The ‘pacing benefit’

Jennifer Huddleston

Critics on both the Left and the Right have called for rather significant changes to the application of existing laws surrounding s-cial media platforms. But this is not the first time r-apid technological change has ignited calls for government action. In fact, it has not been uncommon for the early leaders in n-ew businesses to gain r-apid success, such that th-ose in adjacent or increasingly obsolete industries begin clamoring for regulation to “protect” themselves from the new innovators. Is this era of technology different, and what can we learn from the past when determining the appropriate response to such concerns?
Innovation moves at a rapid pace—typically much faster than traditional policymaking can move. This dichotomy has been referred to as the “pacing problem,” but perhaps, a better term for it is the “pacing benefit.” Rather than languishing in bureaucratic red tape, many innovators and entrepreneurs are able to focus on fine tuning a product that meets a need or desire others haven’t previously realized because they do not have to seek government permission to do so.
America has enjoyed m-uch of this “pacing benefit” thanks to a more permissi-onless approach to innovation for many areas. While there are notable exceptions in areas such as transportation or medicine, where higher risks motivate higher regulatory burdens on innovation, in many cases, disruptive innovation is presu-med allowable until proven otherwise. In contrast, Eur-ope has taken an approach that presumes the need for guidelines and restrictions before new innovations become widely available.
Despite these calls, however, technology often de-velops faster than the regulations proposed. Regulati-on is often difficult and cu-mbersome to undo, so we e-nd up with blocked innovation.
For innovations facing regulatory barriers that may be proven to be outdated, it can take significant time to remove or reform such barriers, thus halting critical developments. This is most commonly seen in heavily regulated industries, such as healthcare and transportation. In such scenarios, policymakers should regularly examine the necessity of existing regulations, weighing them against the benefits of innovation, and seeking to find balanced appro-aches through policy tools such as sandboxes. But ma-ny of the technologies rec-eiving the most policy atte-ntion today are not in heavily regulated industries, but rather in those industries which have flourished with minimal regulation.
In many cases, the most prudent action may be for policymakers to refrain fro-m reacting hastily and in-stead respond only to those agreed-upon harms for wh-ich rulemaking can provide objective redress. There are a few reasons for a res-trained approach. Looking at the matter through a pragmatic lens, the length of time needed for policy development may mean, as discussed above, that technological development may already have advanced past the intended regulatory remedy. Second, it is often not a technology itself but a particular application of it that raises concerns. In many cases, existing laws may already provide redress for the harms in question, such as concern about the potential for artificial intelligence and machine learning to be abused by those looking to engage in discriminatory practices. Finally, regulation tends to benefit the incumbents in an industry who can absorb or pass along the cost of needed changes while creating new barriers for new, smaller entrants, making it more difficult to compete.
But there is another reason to allow innovation to prosper that is often overlooked: innovation, not int-ervention, is often the best competition policy. It is o-ften hard to predict what in-novations will revolutionize an industry, or find unprecedented consumer demand.
History is littered with examples, and the phenomenon is particularly pronounced in cases where regulators desired to intervene in an unpragmatic fashion. For example, while regulators were stopping Blockb-uster and Hollywood Video from merging, the home entertainment industry was changing with the emergence of new players like Netflix and YouTube. Dur-ing the “browser wars,” mo-bile emerged such that Mic-rosoft missed the window to be largely competitive in it. And while working to block the XM-Sirius merger, radio broadcasters ignored the real threat of iPods.
In the above cases, the market may have been wrongly defined in a way that in retrospect makes it look like a mere choice at a time new competition was emerging. But what would be worse would be to change competition law to achieve a policymaker’s preferred outcome in the industry. Such an approach would exacerbate the problems above while also negatively impacting consumers who would be unable to benefit from the natural evolution of the market.
