Category Archives: Technology

Review of Michael Munger, The Sharing Economy: Its Pitfalls and Promises (Institute of Economic Affairs, 2021)

Transaction costs are one of the most overlooked ideas in economics. They are also one of the most important. The lowering of transaction costs is an engine of modernity itself and key to understanding where future progress might take us. That is Duke University economist Michael Munger’s argument in his new book, The Sharing Economy: Its Pitfalls and Promises (free download from the Institute of Economic Affairs). It follows up his 2018 book, Tomorrow 3.0.

What are transaction costs? As the name implies, they are things that get in the way of making transactions. Think of them as economic friction. Things like waiting in line, searching for a product, comparing prices, driving to and from a store, or resetting another forgotten website password. Transaction costs often cannot be measured in money, but they are still part of the price of everything we buy. A good economist knows, money is not everything.

Countless beneficial transactions never happen because the time and hassle required outweigh the benefits. Successful entrepreneurs can make these lost transactions come to life just by lowering their attendant transaction costs. In a way, they succeed by making the invisible visible. Along the way, they can create new industries, revolutionize existing industries, and topple old ones. Transaction costs are the hidden engine of Joseph Schumpeter’s creative destruction.

Munger’s dissertation advisor was the Nobel laureate Douglass North, one of the pioneers of transaction cost economics, along with other laureates such as Ronald Coase and Oliver Williamson. Munger likes to tell a story about North explaining that, while there are endless questions to ask in economics, many of them have the same answer: transaction costs. Over the years, North’s advice has proved useful to countless graduate students in search of thesis topics. As The Sharing Economy shows, there remains plenty of uncharted territory. Today’s graduate students should take note—as should experienced scholars.

How do transaction costs apply to the new sharing economy? Broken down to fundamentals, Uber doesn’t sell taxi rides or food delivery. It sells access to a platform that drastically lowers transaction costs for some services. The product is the platform. Yes, people use it to buy and sell taxi rides and food delivery, but they could use that type of platform for almost anything.

This is why a lot of sharing economy startups describe themselves as the Uber or the Airbnb for this or that service. They’re selling transaction cost savings, not whatever product or service appears in their marketing materials.

Every transaction requires what Munger calls the three Ts: triangulation, transfer, and trust. Sharing platforms can solve the three Ts quickly and cheaply:

  • Triangulation means coordinating everyone involved in the transaction. In a food delivery transaction, those are the customer, the restaurant, and the delivery driver. Until recently, solving this coordination problem was so difficult that most restaurants did not offer delivery at all. And the ones that did had to hire their own drivers to work exclusively for them. Unless business was both brisk and consistent, this was a risky proposition. Today, sharing platforms can solve triangulation problems in seconds. As a result, restaurants that might not be able to afford full-time delivery staff can now share drivers with other businesses and earn additional sales, while customers gain additional choices.
  • Transfer means making sure everyone gets paid. Uber, for example, has all parties’ payment info stored in the app. It automatically charges customers the right amount, pays restaurants and drivers, and handles tips. That is far easier than in the old days of cash, checks, or reading out your credit card number over the phone.
  • Trust is all parties having confidence that everything will go as it should. This is what ratings systems contribute. Riders can avoid drivers with low ratings and drivers can avoid problem customers. They can do this in seconds just by glancing at their ratings. On the other side of the coin, high ratings can be lucrative for vendors, giving them a greater incentive to keep customers happy than a traditional cab driver. And keeping that five-star rating can encourage more civil behavior from customers. It doesn’t pay to be a Karen.

Sharing economy platforms solve the three Ts so quickly and easily that millions of transactions that would never have happened a decade ago are now routine. This, for Munger, is a reason for optimism. Similar platforms could emerge for all kinds of goods. In fact, they probably are doing so right now in a dorm room or a garage somewhere.

Tools that spend nearly all of their time in storage could be rented out, for example. Other possibilities include office equipment, professional-grade audio and video equipment, and designer clothing. Some of these ideas might be successful. Others might be duds. People will likely find out soon enough.

Munger believes the low-transaction cost sharing economy could transform manufacturing as we know it. Factories would make far fewer goods, and what they do make would tend to be professional grade and more durable. A drill that spends 30 years in someone’s garage might get a couple hours of use over its entire lifespan, but if it’s shared, it will get far more use on a wider variety of tasks. It will need to be more solidly built and easily repaired.

