History textbooks are full of populist complaints about business: the evils of Standard Oil, the horrors of New York tenements, the human body parts in Chicago meatpacking plants. To be honest, I haven’t taken these complaints seriously since high school. In the absence of abundant evidence to the contrary, I say the backstory behind these populist complaints is just neurotic activists searching for dark linings in the silver clouds of business progress. When business offers new energy, new housing, new food, the wise are grateful to see the world improve, not outraged to see a world that falls short of perfection.
Still, I periodically wonder if my nonchalance is unjustified. Populists rub me the wrong way, but how do I know they didn’t have a point? After all, I have near-zero first-hand knowledge of what life was like in the heyday of Standard Oil, New York tenements, or Chicago meat-packing. What would I have thought if I was there?
If we’re talking about the year 1900, I’m afraid we’ll never really know. Yet what I’ve seen with my own eyes during the last fifteen years has done much to cement my out-of-sample confidence.
During this time, I’ve seen the tech industry dramatically improve human life all over the world.
Amazon is simply the best store that ever existed, by far, with incredible selection and unearthly convenience. The price: cheap.
Facebook, Twitter, and other social media let us socialize with our friends, comfortably meet new people, and explore even the most obscure interests. The price: free.
Uber and Lyft provide high-quality, convenient transportation. The price: really cheap.
Skype is a sci-fi quality video phone. The price: free.
Youtube gives us endless entertainment. The price: free.
Google gives us the totality of human knowledge! The price: free.
That’s what I’ve seen. What I’ve heard, however, is totally different. The populists of our Golden Age are loud and furious. They’re crying about “monopolies” that deliver firehoses worth of free stuff. They’re bemoaning the “death of competition” in industries (like taxicabs) that governments forcibly monopolized for as long as any living person can remember. They’re insisting that “only the 1% benefit” in an age when half of the high-profile new businesses literally give their services away for free. And they’re lashing out at businesses for “taking our data” – even though five years ago hardly anyone realized that they had data.
My point: If your overall reaction to business progress over the last fifteen years is even mildly negative, no sensible person will try to please you, because you are impossible to please. Yet our new anti-tech populists have managed to make themselves a center of pseudo-intellectual attention.
Angry lamentation about the effects of new tech on privacy has flabbergasted me the most. For practical purposes, we have more privacy than ever before in human history. You can now buy embarrassing products in secret. You can read or view virtually anything you like in secret. You can interact with over a billion people in secret.
Then what privacy have we lost? The privacy to not be part of a Big Data Set. The privacy to not have firms try to sell us stuff based on our previous purchases. In short, we have lost the kinds of privacy that no prudent person loses sleep over.
The prudent will however be annoyed that – thanks to populist pressure – we now have to click “I agree” fifty times a day to access our favorite websites. Implicit consent was working admirably, but now we all have to suffer to please people who are impossible to please. Yes, tech firms made a business decision to ramp up privacy protections; but this business decision is tainted by a barrage of thinly-veiled threats of government persecution. In a functional world, we would have a few start-ups catering to privacy fanatics – and the rest of us could enjoy the bounty of the tech industry without this absurd digital red tape.
How, though, do I logically leap from the unreliability of populists on tech to the unreliability of populists on business in general? After all, anyone can make a mistake. My reply: Being negative about the tech industry isn’t just a small, isolated mistake. Populists are applying massive intellectual energy to major issues and ending up painfully wrong. This is strong evidence that their whole way of thinking is deeply corrupt. They don’t deserve our trust or attention – not today, not yesterday, and not tomorrow.
READER COMMENTS
Don Boudreaux
Jul 4 2019 at 6:55am
Bryan: Brilliant and eloquent and important. Well done!
Mark
Jul 4 2019 at 8:30am
Great analysis. I think there’s some historical debate about what happened to living standards in the first decades of the industrial revolution so perhaps Dickens and Marx get a pass, but it’s clear that living standards had drastically improved for average people in Western countries by the end of the 1800s.
On privacy, another big reason we have more privacy today—I’d argue the biggest reason—is that we’ve become more socially tolerant, which is probably due in part to the spread of the Internet. I remember decades ago when many things that are commonly accepted today like being gay or watching porn would have been embarrassing enough to blackmail someone with.
