Economist Luigi Zingales: To Limit Big Tech’s Power, Regulations Should Be Tailored
For an economist, Luigi Zingales has an unconventional approach when it comes to regulating technology giants and their ever-increasing power. It boils down to this: Breaking up the tech giants isn’t the answer, but regulatory fixes are still needed to preserve competition and democracy.
Zingales, director of the Stigler Center for Study of the Economy and State at the University of Chicago’s Booth School of Business, argues that smaller, targeted legislative moves could address competitive issues without stifling innovation or destroying the companies responsible for some of the biggest technological advances of the last couple of decades. Zingales is scheduled to speak at Fortune‘s Brainstorm Tech conference in Aspen on Tuesday.
“I think what these companies have done, by and large, is fantastic,” says Zingales. “I’m just concerned with their excessive power.”
Big tech’s rising power has gained global attention from a growing number of politicians, legislators, and users. Critics worry that companies like Facebook, Google, and Amazon have become monopolies that are destroying competition and public discourse, and are aiding in the spread of hate, misinformation, and harmful content.
Last week, Facebook reached a $5 billion settlement with the Federal Trade Commission over its data practices. That came on the heels of the FTC and Department of Justice starting investigations into whether Facebook, Amazon, and Google violated antitrust laws. Meanwhile, the European Union and its member states have hammered Google for its data practices and anti-competitive actions.
The debate has also hit the national stage of the 2020 U.S. Presidential Election. Presidential candidate Elizabeth Warren has taken one of the most aggressive stances, championing breaking up the tech giants.
But Zingales, who has spent decades as a financial analyst, has a much more nuanced opinion.
“I don’t go extreme to get something smaller done,” Zingales says.
The answer, he says, is to individually address the problems associated with each technology company, rather than create sweeping legislation for all.
For example, the U.S. traditionally hasn’t allowed companies to both run a marketplace and participate in it at the same time, Zingales says. But regulators have yet to crack down on Amazon, which appears to do both. Meanwhile, a company like Google, for example, should have a fiduciary duty to society, in which board members hold the company accountable for both financial performance and the company’s effects on society.
Zingales’ approach aims to do two things: Limit giant tech companies’ power and strengthen the economy with more competition—all while having a relatively light touch on the legislative front.
But some experts say any new legislation will likely create new problems. Diane Katz, senior research fellow at the Institute for Economic Freedom, believes that consumers need to be the catalyst for driving change, not regulators.
“Government intervention will not make the problems go away, and in fact, may exacerbate them,” Katz says. “It’s almost impossible to adapt regulations in keeping with the degree of innovation and the pace of churn.”
Will Rinehart, director of technology and innovation policy at the center-right policy institution American Action Forum, also doesn’t like the idea of new regulation. Instead, he thinks regulating bodies need more support and expertise.
“So far I haven’t seen that the process is broken,” he says. “We can be more aggressive on enforcement, but I think we need to temper our expectations.”
Zingales’ perspective may have something to do with his global background.
An Italian native, Zingales has worked as an economist sine 1992, when he joined the University of Chicago’s Booth School of Business. In 2003, he won the Bernácer prize for best young European financial economist. He also serves as a fellow of the European Governance Institute and writes editorials for Il Sole 24 Ore, which is the Italian equivalent of the Financial Times, and was a co-creator of the Chicago Booth/Kellogg School Financial Trust Index, which monitors changes in Americans’ confidence in the financial system.
But in the past several years Zingales has become more attracted to the power of big tech. The companies remind him of the big banks before the financial crisis began in 2007.
“I felt that this was to some extent the financial industry again, and to some extent the financial industry on steroids,” he says. “Now we have organizations that are not only powerful as employers… but because they can mobilize consumers.”
Uber, for example, was able to win over consumers, who helped champion regulatory changes so that the company could operate. And most of the large tech companies have numerous lobbyists fighting in Washington, D.C., to protect their interests.
Zingales says though he comes from a traditional economist background, he differs in opinion because of his interest in saving democracy.
Excessive power “is very dangerous,” he says. “We need to recognize that and do something about it.”
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