That is one reason why the sharing economy has costs, as well as benefits. Both words in the phrase “creative destruction” are important. Just because the benefits outweigh the costs doesn’t mean costs do not exist. Manufacturing jobs have already declined by about a third since their 1979 peak, from about 18 million workers to about 12 million. If sharing platforms become popular for a lot of goods, that decline will be deeper and steeper. At the same time, the higher-grade goods still being made might require more skills or more automation to make, displacing less skilled workers.

Other jobs would open up in warehousing and delivery, and likely in other sectors. Munger doesn’t know what these might be, and neither does anyone else. Some of these jobs might not be appealing, might not pay as well, or may not work with some workers’ family responsibilities or other personal situations.

On the other hand, the size of the labor force has stayed remarkably consistent relative to population  throughout America’s transition from agriculture to industry, and from industry to services. While the inability to predict the future is scary, that’s no reason to keep things as they are. As Munger says on page 89, “Platforms are disruptive, but outlawing disruption has never worked.”

Transaction Costs and a Policy Revolution

As transaction cost reductions transform the economy, they also transform public policy. The problem is that public policy usually takes long to catch up. Regulations classify many workers as either employees or contractors, and treat them differently. Employee status comes with certain rules for minimum wages, benefits, and working conditions, while the rules for contractors are generally looser. It is also a false dichotomy that poorly fits workers’ needs.

If an accountant uses a platform like Taskrabbit to work for several clients, is she an employee of any of them? Does she count as Taskrabbit’s employee because it handles her payments or is she a customer who pays to access its platform? Does it matter if she commutes to an office or works from home? What if she’d rather choose her own health insurance or retirement plan? My colleague Iain Murray explored this question in his 2016 CEI paper “Punching the Clock on a Smartphone App.”

Current regulations don’t have good answers to these questions. And laws like California’s AB5 gig worker law and the proposed PRO Act at the federal level would entrench the legacy labor law model even further. All this is because some entrepreneurs thought of a way to use smartphone apps to reduce transaction costs.

In the age of COVID, sharing platforms have made it easier for workers to avoid public transportation and crowded offices. When COVID subsides, many workers will still prefer to avoid commutes and offices in favor of more pleasant surroundings like home offices, coffee shops, or smaller shared offices—which some sharing platforms offer. Regulators should think carefully before they take those options away.

Antitrust policy is in the middle of its own revolution, thanks in part to transaction costs. Sharing platforms are just another version of the old make-or-buy decision. If a company needs legal help, does it use in-house counsel or hire an outside attorney? Should a firm employ its own custodian or hire a cleaning service? The answer depends on transaction costs. If it’s cheaper to do something yourself, do that. If transacting with someone else costs less, do that. The answer is different for every company—and can change over time within a company. Sharing platforms and their lower transaction costs provide new possible answers to this age-old problem.

As of this writing, the leading food delivery platforms are DoorDash, UberEats, and GrubHub. They could buy out smaller competitors or merge with each other in the coming years, which might result in antitrust action. It shouldn’t, and transaction costs explain why.

A restaurant that wants to offer delivery has a make-or-buy decision to make. Does it hire its own driver or outsource to a sharing platform? It will go with whichever has lower transaction costs. This provides a built-in competitive check on sharing platforms that will never go away—even if one sharing platform monopolizes the entire market. If its fees cost more than the restaurant hiring its own drivers, then restaurants will opt for the latter. Several restaurants in the same city could even band together and jointly hire a driver—if regulations allow them.

The reason people use sharing platforms in the first place is because their transaction costs are lower than the alternatives. And the alternative of doing something in-house will never go away. Sharing platforms do not have market power, and never will.

Sharing platforms also do not restrain trade, which is another threshold for antitrust enforcement. They enable new trades that would never have happened otherwise, because they lower transaction costs. Before sharing apps, food delivery options in most places were limited to pizza and Chinese. Now, everyone from McDonald’s to mom-and-pop diners offer delivery. Some restaurants, such as Panda Express, are even attempting to undercut sharing platforms by creating their own app-based ordering services to avoid platforms’ fees.

Transaction Costs and the Moral Economy

Contrary to popular belief, morals are an integral part of economics. One of the discipline’s founding works, after all, is Adam Smith’s Theory of Moral Sentiments. Man is an animal that trades, to paraphrase from Smith’s other great work, The Wealth of Nations. People want to exchange, cooperate, and compete. It is our nature. But transaction costs get in the way of our nature, because they get in the way of trade.

