Tag: regulation

What’s Missing from Facebook’s Oversight Board

Facebook has set out a draft charter for an “Oversight Board for Content Decisions.” This document represents the first concrete step yet toward the “Supreme Court” for content moderation suggested by Mark Zuckerberg. The draft charter outlines the board itself and poses several related questions for interested parties. I will offer thoughts on those questions in upcoming blog posts. I begin here not with a question posed by Facebook, but rather by discussing two values I think get too little attention in the charter: legitimacy and deliberation.

The draft charter mentions “legitimacy” once: “The public legitimacy of the board will grow from the transparent, independent decisions that the board makes.” Legitimacy is commonly defined as conforming to law or existing rules (see, for example, the American Heritage Dictionary). But Facebook is clearly thinking more broadly, and they are wise to do so. Those who remove content from Facebook (and the board that judges the propriety of those removals) have considerable power. The authors of banned content acquire at least a certain stigma and may incur a broader social censure. Facebook has every legal right to remove the content, but they also need public acceptance of this power to impose costs on others. Absent that acceptance, the oversight board might become just another site of irreconcilable political differences or worse, “the removed” will call in the government to make things right. The oversight board should achieve many goals, but its architects might think first about its legitimacy.

The term “deliberation” also gets one mention in the draft charter: “Members will commit themselves not to reveal private deliberations except as expressed in official board explanations and decisions.” So there will be deliberations, and they will not be public (more on this in later posts about transparency). The case for deliberation is strengthened by considering its absence.

The draft could have said “members will commit themselves not to reveal private voting….” In a pure stakeholder model of the board, members would accurately represent the Facebook community (that is, they would be diverse). Members would consider the case before them and vote to advance the interests of those they represent. No deliberation would be necessary, though talk among members might be permitted. And, of course, such voting could be both transparent and independent. But the decision would be a mere weighing of interests rather than a consideration of reasons.

Why would those disappointed by the decision nonetheless consider it legitimate? Facebook could say to the disappointed: The board has final say on appeals of content moderation (after all, it’s in the terms of service you signed), and this is their decision. Logically that deduction might do the trick, but I think a somewhat different process might increase the legitimacy of the content moderation in the eyes of the disappointed. 

Consider a deliberative model for the board. A subset of the board meets and discusses the case before them. Arguments are offered, values probed, and conclusions reached. But the votes on the case would be informed by the prior deliberation. Members will represent the larger community in its many facets, but the path from representation to voting will include a collective giving and taking of reasons. That difference, I think, makes the deliberative model more likely to gain legitimacy. Simply losing a vote can seem like an expression of power. Losing an argument is more acceptable, and later the argument might be renewed with a different outcome.

The importance of deliberation implicates other values in the charter, especially independence. The draft places great weight on the independence of the board from Facebook. That emphasis is understandable. Critics have said Facebook will turn a blind eye to dangerous speech because it attracts attention and thereby, advertising dollars (Mark Zuckerberg has rebutted this criticism). The emphasis on independence from the business contains a truth: a board dedicated to maximizing Facebook’s quarterly returns might have a hard time gaining legitimacy. But the board’s deliberations should not be completely independent of Facebook. Facebook needs to make money to exist. Doing great harm to Facebook as a business cannot be part of the remit of the board. 

Here, as so often in life, James Madison has something valuable to add. In Federalist 10, Madison argues that political institutions should be designed to protect the rights of citizens and to advance “the permanent and aggregate interests of the community.” Facebook is a community. The Community Standards (and the board’s interpretation of them) should serve the permanent and aggregate interests of that community. The prosperity of the company (though perhaps not necessarily at every margin) is surely in the interest of the community. The interests represented on the board are a starting point for understanding the interests of that community, but in themselves they are not enough for that.  Deliberation might be the bridge between those interests and the “permanent and aggregate interests of the community.” Looked at that way, most users would have a reason to believe in the legitimacy of a deliberative board as opposed to a board of stakeholders.

Facebook’s draft charter evinces hard work and thought. But it could benefit from more focus on the conditions for the legitimacy of the oversight board. Deliberation (rather than simple interest representation) is part of the answer to the legitimacy question. As deliberations go forward, perhaps the charter’s framers might give more attention to how institutional design can foster deliberation.

Is EPA Changing the Regulatory Paradigm?

Sometimes it’s worth reading the fine print in obscure regulatory proposals. One such example is contained in a “proposed rulemaking” by the EPA on what are called “dose-response models.”

Buried in the Federal Register a few months back (on April 30) is this seemingly innocuous verbiage:

EPA should also incorporate the concept of model uncertainty when needed as a default to optimize dose risk estimation based on major competing models, including linear, threshold, U-shaped, J-shaped and bell-shaped models.