So if the answer is a policy of prudence, and this sa-me frustration has happened before, why are many acr-oss the political spectrum calling for intervention in the tech industry? I would posit that anger towards tech is a symptom of underlying concerns about society and culture rather than the industry. This is applicable regardless of where on the political spectrum an i-ndividual falls. For the Left, these concerns are often fo-cused on the rise of hate sp-eech and extremism, while for those on the Right, they are largely grounded in concerns that their opinions are being purposely silenced by those in power and that religious or traditional viewpoints are being wrongfully labeled as hate speech or otherwise maligned. On both sides, many express concern about the next generation and their use of technology. The result is that many different policymakers and pundits now call for intervention into technology generally.
Many of these concerns have been dealt with in the past, with other technologies or issues. We may not always agree on the outcome or how we got here, but in time, we’ve generally developed societal norms and used regulation to ad-dress real harms. For example, the camera was extre-mely disruptive when it first emerged and led to many of our ideas around privacy today. However, we did not seek to ban the camera, but we developed societal nor-ms around its appropriate use and regulations around its most harmful uses.
Innovation in the communications space has been viewed as disruptive throughout the development of technology. For example, there were complaints about the problems of how quickly news could travel with the invention of the telegraph. One could play Mad Libs with any number of technologies when it comes to today’s concerns about misinformation being spread and the disruptive impact on the status quo. Today’s technology has increasingly democratized speech by allowing any individual to communicate one to many as one to one. Many of the concerns about online speech on both sides of the aisle come from laying bare the wide array of views held. But along with the views found as distasteful and problematic, this democratization of speech has been incredibly powerful for many who would have struggled to have their voices heard in a prior era where only a few individuals made decisions about whose voices could be he-ard. Similarly, the concerns many see in alleged anti-conservative bias can also be seen in other forms of m-edia, like television and mo-vies. But just as Fox News provides an alternative to MSNBC in the news market, new websites such as Rumble and Truth Social p-rovide alternatives for those seeking different types of content.
Some concerns, however, are not related to speech but to the impact of technology on the next generation. Many are concerned about the apparent decline in youth mental health and see technological change as a cause. The concerns about the next generation and te-chnology too have historical parallels from past innovations. While well-meaning, these concerns rarely if ever turn out to be as truly problematic as initially perceived. From novels to co-mic books to landline telephones, any number of tec-hnologies have raised concerns that they are corrupting or harming the next generation.
Perhaps the most recent memorable example was the concern over violent video games leading to real-world violence or other harms. Video game systems increased in popularity at the same time as growing concerns about youth violence, so many claimed that violent video games were connected to increased aggression. But any number of studies have since rejected this connection. Today, data remain mixed on the connection, if any, between social media and youth me-ntal health. As we’ve seen with other, similar concerns, there are often much less restrictive tools that can be led by the industry, emp-owering parents to better meet the individual needs of particular young people ra-ther than embracing a one-size fits all approach that is not fully backed by data.
So, what should we think about how to approach our current technological age in a way that most benefits s-ociety? Our current situati-on suggests 3 key proposals: 1. Innovation can often be disruptive in unpredic-table ways, and policy sho-uld remain flexible to allow for dramatic, unprecedented, and unforeseen changes. If we only look for the “next Facebook,” we may miss the entirely new ways in which social media and connections are developing.
2. The market for ideas is still a market, and many of the concerns around online speech and content moderation are not limited to our online experiences. There continues to be a need for greater tolerance and understanding that allows individuals with different viewpoints to communicate with respect. However, it can also be beneficial for different and specific groups to be able to connect with each other. The current approach to online content moderation may create discomfort, but ultimately, it provides the best opportunity for the most speakers.
3. We should consider a full spectrum of tools and not rush to demand regulation or government interv-ention, particularly for iss-ues without objective data to back them up. Education is often an under-utilized policy tool that can support consumer choice in a complicated market. Similarly, there are opportunities for the development of industry best practices and support from the government for better studies to understand the underlying concerns.
The tech policy debate these days is often focused on these incredibly polarizing issues, but as a result, we may be missing opportunities for very important policy debates on topics like data privacy or ensuring the opportunities for innovation in currently heavily regulated industries. And the past tells us that while new technology may make us very anxious and afraid, we tend to maximize the benefits and come out on the other side with minimal harm.