Economists Virgil Storr and Ginni Choi, of the Mercatus Center at George Mason University, argue in their book Do Markets Corrupt Our Morals? that markets are moral playgrounds. When people enter those playgrounds, they learn how to trust and earn trust. They learn to keep their word and be polite—the late, great Steve Horwitz delighted in the “double thank you” that accompanies most transactions. People on the playground learn that the best way to get something you value is to give others things they value even more.

These are skills that take practice and repetition to develop. Transaction costs raise the cost of this moral practice. And when something costs more, people consume less of it.

If the goal is an open, civil society, then transaction cost reduction should be an important priority. Sharing economy platforms have the potential to do exactly that on a massive scale. At the same time, they are just another chapter in a long story, and hardly the final one.

Munger, by taking Douglass North’s advice, has used an old and overlooked tool to better understand new technologies and emerging economic changes. Sharing platforms have already changed the way people take cab rides, order food, and go on vacation. In the coming years, they could reshape the manufacturing sector, office culture, and even urban design, if traditional offices and downtowns continue to fall out of favor.

Transaction costs can also lead to fresh insights about labor regulations, antitrust, and other areas of public policy, as well as the overlooked symbiosis of markets and morality. Though The Sharing Economy is geared to a British audience, American readers will still get far more value from this freely downloadable book than they spend in transaction costs. While this admittedly sets a low bar, I intend it as high praise. I could not recommend this book more highly.

Download The Sharing Economy for free from IEA’s website here.

Court Rules Apple App Store Rules Do Not Violate Antitrust Laws

This press release was originally posted on cei.org.

A federal district court today ruled that Apple’s rules regarding payments on its App Store do not violate antitrust laws. The case, brought by video game maker Epic Games, alleged Apple violated antitrust laws by requiring purchases be made on its own system.

Director of CEI’s Center for Technology and Innovation Jessica Melugin said:

“With a court finding it is not a monopoly, the decision is largely a victory for Apple. The company will mostly continue to operate their private property, the Apple App Store, by the rules it wishes. Apple will not be forced to allow outside payment systems from developers and the App Store can remain the exclusive app download method on iPhones and iPads. The finding that Apple is in violation of California state law under the software giant’s prohibition on developers telling users there are alternative and cheaper payment options is along the lines of concessions it has already started to make with internal policy changes and legal settlement offers. Consumers will continue to benefit from Apple’s intact security, convenience and reliability at the App Store.”    

Senior Fellow Ryan Young said:

“The wisdom of Apple’s business practices is constantly being put to the test by consumers. Their size does not protect them from flops like the Newton tablet, its failed Ping social network, or its forgotten Pippin gaming console. Same goes for the App Store’s payment and commission policies.

“The separate question of whether Apple’s App Store is a monopoly is less debatable. Making that case requires defining Apple’s market so narrowly that real-world consumers can escape its boundaries with a dozen keystrokes or less. Before Apple booted Epic’s Fortnite game from its App Store in August 2020, roughly 90 percent of Fortnite downloads came through non-App Store vendors. Epic tried to define Apple’s market this way; the court disagreed.

“Any market is a monopoly if you define it narrowly enough. But those types of language games don’t always hold up in court. Real-world considerations keep getting in the way.” 

In the News: Facebook’s Antitrust Case

I’m quoted, in French, in Paris’ Le Monde newpspaper about the FTC’s revised antitrust complaint against Facebook:

La FTC « joue sur les mots », abonde Ryan Young du think tank Competitive Enterprise Institute. Pour lui, l’autorité s’est juste « arrangée pour exclure TikTok, Twitter, Clubhouse, Discord, et d’autres de ce marché »« Tout marché est un monopole si vous le définissez de façon suffisamment étroite, et c’est la seule chose que la plainte de la FTC prouve réellement. »

An English-language version of the same story in Techxplore says:

But Ryan Young of the Competitive Enterprise Institute countered that the FTC complaint “relies heavily on wordplay” to define Facebook as a monopoly.

“It argues that Facebook dominates the market for ‘personal social networking services,’ then defines that term in just such a way that excludes TikTok, Twitter, Clubhouse, Discord and others from that market,” Young said.