Your eyes glaze over, right?

Instead they should be popping out. EPA is proposing a major change in the way we regulate radiation, carcinogens, and toxic substances in our environment.

Childcare Regulation and Quality

David Boaz blogged today on the Washington Post story about a lawsuit regarding DC childcare regulations. DC is set to require directors of child-care facilities to obtain a bachelor’s degree in early childhood development, and assistant teachers and home-care providers to have Child Development Associate (CDA) certificates in the same subject.

The WaPo write-up follows the usual boilerplate for these discussions: on the one hand, providers say complying with the regulations will be burdensome and increase costs; on the other hand, the government talks up the educational benefits of the new regulations. This all implies there is a trade-off between quality and cost.

But is there? Actually, this is a classic example of the government’s argument not considering the market for childcare as a whole.

Yes, requiring child-care workers to achieve higher qualification levels could result in more highly trained formal caregivers, who can help children to develop from an educational perspective. Such a regulation might also provide a “quality assurance” effect for some particularly conscientious parents.

But the effect on the quality of care faced by the whole population of children is ambiguous. By restraining the supply of formal care via regulation, the price of formal care will rise. If the price of formal childcare rises, then some parents will decide to substitute to more informal forms of care or even have to stay home to care for their own children. According to the government’s definitions of “quality” (which may be quite different from parents’ own perception) there will be substitution into lower quality settings as a result of childcare becoming more expensive.

Previous academic work suggests the price effects of these types of regulations are large. Diana Thomas and Devon Gorry estimated that even the more modest requirement for lead teachers to have a high school diploma increases childcare prices by between 25 and 46 percent. Hotz and Xiao likewise find that increasing the average required years of education of center directors by one year reduces the number of child care centers in the average market by between 3.2% and 3.8%. This effect manifests itself overwhelmingly in low income areas, with quality improvements (proxied here by accreditation for the center) occurring in high-income areas.

In other words, the real trade off is not quality vs. cost, but better quality for those rich enough to still be able to use formal care vs. less accessibility to care and higher prices for the poor. And that means lower quality and fewer options for the least well off – widening, rather than narrowing, supposed educational inequalities. Given average annual full time infant care in DC already costs $23,000 plus per year, one would think the government would be sensitive to these concerns about affordability.

Could Inefficiency Balance Out Overregulation?

The top left-hand story on the front page of the Metro section of today’s Washington Post:

Lawyers for the District argued Wednesday for the dismissal of a lawsuit that challenges city regulations requiring some child-care workers to obtain associate degrees or risk losing their jobs….

The requirements … stipulate that child-care center directors must earn bachelor’s degrees and assistant teachers and home-care providers must earn Child Development Associate (CDA) certificates.

Meanwhile, just across the page, in the top right-hand space:

About 1,000 teachers in D.C. Public Schools — a quarter of the educator workforce — lack certification the city requires to lead a classroom, according to District education leaders.

So how about this compromise: the child-care licensing requirement will go into effect, but it will be enforced by the crack management team at DC Public Schools?

Will Regulations Create Big Marijuana?

I wrote last month that new regulations and taxes in California’s legalized marijuana regime are likely to result in a situation in which

a few people are going to get rich in the California marijuana industry, and fewer small growers are going to earn a modest but comfortable income. Just one of the many ways that regulation contributes to inequality.

Now the East Bay Express in Oakland offers a further look at the problem:

East Bay ExpressAsk the people who grow, manufacture, and sell cannabis about the end of prohibition and you’ll hear two stories. One is that legalization is ushering a multibillion-dollar industry into the light. Opportunities are boundless and green-friendly cities like Oakland are going to benefit enormously. There will be thousands of new jobs, millions in new tax revenue, and a drop in crime and incarceration.

But increasingly you’ll hear another story. The state of California and the city of Oakland blew it. The new state and city cannabis regulations are too complicated, permits are too difficult and time consuming to obtain, taxes are too high, and commercial real estate is scarce and expensive. As a result, many longtime cannabis entrepreneurs are either giving up or they’re burrowing back into the underground economy, out of the taxman’s reach, and unfortunately, further away from the social benefits legal pot was supposed to deliver….

Some longtime farmers, daunted by the regulated market’s heavy expenses, taxes, and low-profit predictions, have shrugged and gone back to the black market where they can continue to grow as they always have: illegally but free of hassle from the state’s new pot bureaucrats armed with pocket protectors and clipboards.

Not all the complaints in the two-part investigation are about taxes and overregulation. Some, especially in part 1, are about “loopholes” in the regulations that allow large corporations to get into the marijuana business and about “dramatic changes to Humboldt County’s cannabis culture, which had an almost pagan worship of a plant that created an alternative lifestyle in the misty hills north of the ‘Redwood Curtain.’”

