Innovate don't regulate
Delivered on 11 February 2019 by Justin Pyvis. About a 3 min read.
Good morning and welcome to the first Issue of the all-new EconByte weekly newsletter! Well, kind of; it's actually Issue 10/2019. Let me explain:
Rather than producing two different products twice a week - the Monday morning in-depth article and Friday's Assorted bits - I decided to amalgamate the two into one update, set to arrive in your mailbox every Tuesday or Wednesday morning.
Why the change? Believe it or not, my day job takes up a fair bit of my time. Writing this newsletter along with various hobbies, a couple of huskies and a wife doesn't exactly leave that much time to compile the EconByte website and newsletter.
So from now on, every Issue of EconByte will have a similar format to this update, with something I've written at the top, followed by a collection of interesting articles I've read, topped off with an image (usually a chart, but not always). If something looks out of place, please let me know.
Anyway, I hope the new format is to your liking (or at least, the silent majority's); enjoy the rest of this week's Issue!
The "bits" are an assortment of articles that caught my eye this week, categorised by subject, with some brief comments from yours truly.
I wrote back in Issue 1/2019 that regulating Facebook could potentially 'utilitise' it, entrenching it as the social media gold standard. I stand by that and still believe that "regulating Facebook would be a win for Facebook, regulators, politicians, lawyers, accountants, content screeners, the NSA, etc., but would represent a large unseen loss for consumers who will be stuck with Facebook and its data abuse for far longer than they should".
Twitter is in trouble, but not in the way that say Facebook would be if its active user growth were declining. Twitter has a loyal, established userbase but I just can't see it ever going as "global" as the other social networks, given at the end of the day all it does is publish text messages on the internet. When it had the opportunity to do so, it was too slow to react and so missed the Instagram (images) and YouTube (video) boat. Competitors such as Reddit are nipping at its heels.
Facebook won't be able to grow its user base forever. It's an advertising company and due to the Great Firewall, China is still an emerging frontier for such businesses. 10% of total revenue is huge, and it will continue to grow... until the government bans them to help out a local competitor, that is.
What an incredibly linear, static view to hold as the head of a competition bureau. How does Sims know that 2006 had the optimal number of 'news producers', given the arrival of news aggregators such as Facebook? If something is "commercially focused and highly effective", what does the competition regulator care? Sims' solution is as you would expect: a new government body to oversee the advertising market and to scrutinise Facebook and Google's "secretive algorithms" (no doubt answerable to the ACCC). I've written extensively about this issue.
Amazon will still open its campus in New York, because it makes sense even at zero subsidies. At this stage, the only way Amazon doesn't open its campus is if New York-based politicians create obstacles so costly that, to borrow from Game of Thrones, they would be happy to see New York to burn so long as they can rule the ashes.
The "Bitcoin bonanza" of 2017-18 was exactly as I said it was at the time: a bubble, destined to end the same way as all other asset price bubbles. But that doesn't mean it should be cast aside forever. The market has matured, prices have stabilised and real world use-cases are emerging everywhere. Ignore it at your peril.
Image of the week
This is a bit of a controversial image of the week, not because of what was tweeted but because it has since been deleted. Apparently, many of Matt Yglesias' 419,000+ rabid Twitter followers didn't appreciate him questioning the merits of a massive government spending program, so he caved.
It's important to remember that just because there are visible benefits to an option, it doesn't mean it's worth doing; alternatives, including the do-nothing option, may produce greater benefits relative to the costs.