“Any market is a monopoly if you define it narrowly enough, and that is the only thing the FTC’s complaint successfully proves.”

Facebook’s Content Moderation Decisions Preferable to One-Size-Fits-All Government Regulation

This news release was originally posted on cei.org.

Facebook announced today it suspended former President Donald Trump from the platform for two years retroactive to January 7, 2021. Responding to a ruling against the former president’s indefinite suspension from its own Oversight Board, the social network also laid out policies for how it would treat content moderation of posts by public officials.

Director of CEI’s Center for Technology and Innovation Jessica Melugin said:

“People who value freedom of speech should be encouraged a private entity like Facebook is attempting to deal with thorny issues about what is and is not permissible speech on their own, without heavy-handed and rigid government regulation. Facebook is under pressure from both sides of the ideological spectrum to enact very different policies toward content moderation and are faced with novel challenges presented by the billions of user-generated post shared on their platform daily. No decision will make everyone happy.

“While it is curious Facebook chose to respond to the Oversight Board’s decision five months early, dealing with these issues without government coercion will allow Facebook to institute policies in line with its own values while not imposing their own content moderation standards on other platforms, as would happen with a one-size-fits-all federal regulatory approach.

“The former president might be suspended from Facebook for two years, but that is not the same as being ‘censored’ or ‘silenced.’ He is still free to make public statements, appear on television and radio, hold rallies, or join other social networks. The government compelling Facebook to carry speech with which it disagrees would be the real threat to free speech.

“Facebook has every right to curate their product as they choose, just as consumers have every right to use a different social media platform with content moderation and community standards more in line with their own.”

CEI senior fellow Ryan Young said:

“What is the right way to deal with malicious, incendiary, or fake content? Nobody knows—and that’s the point. Facebook doesn’t know. President Trump doesn’t know. Nor do Republicans and Democrats in Congress. We are in the middle of a discovery process right now. Maybe Facebook made the right call to ban President Trump from its platforms for two years after his remarks about the January 6 Capitol riots. Maybe they didn’t. Not only does nobody have the correct answer, there likely isn’t a single correct answer.

“What we need is an ongoing process of trial and error, where individuals and companies discover which norms, institutions, and policies will help to slow the spread of misinformation on social media while giving people space to express themselves. Washington is not the place to look to for leadership here. People are already coming up with multiple competing approaches to content moderation. As people try them out, tinker with them, discard them, or improve them, the results will be far better than whatever uniform, politically motivated policy Congress would write down in stone.”

Next week, CEI is holding a book forum for Jonathan Rauch’s “The Constitution of Knowledge: A Defense of Truth.” Join us on Wednesday, June 9 at 12:00pm ET. RSVP here.

Microsoft to Retire Internet Explorer: Lessons for Today’s Antitrust Cases

Microsoft just announced it will retire its Internet Explorer browser next year. This is the same program that was at the heart of an antitrust lawsuit against Microsoft in the late 1990s. There are two lessons here for today’s calls for expanding antitrust enforcement. One is that making something the default option does not guarantee that people will use it. The second is that the difference between a 90 percent market share and a laughing stock can be as small as a few years.

Internet Explorer was bundled into Microsoft’s Windows operating system, and Microsoft would not allow computer manufacturers to unbundle it. It was also set as Windows’ default browser in every new machine. It had a 90 percent market share in 2001, when the case was still active. The antitrust case argued that Microsoft’s inclusion of Internet Explorer with Windows was illegal tying—requiring consumers to buy two products together, even if they only want one of them.

The case more or less ended in a draw. The initial decision to break the company up was overturned on appeal. In the final settlement, Microsoft made some minor concessions to the government and paid about $3 billion to competitors who had sued it in separate private antitrust lawsuits.

Just a few years later, Internet Explorer’s 90 percent market share cratered. It turns out that making something the default option is not enough to make people actually use it. A succession of superior browsers, including Mozilla’s Firefox and Google Chrome, have taken turns as the leading browsers. Chrome is the current market leader with about a 65 percent market share.

As a response to the competition, Microsoft launched Edge, a new browser, and made it the default Windows browser. Its market share is currently about 3 percent. Internet Explorer is around 1 percent.

Microsoft’s real-world experience puts a damper on today’s antitrust claims that Google, Apple, and Amazon giving preferential treatment to their in-house offerings is an effective anti-competitive strategy. This is because of what I call the dozen keystrokes argument—that’s about how difficult it is to download a different browser, type in a different search engine’s URL, join a new social network, or find a different product in a search.