WSJ on RegulationBut there’s plenty of evidence that regulations are more burdensome on newer and smaller companies than on large, established companies. Indeed, regulatory processes are oftencaptured” by the affected interest groups. The Wall Street Journal confirmed this just yesterday, reporting that “some of the restrictions [in Europe’s GDPR online privacy regulations] are having an unintended consequence: reinforcing the duopoly of Facebook Inc. and Alphabet Inc.’s Google.”

Small Marijuana Growers Squeezed Out by Legalization and Regulation

It’s often been noted that regulations can impose larger relative costs on small businesses and can serve to protect incumbent firms from new competitors. Goldman Sachs CEO Lloyd Blankfein noted that new regulations created a “moat” around his firm:

That all industries are being disrupted to some extent by new entrants coming in from technology. We, again, being, you know, technology-oriented ourselves, try to disrupt ourselves and try to figure out what’s the new thing, and come up with new platforms, new forms of distribution, new products. But in some ways, and there are some parts of our business, where it’s very hard for outside entrants to come in, disrupt our business, simply because we’re so regulated. You’ll hear people in our industry talk about the regulation. And they talk about it, you know, with a sigh: Look at the burdens of regulation. But in some cases, the burdensome regulation acts as a bit of a moat around our business.

The Washington Post reports on a new example: the legalized marijuana market in California. Libertarians have long urged the legalization of marijuana and other drugs. Certainly I expect better results from a legal regime where people are not arrested for buying, selling, or using marijuana. But governments can’t just repeal laws and stop arresting people; instead, they prefer to set up a regime of taxes and regulation. And that’s having an effect on the small marijuana growers in the state’s “Emerald Triangle.” As Scott Wilson reports in the Post:

Humboldt County, traditionally shorthand for outlaw culture and the great dope it produces, is facing a harsh reckoning. Every trait that made this strip along California’s wild northwest coast the best place in the world to grow pot is now working against its future as a producer in the state’s $7 billion-a-year marijuana market.

A massive industry never before regulated is being tamed by laws and taxation, characteristically extensive in this state. Nowhere is this process upending a culture and economy more than here in Humboldt, where tens of thousands of people who have been breaking the law for years are being asked to hire accountants, tax lawyers and declare themselves to a government they have famously distrusted. 

Wilson estimates that “Fewer than 1 in 10 of the county’s estimated 12,500 marijuana farmers are likely to make it in the legal trade….Less than 1 percent of the estimated 69,000 growers statewide have received a permit to farm marijuana since the beginning of the year.”

Why Does AT&T Want Net Neutrality Regulation?

Regulation is often portrayed as the use of government authority to alter market outcomes away from the interests of firms and toward those of consumers and employees.  In turn, the “story” associated with deregulation is the opposite: Corporations and the powerful use their influence to eliminate public sector controls on their conduct at the expense of consumers and employees.

But if the usual narrative is true how do we explain a full-page ad that AT&T recently published in multiple newspapers, including the Washington Post and the New York Times, calling on Congress to pass new legislation to guarantee internet neutrality?  The short answer is that existing companies often favor regulation that reduces competition in ways not well understood by consumers or legislators.   

AT&T, one of the nation’s largest ISPs and a company that recently dedicated significant resources to support the FCC’s recent repeal of Title II net neutrality regulations, seems like an unlikely proponent of net neutrality legislation. But its position on the policy highlights why companies sometimes support regulations that would appear to harm them.

AT&T’s opposition to Title II net neutrality regulations is not based on a general hostility towards all regulations, but instead stems from the specific types of rules that Title II regulations would impose. Title II of the Federal Communications act of 1934 was originally intended to regulate telephone companies, and gave the government the ability to review and accept or reject telephone rates. During the fight for net neutrality regulation over the last ten years, the FCC sought to regulate the internet under other parts of the Communications Act, but courts continually said no, forcing the Commission to regulate under Title II. Because Title II comes with the possibility of price controls like those imposed on telephone companies, AT&T opposed that regulatory system and called for Congressional action to ensure net neutrality without the possibility of price controls.

As I’ve previously argued, net neutrality regulations are an attempt to settle fights between ISPs and content providers, like Netflix or Hulu. Both sides “need each other to satisfy consumers, but they fight each other to capture the larger share of consumers’ payments.” Title II price controls would have disadvantaged ISPs and benefitted content providers. Now that the debate over whether ISPs should be regulated under Title II is, at least temporarily, seemingly in its favor, why is AT&T continuing to call for new legislation?

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