(1/N) #ecoreset
Could we use this unprecedented global lockdown to reset some parts of the economy that have not been working properly?
I am going to talk about the parts I know something about: dominant firms, notably Google, Facebook and co.
Could we use this unprecedented global lockdown to reset some parts of the economy that have not been working properly?
I am going to talk about the parts I know something about: dominant firms, notably Google, Facebook and co.
(2/N) The basic theory for their dominance is:
(i) Once upon a time they were good, efficient and innovative. They even respected our privacy.
(ii) Not anymore, but their dominance is entrenched by heavy lobbying and network effects.
(i) Once upon a time they were good, efficient and innovative. They even respected our privacy.
(ii) Not anymore, but their dominance is entrenched by heavy lobbying and network effects.
(3/N) They lobby aggressively against any regulation that would meaningfully prevent them from mining private data and being held responsible for their products. Like a car company who would convince regulators they are not liable for faulty breaks. So far they have succeeded.
(4/N) Network effects make it hard for a would-be competitor to enter because a new company would need to build up 2 sides of the market at the same time: lots of users on one side, sellers/advertisers on the other.
(5/N) There are market structures (equilibria as we call them) that would sustain more competition. But it takes a large shock, or a coordinated effort, to jump from the current monopoly situation to an equilibrium with more meaningful competition.
(6/N) But large economies do not jump, and people do not coordinate... UNLESS perhaps they are stuck at home and they have some time to think about it.
The lockdown has boosted the networks of at least two companies: Zoom and Slack. They could eventually challenge Facebook.
The lockdown has boosted the networks of at least two companies: Zoom and Slack. They could eventually challenge Facebook.
(7/N) Google's dominance of the search market reinforces its quasi-monopoly position in online advertising.
What if we all switched our default home page to another search engine for the next two weeks? Duckduckgo or whatever else?
What if we all switched our default home page to another search engine for the next two weeks? Duckduckgo or whatever else?
(8/N) We would all benefit from having more competition in these markets but none of us has the incentive to bear the private cost to make it happen.
In normal times this would be a hopeless coordination problem.
BUT ... these are not normal times.
In normal times this would be a hopeless coordination problem.
BUT ... these are not normal times.
(9/N) Same with Amazon. If we all make the effort to order from local stores, they might get the chance to build up an efficient delivery network and bring down their costs.
It's harder because Amazon does have amazing logistics. It is not just entrenched by its network.
It's harder because Amazon does have amazing logistics. It is not just entrenched by its network.
(10/N) It's worth a try.
This consumer driven solution would alleviate the need for lengthy and costly antitrust battles against the internet giants.
This consumer driven solution would alleviate the need for lengthy and costly antitrust battles against the internet giants.
(11/N) Final thought: these ideas obviously apply more broadly than competition among internet giants: transportation and green policies come to mind.
But since I know next to nothing about these, I would rather let other people elaborate.
But since I know next to nothing about these, I would rather let other people elaborate.