Internet Explorer’s journey to the pasture is not the only news story poking holes in populist antitrust arguments. AT&T is selling its WarnerMedia division for about half of what it paid for it just three years ago. The deal was nearly blocked, with critics arguing that combining network infrastructure and media content in the same company would devastate competition. Now AT&T is refocusing on networks, while WarnerMedia is attempting to compete with a raft of streaming services, many of which did not exist just a few years ago. Antitrust regulators’ cries of foul will never change, but markets always do. Just ask Microsof and AT&T.

EU Antitrust Action Against Apple – Bad for Trade, Bad for Consumers

This press release was originally posted at cei.org.

The EU Commission declared today that “Apple has a monopoly” in the distribution of music streaming apps to owners of Apple devices, the upshot of an antitrust investigation launched last year against the App Store and triggered by a complaint filed by streaming music company Spotify. CEI experts criticized the EU for what will be a poor outcome for consumers, entrepreneurs, and trade.

Ryan Young, CEI trade policy expert

“Antitrust policy can be a form of trade protectionism, similar to tariffs. Europe’s tech industry has long lagged behind America’s, largely due to the EU’s stifling regulatory climate. The EU could boost its tech industry by reforming its own bad policies, such as its corporate subsidies and overly risk-averse regulatory approach. Instead, it is trying to boost Europe-based Spotify by taking U.S.-based Apple to court.

“It is better to build up than to tear down. Europe has plenty of talented innovators and plenty of capital to fund them. The EU would better help consumers and businesses by letting its entrepreneurs innovate, rather than suing foreign competitors.”

Jessica Melugin, CEI technology policy expert

“Apple’s fees are in line with or less than the global industry standard, and Spotify has benefited greatly from the App Store’s distribution network. Spotify chose to offer its product through the App Store and now is crying to regulators in the EU and US for them to intervene and change the rules. Apparently, corporate cronyism is at home on both continents.”

Related analysis: Terrible Tech 2.0: The Most Burdensome, Anti-Consumer Technology Policy Proposals in Washington

Book Review: Erik Brynjolfsson and Andrew McAfee – The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies

Erik Brynjolfsson and Andrew McAfee – The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (New York: W.W. Norton, 2014)

This book from two MIT professors is part big-picture history, and art techno-optimism. McAfee is also the author of the excellent 2020 book More from Less, which is better-argued from a public policy perspective.

The opening chapter sets the historical stage. Living standards were poor and stagnant for nearly all of human history, from our birth as a species until about 1750 or so. If you put human well-being on a graph, it runs almost perfectly flat for thousands and thousands of years. Then it spikes sharply upwards starting around 1750-1800, like a hockey stick on its side. This giant wealth explosion is still happening today, and the authors believe it will continue for some time to come. This is one of the biggest changes in human history.

What caused it? Brynjolfsson and McAfee think it was technology. More specifically, it was the steam engine. Even more specifically, it was James Watt’s iteration of the steam engine. Steam power existed as early as ancient Rome, but it was mostly used for amusement purposes, and not industry. That changed in Watt’s lifetime. This was the start of Bynjolfsson and McAfee’s First Machine Age.

The Second Machine Age is the computer revolution. The First Machine Age revolutionized physical power. The Second Machine Age is revolutionizing mental power. Just as Watt’s steam engine took time to influence manufacturing, technological development, government, and culture, so too is the Second Machine Age. It is far enough along where they argue its fundamental difference from the First Machine Age is clear. But it is also early enough where its impact is only beginning to be felt. The future has almost limitless potential—and some tradeoffs.

The larger arc they draw is the right shape, though I don’t know that their need for two separate Machine Ages is much more than a useful gimmick for talking about technology. I would also submit that the true cause of both revolutions goes a level deeper than just technology. Yes, steam engines and computers are necessary for the two machine ages. Necessary, but not sufficient.

They need another ingredient in the mix: culture. Larger cultural values are difficult to quantify, which is why economists and many other social scientists do not use them. They are still significant, even if they are immune to regression analysis and other quantification. Statistically significant? No. Real-world significant? Very.

