Hope from Europe on Economic Liberty

Last week I attended and spoke at a conference hosted by the Financial Times and JTI on economic regulation in Prague.

During my panel on the regulation of AI and other innovative new technologies, I made five substantive points about the economics and public policy implications of new technologies:

1. As far as possible, policymakers should allow permissionless innovation rather than be overly precautionary, only intervening when there was a clear need to do so for some specific application in a given product market.
2. Where regulatory oversight occurs and new products compete with existing goods, policymakers shouldn’t automatically try to shoehorn innovations into current regulatory strictures to maintain a “level playing field.” New products often come with new safety features, for example, changing the balance of risks or mitigating previously perceived market failures. As such, innovation can compete with the regulator as well as incumbent products.
3. Discussion of highly speculative extreme worst-case scenarios and ethical imperfections of new technologies sometimes seemingly ignore that the current world is not perfect, and human beings themselves exhibit biases. It’s a mistake to try to make perfect what is ever-evolving and already very good, especially if doing so deters other new innovations through fines or heavy compliance costs.
4. In some fields where regulation is perceived to be needed, the rules should aim merely to solve the perceived problem proportionately and provide certainty for business. As Alexander Kryvosheyev from JTI explained, for businesses, regulatory clarity can be as important as the regulation itself. It may be that in some areas industry protocols and sharing of best practice can be facilitated, obviating the need for direct government regulation, but we should be ever mindful of the risk of cronyism and capture if this type of forum is provided through government.
5. Regulatory policy is a terrible tool for dealing with distributional concerns re: the winners and losers of technological change.

All in all, I found the messages well received and the conference somewhat heartening.

Speaker after speaker in what was a central and eastern Europe heavy event bemoaned the tendency for Europe to be overly prescriptive with regulation and a mere talking shop for genuine pro-growth reform. Many indicated how the US was their beacon for a better environment for innovation in respect of new technologies.

What was clear though was an apparent appetite for change. Central and eastern European countries have already experienced significant economic upheaval over the past three decades. That means perhaps they are more willing to embrace a radicalism on moving in a market-friendly direction. Certainly, Czech Prime Minister Andrej Babiš talked a good game about the need for pro-market liberalization both domestically and within the EU, at one stage saying explicitly, “the biggest problem for regulation is in Brussels, not Prague,” and lamenting that “the European Union has no vision.”

With much Brexit Remain-sympathizing commentary both here and in the UK seeking to retrospectively paint the EU as a bastion of economic liberty, it was cheering to re-hear the sort of pro-liberty eurosceptic critiques of yesteryear and a determination to make Europe more open to wealth-enhancing innovation.