Last month, one of my blogs was titled, “A penny for your thoughts.. or is free overpriced?” I basically explained how, when it comes to Google or Facebook, the saying of Nobel Prize winning economist Milton Friedman applies, “There’s no such thing as a free lunch.”
A subsequent Wall Street Journal column (June 8) by Christopher Mims seemed to elaborate on my thesis; its headline was “When Free Is Too High A Price.” Mims wrote that Google and Facebook “services are anything but free. We just don’t pay for them in the way we’re used to.” I’ve made this same point for several years when I had argued that, for example, prominent users of FB who draw people in are, in effect, giving away their stardom, without compensation, and FB was reaping the rewards, because the greater activity enabled FB to charge more for revenue.
I applaud Mims for explaining that, for example, FB’s business model that depends on expropriating our personal information as payment is exactly what is causing their problems, including attacks from candidates and politicians and calls for regulation, and even using antitrust laws to break up the tech giants.
Few people realize the origins of “antitrust” are the Standard Oil case, long, long ago, where “trusts” were used to create supposed monopolies. We no longer have trusts. And with Standard Oil, the argument was that monopolistic control meant “monopolistic prices.”
Makan Delrahim is the respected and highly competent assistant attorney general in charge of antitrust. Effectively, he is an antitrust czar who, while technically operating under the attorney general, is a force of his own. Thus, while ten state AGs sued to block, for example, the Sprint/T-Mobile merger, which actually would likely enhance competition (!) against At&T and Verizon in 5G, it’s ultimately the Department of Justice at the federal level that’s dispositive.
So we come to this “free” stuff. Delrahim in a major speech on June 11, said that “in digital markets the profit-maximizing price is zero.” Think of that. This is as variant of the old argument that a monopolist drives competitors out, or prevents competitors from entering, because the monopolist prices a product below cost. (Of course, what happens if FB adopts tier pricing – and charges you more to avoid marketing your privacy.
Delrahim argues that the issue is not that Alphabet’s Google or Facebook charges too much in price, but that the lack of competition degrades the quality of their product, notably privacy. Then we have the matter of FB criticized on how it handles free speech.
All I know is, whenever the governments gets involved in anything that smacks of regulating free speech, I worry. Do we want politicians or bureaucrats interfering in our dialogue, even on social media?
I’m also concerned that regulations in a volatile industry — technology — that is rapidly changing — can end up protecting the very “monopolists” we decry. Whatever you think about applying antitrust to the tech giants, I agree with Delrahim on one point — that antitrust is probably better than regulation.