Culture shifted in the centuries leading up to Watt’s generation. People were gradually becoming a little more open to change, progress, and improvement. It showed in literature, trade patterns, philosophy, and a new prestige for science and its discoverers. That is why a technology that was already around now began to be used more differently—people allowed it, approved of it, and were willing to countenance large fortunes being made from it.

After setting up their two-machine-ages framework, Brynjolfsson and McAfee go on a tour of new and emerging technologies to see where the Second Machine Age might take us. They take a ride in one of Google’s self-driving cars, among other highlights, and draw encouraging pictures of some of the things new technologies could do for people over the next few decades.

One area where they fall short is their discussion of inequality. They are so focused on the mathematical ratio of the differences between rich and poor peoples’ incomes, that they forget to ask how people at the bottom are actually doing. They also focus almost solely on wage income, which is a significant mistake. This leaves out non-wage income such as employer-sponsored insurance, tuition assistance, free meals, company cars, and other perks that do not show up in income data.

More to the point for a book about technology, Brynjolfsson and McAfee should have asked a question similar to one Don Boudreaux likes to ask: would you rather have 1970-quality medical care at 1970 prices, or today’s health care at today’s prices?

Very few people would rather have 1970’s health care, even at its lower price. That means people view themselves as better off with today’s options. Most people would similarly answer related questions about televisions, computers, cars, appliances, and many other products that both rich and poor people consume.

In fact, society today has substantial consumption equality. Most low-income households have cars that drive at the same speeds on the same roads as wealthy people. They watch the same television shows and have similar Internet connections. More tellingly, rich people are not substantially taller or longer-lived than poor people. In the olden days, one could tell nobles and peasants apart at a glance by their height. Children of nobility got enough to eat, while peasant children were often so malnourished that their growth stunted. There were also substantial differences in infant mortality and life expectancy.

While the very wealthy have orders of magnitude more wealth than ordinary people do, they don’t consume very much of it. Nor do they keep it in a Scrooge McDuck-like vault. They invest it, in an unexpected type of income redistribution. When it’s invested, borrowers use that money to buy homes, go to college, and start businesses. The wealth doesn’t just sit there, people make use of it. It is a subjective question how much of this type of wealth is the “right” amount. But this positive use of wealth is something inequality scholars need to account for, and rarely do. In fact, invested wealth is where most of the capital that funds the amazing technologies Brynjolfsson and McAfee discuss in this book comes from.

They make another lapse in quoting a professional trade association for civil engineers in calling for more infrastructure spending. Of course civil engineers want more infrastructure spending, they have a vested interest in it! This is basic public choice theory. While they briefly acknowledge this conflict of interest, they also do not acknowledge the seriousness of the point, or look at data from less self-interested sources.

Their promotion of a Universal Basic Income (UBI) is similarly idealistic. This model, essentially a straight cash grant, is an objectively better system of poverty relief than the current welfare state. A UBI is easier to administer and more flexible for the recipients. A UBI also makes it more difficult for nanny statists to tell the poor what they shall eat, what things they may and may not buy, what types of health care they may receive, or where they shall educate their kids.

The trouble is politics. Again, a little public choice theory would go a long way in this discussion. Replacing the current welfare state with a UBI would be a fantastic tradeoff, both for the poor and for taxpayers. But the way politics works in practice, this would not happen. A UBI would be negotiated in a Congress led by people like Nancy Pelosi and Mitch McConnell, or whoever succeeds them in a few years. Real-world politicians are unlikely to enact a well-functioning UBI, nor will their constituents let them. Public sector unions whose members administer the current system will block any reform they possibly can.

Tis means any politically-possible UBI would be added on top of the current system, preserving the current system’s flaws and minimizing a UBI’s advantages. Unless this problem is addressed, a UBI risks causing more harm than benefit.

Brynjolfsson and McAfee are consistently a little too idealistic. Some of the technologies they explore in this 2014 book turned out to be flops, and others are still materializing. Similarly, they assume that their political reforms will actually work as they intend them to.

They are certainly right about the larger arc of progress and prosperity. And though I take their technological hyper-optimism with a grain of salt, it is also inspiring. Books like this one and by other thinkers such as Kevin Kelly give me confidence that my daughter’s life will be richer, longer, healthier, and frankly, cooler than mine. This is a source of happiness for me, and gives me inspiration to continue my work on improving economic policy and defending liberalism against populists who would tear it down for no good reason.

