of monopolies. The first major experience with monopolies in America was before the great depression, when regulations on most businesses were virtually non-existent. Economic history is fairly clear that unregulated markets consolidate into monopolies without regulations to ensure ongoing competition. While there are certain cases where regulatory capture has created regulations that enforce monopolies, this isn't the case for the entire tech sector in general. Regulatory monopolies protect telephone, cable, and Internet providers. In some areas it is simply illegal to construct competing communications infrastructure. Under Trump, the national security process is also now being used to protect market incumbents; the TikTok confiscation--that Zuk----rg lobbied for--coming just as Facebook is planning to roll out a TikTok competitor likely isn't a coincidence. Removing these regulations would help competition in these areas, and should be done. However, outside of these cases, the tech sector in general exists to make a legal revenue stream from loopholes and lack of enforcement in the regulatory regime. Platforms like Uber are only viable businesses because they've been allowed to circumvent both minimum wage laws and regulations surrounding the taxi industry. AirBnB is, fundamentally, an unlicensed franchise hotel operator, and is only viable as long as regulators refuse to require it to abide by the same rules as the rest of the hotel industry. Much of the contemporary video gaming sector is based on evading regulations on gambling. Finally, adtech firms, like Facebook and Google, are only viable because the US has no consumer privacy laws. Taking away what little enforced regulations cover these firms would not benefit consumers or market competition. Quite frankly, so much of the tech sector was built on the monetization of socially destructive behavior, legal-but-predatory business practices, "regulatory arbitrage", and outright illegality, that large parts of it should be outlawed entirely.