Facebook wants new internet regulations. And they haven\u2019t been shy about saying so. The company has put out at least three sleek, well-produced ads calling for new internet regulation. The ads direct viewers to a website Facebook operates that has more details on their preferred regulations.[1]<\/sup><\/a>The website, which features the ads as well as more details on Facebook\u2019s preferred regulatory reforms, can be found at https:\/\/about.fb.com\/regulations.<\/span><\/span><\/span><\/p>\n\n\n\n As an economist, I get suspicious whenever I hear a large corporation calling for regulation. Some might see these ads as evidence that Facebook is being socially responsible. Even though regulations might be costly for them, they want regulations that they believe will serve the public interest. But regulations don\u2019t always serve the public interest. Too often, they instead serve incumbent businesses. How? Regulations often make it costlier to enter an industry, which protects the current big players from competition.<\/p>\n\n\n\n Economists call this\u00a0regulatory capture.\u00a0<\/em>George J. Stigler, a Nobel laureate in economics, explained that \u201cevery industry or occupation that has enough political power to utilize the state will seek to control entry.\u201d[2]<\/sup><\/a>Stigler, George J. \u201cThe Theory of Economic Regulation.\u201d The Bell Journal of Economics and Management Science, vol. 2, no. 1, 1971, pp. 3\u201321. JSTOR, www.jstor.org\/stable\/3003160. Accessed on … Continue reading<\/span><\/span><\/span><\/p>\n\n\n\n On their website, Facebook points out that they have \u201ctripled our security and safety teams to more than 35,000 people and built new privacy tools.\u201d They have also \u201cexpanded our efforts to fight voting misinformation, removed 100+ networks of coordinated inauthentic behavior globally and launched a Voting Information Center.\u201d They boast that they \u201ctake down millions of fake accounts every day and collaborate with experts and authorities to reduce misinformation.\u201d[3]<\/sup><\/a>https:\/\/about.fb.com\/regulations\/<\/span><\/a> Accessed on April 8, 2021.<\/span><\/span><\/p>\n\n\n\n In other words, they are already investing large amounts of resources in efforts that new regulations could make mandatory for all. They know that they can profitably run a business while complying with the new standards they would like regulators to impose. But a new startup may not have the resources to comply with such regulators. They would likely not be able to hire thousands of people to work on security, privacy and election integrity issues. Yet such new entrants might still offer value to internet users, and that value creation could be stifled by new regulations.<\/p>\n\n\n\n Facebook emphasizes that the last piece of legislation comprehensively regulating the internet was passed in 1996. After showing some of the many <\/em>things that have happened online since, a woman in one Facebook ad asks, \u201cIf the internet has come a long way in the last 25 years, shouldn\u2019t internet regulations too?\u201d<\/p>\n\n\n\n But the simple regulatory framework established in 1996 is part of\u00a0why\u00a0<\/em>the internet has come a long way. The 1996 law Facebook is referencing is presumably the Telecommunications Act of 1996. As Adam Thierer explains in\u00a0Permissionless Innovation<\/em>, this law \u201cnotably avoided regulating the Internet like analog-era communications and media technologies.\u201d[4]<\/sup><\/a>Thierer, Adam D. Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom, Revised and Expanded Edition. Arlington, VA: Mercatus Center at George Mason University, p. 14.<\/span><\/span>\u00a0In particular, Section 230 of this 1996 law meant that companies that host digital platforms would not face costly liability for the actions of their users. This allowed for companies to host user-generated content without fear of costly legal reprisals. \u201cToday\u2019s vibrant Internet ecosystem likely would not exist without Section 230,\u201d Thierer argues.[5]<\/sup><\/a>Ibid, Thierer, p. 14.<\/span><\/span><\/p>\n\n\n\n Subsequent laws and policies maintained a similarly laissez-faire approach. For example, in 1998 \u201cCongress enacted the Internet Tax Freedom Act, which blocked all levels of government in the United States from imposing discriminatory taxes on the internet.\u201d[6]<\/sup><\/a>Ibid. Thierer, p. 15.<\/span><\/span>\u00a0The executive branch also embraced a laissez-faire approach in 1997 by issuing \u201cThe Framework for Global Electronic Commerce.\u201d This framework recommended private sector leadership and advocated limited governmental involvement that would \u201csupport and enforce a predictable, minimalist, consistent and simple legal environment for commerce.\u201d[7]<\/sup><\/a>Ibid, Thierer, p. 15.<\/span><\/span><\/p>\n\n\n\n Digital entrepreneurs had the freedom to experiment and try things out. Even when a platform such as MySpace seemed like a monopoly, new entrants like Facebook and Twitter could try out new ideas and ultimately displace the old winners. Facebook\u2019s ads show some of the numerous changes and advancements that have happened online since 1996. But the truth is that these changes were possible precisely because the policy framework established in the late 1990s was simple and allowed entrepreneurial experimentation.<\/p>\n\n\n\n If new regulations raise the cost of starting new online ventures and experimenting with new approaches, then consumers and internet users will lose out on exciting new opportunities. This may benefit incumbent firms like Facebook, as they would be protected from competition. But it will hurt everyone else. If we want the next 25 years online to be as exciting and innovative as the last 25 years, any new regulations should have simple, predictable rules that let new entrants innovate.<\/p>\n References<\/span><\/p><\/div>