Book Review: Arthur C. Clarke – A Fall of Moondust

Arthur C. Clarke – A Fall of Moondust

A good old-fashioned disaster story, set on the moon. A moon rover carrying a group of well-heeled tourists across the Sea of Thirst gets swallowed into a sinkhole. The passengers are unable to radio for help–the regolith (moon soil) blocks their transmissions. They have few provisions, since they were on a short trip. Worse, the heat buildup inside the vehicle, plus a limited oxygen supply, means that help needs to arrive fast. Fortunately, the passengers include a world-famous retired astronaut who was trying to take a low-key trip, among other people with unexpected talents. Some clever scientists back at the base and on Earth are also able to suss out what happened to the missing vehicle, and are able to finagle a dramatic rescue.

The plot is formulaic and the characters are cheesy. But the setting is remarkable, the science is enjoyable—though I don’t think the bits about the moon’s surface hold up very well—and it’s a lot of fun. Not as substantial as Clarke’s usual fare, but if you’re in the mood for something light, one could do worse.

Book Review: Ashlee Vance – Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

Ashlee Vance – Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (New York: HarperCollins, 2015)

This is an authorized biography, so take it with a grain of salt. Musk is an interesting person whose flaws and accomplishments are both outsized. I was also unaware that Musk is an immigrant, born and raised in South Africa—yet another data point in favor of loosening restrictions against immigrants, who tend to be more entrepreneurial than us native-born Americans.

Musk’s reliance on government subsidies and tax breaks do not get nearly enough attention, and dull some of his sheen. On the positive side of the ledger, Musk is easily one of the highest-profile practitioners of what the Mercatus Center’s Adam Thierer calls “permissionless innovation.” Vance’s stories of Musk telling off innovators and proving stodgy competitors wrong are satisfying; though not so much the stories of how he treats many of his engineers and other employees. His often-humorous trolling also adds some irreverence to a business culture that could use a little more of it; innovation itself is a tacit rebuke of past generations.

The ethos of permissionless innovation is good not just for business, but for politics and culture. Widespread delegitimization of regulators and their rules would do more to limit their power than just about any reform bill Congress could pass. This is an important point many reformers overlook. Individual rules matter, but the institutions that generate those rules matter more. But in the long run, what generates those institutions? Cultural norms. One of the reasons Musk left South Africa is because its culture, barely a generation removed from apartheid, is not exactly innovation-friendly or market-friendly—and its political institutions reflect that. America turned out be a much better fit.

Unlike many green entrepreneurs, Musk believes in what he is selling. He has put almost all of his own money at risk over the years, and has very nearly lost everything more than once. His frenemy and fellow PayPal alum Peter Thiel has had a longtime policy of not investing in green startups because they don’t pan out. Musk, though still subsidy-reliant, has so far proven an exception to the rule with Tesla. While its ultimate fate is still unclear, its recent listing on the S&P 500 bodes well.

One place where Vance’s too-frequent Steve Jobs comparisons make sense is that Musk has something similar to what Jobs’ friends and enemies called his “reality distortion field.” Jobs had a rare charisma and intensity that made people buy into his vision, and work impossibly hard to make moonshot projects happen. Jobs did it with Apple’s computers and phones, and Musk has done it with cars and rockets.

While Musk’s long-term dream of colonizing Mars is unlikely to come to pass during his lifetime, it won’t be because the technology isn’t there. Most of it already exists in his current line of space vehicles. I am not alone in being extremely curious to see what happens next.

Third Antitrust Suit against Google since October Based on Flawed Argument

This press release was originally posted on cei.org.

A coalition of more than 30 states and territories today filed an antitrust lawsuit against Google, alleging the search engine has abused its power in markets ranging from voice assistants to digital advertising in an attempt to maintain a monopoly over internet searches. The antitrust lawsuit is the third filed against Google since October.

CEI Senior Fellow Ryan Young said:

“Today’s antitrust lawsuit, the third against Google since October, has a major flaw: the dozen keystrokes argument. It is not difficult to type bing.com or duckduckgo.com into your browser. Google pays Apple as much as $12 billion per year to Apple to have Google be its default search engine. This is apparently not enough to prevent Apple from reportedly building up its own search engine.

“Nor was Microsoft’s similar default status for its Internet Explorer browser enough to stave off competition from Firefox, Google Chrome, Apple Safari, and other browsers. Just as Microsoft never actually controlled the browser market, Google does not control the search market. Consumers do.”

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