Pluralistic: 13 Jun 2022

Today's links

A Soviet editorial cartoon featuring an ogrish capitalist in top hat and tails yanking a dollar-sign-shaped lever that ejects a tiny bureaucrat from a seat; ranks of bureaucrats behind him wait their turns, grinning idiot grins.

Podcasting "Regulatory Capture" (permalink)

This week on my podcast, I read my Medium column, "Regulatory Capture: Beyond Revolving Doors and Against Regulatory Nihilism," about the left/right split on theories of sound regulation:

The column opens by recounting a recent, extremely public, extremely egregious example of regulatory capture: the way that Trump's FCC chair Ajit Pai – a former Verizon lawyer – killed Net Neutrality.

Net Neutrality is a very simple proposition: it's the idea that your ISP should send you the bits you request when you click links as quickly and efficiently as it can. The opposite of neutrality is net discrimination, which is when your ISP demands bribes from the services you want to use, and punishes the companies that refuse to pay by slowing down their connections to you.

No one wants this, for fairly obvious reasons, which left Pai with a dilemma: as a matter of law, he couldn't just kill off Net Neutrality; first, he had to seek public comment on the proposal, and the public didn't want Net Neutrality dead. When John Oliver did an episode about this, 1.5m people commented in the docket, melting the FCC's servers.

If Pai had listened to those commenters, he wouldn't have been able to kill Net Neutrality. Instead, he falsely claimed that the FCC's website had gone down because it had been hacked:

(He subsequently lied about lying about this, which is wild.)

Then he reopened the server for more comments. This time, 22 million comments flooded in. But unlike the comments that came in the first time around, these ones supported Pai's plan to kill Net Neutrality. That was weird, but weirder still was who had (purportedly) sent those comments. A million identical comments came from people with addresses:

Millions more came from the addresses of people who'd been compromised in data breaches, including many dead people:

Two came from sitting US Senators – Senators who supported Net Neutrality and denied having sent the comments in:

More came from nonsense email addresses:

But Pai – incredibly – declared these obviously forged comments to be the legitimate will of the people:

And obstructed a law-enforcement investigation into the comments:

(That investigation later determined that the fakes had been sent by a dirty-tricks firm in the pay of Big Cable and Big Telco companies):

Pai and the FCC finished off Net Neutrality at a "public meeting" held under cover of Thanksgiving weekend, with the public's attention elsewhere, which allowed them to tell a bunch of easily disproved lies:

Today, Pai's an investment banker, using his access to the capital markets to buy up and consolidate small ISPs, which they call "closing the digital divide":

That's as neat a parable about regulatory capture as you could ask for. Pai, an industry executive, was confirmed as FCC chairman by Republican Senators who had each received small (or large!) fortunes in campaign contributions from the carriers and cable companies Pai would go on to oversee.

Pai then cheated and lied to create a regulation that his former employer and its cartelmates could use to extract billions from the American public, whom he had sworn to serve. Moreover, Pai ordered the FCC to drop its opposition to state laws (also lobbied into existence by the ISP cartel) that banned cities from offering competing networks.

This is the formal definition of regulatory capture: that industries will suborn their regulators and thus gain access to the power of government, which they will use to suppress competitors and harm the public.

But while that is undoubtably what's going on here, the ideological origins of the theory of regulatory capture are not in anti-corporate, leftist thinking. Regulatory capture was popularized by the "public choice theory" school of economics, a cynical, far-right branch of neoliberal Chicago School economics. It's of a piece with the ideological project of cheering on monopolies as "efficient," promoting unlimited campaign contributions as "free speech" and celebrating inequality as "fair."

The public choice account of regulatory capture goes like this: a corporate-friendly regulation might hurt the public a lot more than it benefits a company, but because the company has concentrated gains, and the public has diffuse losses, the public won't fight as hard as the company will. Thus, any regulator who has any power will be hijacked by the companies that it is supposed to regulate, and they will use that power to clobber their competitors and screw the public.

Public choice theorists insist that there's nothing that can be done about this. If we give regulators more power, that will just make them into juicier prizes for corporate corruptors, who will spend even more to capture them.

In public choice theory, the only thing we can do to keep regulators from being captured is to eliminate regulators altogether – or at least, to the greatest degree possible.

When you hear people on the right talk about "regulatory capture," that what they're talking about – not making companies more accountable to regulators, but eliminating regulators so that they can't be captured. "This game," they say, "is rigged. One team is so powerful that the ref is working for them. The answer is to eliminate the ref. Then that powerful team will play fair."

Put that way, it's easy to see the problem with the right's conception of regulatory capture: it excludes the possibility that we might safeguard regulators from capture by making companies weaker, and instead argues that companies should be as strong as they can be, and that we should voluntarily give up any hope of protecting ourselves from these all-powerful titans.