Roger
Jul 9 2019 at 3:56am
Wages for industrial workers went up right away. But stature (height) fell. So it looks like the Industrial Revolution was bad for workers for several decades. BUT, the population spiked. Thus, it could be (as I believe) that people were rationally choosing to have more children and feed them less. That looks like an improved opportunity set to me. And if you look at life expectancy in England from 1541 to 1871, a clear upward trend kicks in about 1731. It always goes up and down, but that trend is up from 1731 or so. All in all, I think the Industrial Revolution was clearly a benefit to workers right from the start.
Joseph
Jul 4 2019 at 9:20am
If, by “free”, you mean that we don’t have to pay money for the service or product, then thats a banal statement that misses the point people who have concerns are making. If by “free”, you mean has “no costs”, then as a software engineer with some passing knowledge of this industry, let me assure you that you are gravely mistaken.
For example, what if a company, for “free”, let’s you use their autonomous vehicle. In their haste to get to market, they write really bad bug ridden code, which they don’t test. They don’t share this fact with you and would lie if asked. Due to said buggy code, the vehicle crashes into another killing you and the family in the other vehicle.
This analysis fails ideological Turing test badly. It also indicates a lack of understanding about how the technology industry works and completely ignores how people are applying moral intuitions, their value systems, and how people define negative externalities and costs.
Danny
Jul 4 2019 at 10:19am
Just to be clear: are you suggesting that the correct benchmark for when it is correct to praise goods and services is when they have “no costs” in the sense of having no drawbacks?
Mark Z
Jul 4 2019 at 10:42am
Can you explain how any of Bryan’s examples are analogous to your hypothetical self driving car example? Because it seems to me that people are up in arms against the self driving car that made driving vastly safer because it failed to eliminate car accidents altogether. And the example of self driving cars dovetails nicely with this analysis: many people are paranoid about a technology that is certain to improve safety because it won’t be perfectly safe.
Diane Merriam
Jul 4 2019 at 12:44pm
So if it cuts the number of people that die in car crashes it’s bad because it hasn’t eliminated them altogether? Anything less than absolute perfection is dangerous?
Crossing a street is dangerous. Going swimming is dangerous. Taking a shower is dangerous. LIFE is dangerous.
None of us is getting out of it alive and some sooner than others.
AMT
Jul 4 2019 at 12:44pm
Free? You mean now I see ads for things I might want to purchase, rather than tampons and Taylor Swift concert tickets? This is a massive improvement, even better than free!
The only caveat is if at some point in the future, businesses are able to price discriminate very well based on their copious information and claim the vast majority of the consumer surplus, that might be a concern for future inequality, though also a probable efficiency improvement. Business owners probably become richer, but perhaps some people receive products for cheaper that they otherwise would not have purchased, and maybe the poor even benefit substantially. I recall hearing a long time ago that Amazon may have priced things differently to people based on an estimate of their income based on past searches, and even if that was false in the past, I could see it being true at some point in the (perhaps distant) future. I agree with almost everything else you have said, but am not sure how much of a potential issue this is.
I would say that antitrust is not always bad, but here the issue is what to do when a market with massive network externalities creates a natural monopoly (i.e. Facebook), which also could very well be transitory. In most cases I think you gain far more from the network externalities than you lose from the monopolization, as you have pointed out that these tech services are mostly free or very cheap.
Larry Ruane
Jul 8 2019 at 9:59am
Seems like as long as competition exists, firms would not be able to engage in this kind of price discrimination. If seller S1 priced an item higher than is needed to produce the item (taking into account profit, risk, etc.) to buyer B, then seller S2 would find it profitable to undercut S1’s price, regardless of how much B is willing and able to pay. B would buy from S2.
AMT
Jul 11 2019 at 5:41pm
That is only true if you assume we live in a world with perfect competition and completely homogenous products. Obviously, we live in a world far closer to monopolistic competition. Practically all consumer products are branded, differentiated, imperfect substitutes (to many consumers) and they are not priced the same. That immediately disproves your core assumption. (E.g. Why does anyone buy Tylenol instead of generic acetaminophen? I would never, but apparently many people do!) Tell me any consumer product where all sellers offer it the same price. This isn’t like oil, or wheat, or some other generic good named in an intro econ textbook (and even those can have different quality levels!).
