Tech Platforms and the Knowledge Problem

Artificial Intelligence and Competition Policy and Antitrust

Article Snapshot


Frank Pasquale


American Affairs, Vol. II, No. 2, pp. 3-16, 2018


Critics question the size and scope of massive firms like Amazon and Google. “Jeffersonians” and “Hamiltonians” offer complementary policy strategies to counter the failures of digital capitalism.

Policy Relevance

Blocking mergers would limit the power of large firms. Treating platforms like public utilities could support new competition.

Main Points

  • Friedrich von Hayek described the "knowledge problem" as a barrier to central planning of the economy; knowledge about individual preferences, values, and willingness to pay is scattered throughout the economy, and cannot be grasped by central decision-makers.
  • Artificial intelligence and mass surveillance systems give massive intermediary firms like insurers and social networks knowledge of intimate details about consumers and suppliers, perhaps making central planning feasible.
  • Some critics question the size and scope of firms like Amazon, Google, and Facebook.
    • Populist Jeffersonian “trust-busters” seek strong antitrust enforcement to break up large firms.
    • By contrast, "Hamiltonians" propose that large firms be regulated like public utilities.
  • Antitrust authorities are cautious about breaking up large firms.
    • DOJ and the FTC focus on prices rather than product quality and the fate of competitors.
    • Because Google’s weather service is offered for free, authorities decline to intervene.
  • A Jeffersonian approach should be the first line of defense against overconcentration.
    • Authorities find it hard to reverse past acquisitions by dominant firms.
    • Antitrust authorities should have blocked Facebook’s acquisitions of WhatsApp and Instagram.
    • Authorities should allow mergers that help to solve real-world problems, but block the accumulation of bargaining power.
  • A Hamiltonian approach would support the Federal Trade Commission (FTC), the Federal Communications Commission, and other agencies in monitoring platforms’ behavior.
    • The FTC could require Google to display competitors’ offerings in its search results.
    • Google could be required to carry certain content on YouTube, as cable networks were required to include local news.
    • Regulators could limit the share of transactions that platforms can claim.

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