Regulation & Industry

Safeguarding Progress: The risks of internet regulation

A new paper by Matthew Lesh, the ASI’s Head of Research, and Sam Dumitriu and Philip Salter of the The Entrepreneurs Network, makes the case for a free, open internet:

  • Technology is improving our lives, connecting people, creating communities and contributing to Britain’s economy to the tune of £170bn a year.

  • The policy environment is becoming increasingly hostile to technology, undermining the free exploration of ideas and innovation that is essential to economic progress.

  • If policymakers want to encourage entrepreneurship they should embrace a culture of ‘permissionless innovation’.

    • Permissionless innovation means allowing entrepreneurs to experiment with new business models and technologies, and only intervening when there are clear, demonstrable harms to the public. 

    • Growing calls to regulate the internet risk undermining progress and threaten the future of the internet and the digital economy.

  • Platform liability exemptions are essential to the fabric of the internet, and promote free speech and enterprise.

    • The exemption of platforms, such as Google and Facebook, from liability for the activity of their users was essential for the development of the internet, and digital innovation, and has delivered massive benefits for consumers.

    • Laws forcing platforms to be liable for user content to restrict hate speech have prompted social media companies to engage in excessively risk-averse moderation, threatening freedom of expression. Further measures such as the EU’s new Copyright Directive threaten the capacity of ‘creators’ to remix copyrighted content and share memes, while the Online Harms White Paper is a serious threat to free expression.

  • Internet red tape undermines small business, competition, and entrepreneurial activity

    • There is intense competition within the technology sector, including between large online platforms and from startups and small businesses. Platforms help stimulate entrepreneurial activity by providing Corporate Venture Capital and opportunities for exit.

    • Controls such as excessive data regulations, by creating barriers to entry and excessive costs, are particularly harmful to startups and small-to-medium sized enterprises (SMEs) that have lesser financial capacity for compliance.

The report also explains that if the Government wants to achieve an open, competitive and entrepreneurial online space they would do well to follow these Five Principles for Permissionless Innovation:

  1. Identify and remove barriers to entry and innovation;

  2. Protect freedom of speech and entrepreneurship by retaining immunities for intermediaries from liability;

  3. Rely on existing legal solutions, the common law, and competitive pressures to solve problems. 

  4. Push for industry self-regulation and best practices.

  5. Adopt targeted, limited legal measures for truly hard problems based on evidence.

Reforming the Regulators

This briefing paper, by ASI fellows Tim Ambler and Keith Boyfield, notes the extraordinary growth of the UK's regulatory agencies since 1997 and the deleterious consequences for the UK economy. They argue that the UK's regulators should first be restricted to their original, purely economic role, and subsequently merged into a single, competition-focused Office of Fair Trading.

Read this report.

Re-energizing Britain

In Re-energizing Britain Nigel Hawkins warns the UK faces blackouts unless the six major energy companies invest. New nuclear plant should be encouraged by replacing the existing Renewables Obligation with a new Low Carbon Obligation, which would include nuclear power. The three key aims of energy policy – security of supply, reduced carbon emissions, and lower prices – would all benefit from this change, since nuclear energy is both low-carbon and less expensive than many other ways of generating electricity, and does not depend on risky supplies of gas from Russia. The government also needs to work with the energy companies to make sure that they have both planning approval and access to finance to increase Britain's gas storage facilities substantially. The UK has only one-tenth of the gas storage of Germany, and is dangerously exposed to interruptions in supply.

Read it here.

Stemming the growth of UK regulatory agencies

The ASI's regulation supremos, Keith Boyfield and Tim Ambler, have published a new briefing paper as part of our Regulatory Monitor project, entitled Stemming the growth of UK regulatory agencies.

The ultimate objective is to merge all the existing regulatory agencies into a single Fair Trade Authority, which would be formally responsible to parliament and which would intervene only to ensure free, competitive markets. A great deal of the regulation aimed at protecting the consumer could be left to the courts, while the greater use of market mechanisms, such as mandatory insurance, would serve to improve standards.

Read it here.

The Financial Crisis: Is regulation cure or cause?

In this briefing paper the ASI's regulation fellow Tim Ambler examines the populist demands for financial stability and security though increased regulation. The question the paper poses is whether existing regulation mitigated the 2008 financial crisis, had no impact, or exacerbated it. Answering this question is the key to deciding how we respond to the crisis. The paper's main conclusion is that improving regulation will not provide more than modest help in future. The important thing is that the Bank of England, the FSA and the credit agencies do the jobs they are supposed to do more effectively.

Read it here.

 

Road Map to Reform: Deregulation

"Over-regulation depresses corporate profits, consumes valuable management time and saps entrepreneurial morale," say the authors. "It makes the UK less attractive to investors and destroys the wealth creation on which the whole of government depends."

There are three big sources of red tape - the EU, Whitehell, and the regulatory offices like Ofcom and Ofwat. For each one, we need to make sure that fewer new regulations are created, that existing ones are rationalized, and that enforcement does not become over-zealous.

Read it here.

Competition in Corporate Control

Do we need regulation, rule-books and new codes of practice to keep boardroom executives in check? Corporate-governance specialist Elaine Sternberg says not. The keys to getting on-the-ball, responsible management are competition and shareholder empowerment. Her punchy report takes on the regulationists and shows how to achieve good governance without politics.

Read this report.