Think about the political economy of regulatory capture. For Ajit Pai to kill Net Neutrality, the telecoms sector first had to create a cartel. It had to buy up or destroy all the small competitors and then the survivors had to merge. By doing this, the ISPs were able to conspire to divide up the country so that they didn't have to compete with one other. That let them extract "monopoly rents" – the massive margins that companies without competitors can extract from their customers and workers. Thus armed with surplus billions, the highly concentrated sector could leverage its small numbers to agree on how to spend those billions to corrupt the senators who confirmed Pai and the think-tanks and dirty tricksters who produced the evidentiary record that let him kill Net Neutrality.

If the ISP sector consisted of hundreds of squabbling companies all at each other's throats, they'd be undercutting each other's prices, depriving the sector of those corrupting excess billions. And if they were a squabbling mob – rather than a cartel of giants – they wouldn't be able to agree on a single regulatory agenda.

When one company told a lie to the FCC, its bitter rival would be right behind it, waiting to debunk that lie. They wouldn't just compete for your business – they'd compete to supply information to regulators.

Regulators can make good regulation. That's why your dinner doesn't give you food poisoning, why your kid learned to read at school, why your phone's battery doesn't blow your face off. But for regulation to be good, regulators and lawmakers have to fear and respect the public – not lobbyists.

Public choice theory – and its adjacent economic ideas, like "money is speech" and "monopoly is efficient" – has produced a system where any regulator can be captured. But that's because public choice theory is part of a project to produce cartels and arm them with fortunes to use when they set out to capture their regulators.

Anti-monopoly law – and other anti-corruption policies, like public election campaign financing, and laws against public servants rotating into jobs in the sector they previously oversaw – can produce a governable private sector, one that can't readily capture its regulators.

The FCC didn't kill Net Neutrality because it was too strong. It did so because it was so very weak. The Commission didn't have the resources to fact-check the big carriers' lies. It had eliminated the data-gathering projects that tracked carrier performance. It was overseen by lawmakers who were in the carriers' pockets.

For an agency to oversee an industry, it has to be more powerful than that industry. Obviously. A left theory of regulatory capture isn't merely about strong agencies – it's about weak corporations: fighting cartels and monopolies so that they can't capture their regulators.

The public choice answer to all this is we're just not deregulated enough. Once we completely dismantle the administrative state, then we'll achieve nirvana. But that's not what happens. When we let Boeing self-certify the 737 Max, Boeing wasn't better – they built planes that fell out of the sky and killed hundreds of people.

We have to regulate, because that's the alternative: planes falling out of the sky. Expensive, slow broadband. Food poisoning. Medicines that kill. We need regulators that are more afraid of the public than they are of corporations.

The 2014 study “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens” found that "ordinary citizens… get the policies they favor, but only because those policies happen also to be preferred by the economically-elite citizens who wield the actual influence."

That is, the only reason you're not dead from food poisoning is that some rich person hasn't decided to kill you yet.

Regulatory capture is real, but the public choice movement's promotion of regulatory capture theory has nothing to do with blunting corporate power. For everyday people to have a safe and prosperous life, we have to shrink down the corporate titans that public choice theory built, shrink them until they fit in a bathtub…

…and then drown them.

Here's the podcast episode:

And here's a direct link to the MP3 (hosting courtesy of the Internet Archive; they'll host your stuff for free, forever, too):

And here's a link to my podcast feed:

Hey look at this (permalink)

This day in history (permalink)

#10yrsago Meritocracies become oligarchies

#10yrsago FunnyJunk’s bewildered lawyer: “I’m completely unfamiliar really with this style of responding to a legal threat”

#5yrsago PA supreme court: was illegal to steal elderly woman’s home because her son sold $140 of weed

#5yrsago Missouri legislator responds to abortion controversy by slaughtering chicken. ‘God gave man dominion over animals.’

#5yrsago Down Among the Sticks and Bones: return to the world of Every Heart a Doorway, where gender and peril collide

#5yrsago Automattic’s teleworking program is so successful they’re closing their San Francisco office

#5yrsago Bruce Sterling: science fiction won’t make the future better

Colophon (permalink)

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Currently writing:

  • Some Men Rob You With a Fountain Pen, a Martin Hench noir thriller novel about the prison-tech industry. Friday's progress: 554 words (14588 words total)

  • The Internet Con: How to Seize the Means of Computation, a nonfiction book about interoperability for Verso. Friday's progress: 506 words (10981 words total)

  • Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. (92849 words total) – ON PAUSE

  • A Little Brother short story about DIY insulin PLANNING

  • Vigilant, Little Brother short story about remote invigilation. FIRST DRAFT COMPLETE, WAITING FOR EXPERT REVIEW

  • Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION

  • Spill, a Little Brother short story about pipeline protests. FINAL DRAFT COMPLETE

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: Regulatory Capture: Beyond Revolving Doors and Against Regulatory Nihilism

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Upcoming books:

  • Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022

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