Implicit in my argument was the realization that a consumer will have different demand curves for various quality levels of a good, and this “copious information” I referred to integrated that knowledge as well. The “high quality” product brand can now estimate far more accurately just how much more this individual consumer will pay for its product vs the “low quality” brand, and increase its price accordingly (or decrease it to gain the sale). In any case, no matter what quality level the consumer ends up buying, the fully informed seller will extract all of the consumer surplus (the purchaser pays the maximum they were willing to).
In theory, various competing sellers could all know that information, and so the lower quality seller would also know how low they had to price their product for the purchaser to be indifferent to purchasing it vs the higher quality product, and reduce their price just below that. That might actually make competition improve, and take us much closer to actual perfect competition!
But, this hinges on how the consumer’s information is distributed. If just one or two firms have access, they may profit immensely, while widespread access may be a massive benefit for consumers. So, it could become an important antitrust issue to make sure no restrictive contracts are allowed (e.g. “you promise to sell this consumer’s information only to us, not to our competitors”). It is possible that such a contract would be agreed to if the information holder realizes that the creation of a monopoly maximizes profits within that industry, and therefore, may also maximize the profits it can extract from selling that information in that industry.
blink
Jul 4 2019 at 1:11pm
Touche! Your analogy hits the mark perfectly to make the point. My question now is: Why do populists persist? Is there, say, a Public Choice explanation for this? Who actually benefits from deriding big firms like Amazon on Google? Even more perplexingly, who benefits from putting a monopoly spin on history?
John J Donnelly
Jul 4 2019 at 1:30pm
First thought is that you are using populism in a way I’m not familiar with.
Populism: “… an Ideology which presents “the people” as a morally good force and contrasts them against “the elite”, who are portrayed as corrupt and self-serving.” -Wikipedia
Populism’s problem would be with elite rent seekers (a la Trump) and corruption (a la Trump). I believe its more about the ordinary man against the elite than vilifying business. But let’s face it many elites and non-elites continually seek to improve their fortunes through government action.
Wil W
Jul 4 2019 at 1:33pm
While the specific complaints in High School textbooks are perhaps questionable, there is a large set of differences between the examples of today vs the examples of yesterday:
Today: Most of the value does not detract from the public good. Instead it extracts value from private goods (privacy, attention, extras) (Although some may say social media is different, as someone who is not on Facebook I find it difficult to say)
Yesterday: The value could or would detract from public good. Public health being at the top of the list for meatpacking and apartments. Environmental health for companies that left behind brownfields
Today: Creating a new company that provides a service at a national level, i.e. on the Internet, is easy and easy to scale (disregarding the troubles with software patents). Creation of a company and product is easy.
Yesterday: Creating a company that competed nationally is hard. The physical constraints gives advantage to the large that is less common today. Today an Internet “Standard Oil” would have many more challengers available or at least possible.
My point is not that today or yesterday is good or bad, but that it is dangerous to use the examples of today to understand yesterday especially with markets due to the ability of the Internet to create a larger marketplace.
Alan Goldhammer
Jul 4 2019 at 2:02pm
I wonder if Professor Caplan believes that the Triangle Shirtwaist Factory fire was ‘fake news.’ I think it’s fine to celebrate progress (though to think any of the things cited are “free” is incorrect, somebody is paying for them at one point or another). However, to begin this with a disjointed opening number of sentences on the “hollowness of populism” in the light of what we know from history is just being ‘too smart by half.’
Mark Z
Jul 5 2019 at 4:45am
I think the real question is: was the triangle shirtwaist fire representative of the relative conditions of urban workers compared to precapitalist rural workers? What’s in dispute isn’t whether the event happened, but what it’s supposed to reflect about the world in general. For a counterexample: no one disputes that the 9/11 terrorist attacks happened. But is what happened on that particular day really reflective of the general threat posed by jihadists to American citizens? Should American security policy be based on that particular event? Should labor policy be based on the triangle shirtwaist fire?
I suspect that for almost any conceivable narrative, there are a decent number of events that could be used to buttress that narrative. It is therefore important, in deciding what narratives are more accurate, to be wary of viewing a particular example – or handful of examples – of bad things happening as reflective of reality in general. After all, there are plenty of horrific stories of plane crashes over the past few decades that have been coincident with a general increase in the overall safety of air travel.
Robert EV
Jul 4 2019 at 2:02pm
Academics have the “ivory tower”, well-to-do people (ie. Mr. Caplan) have their own green tower. Seriously, you’re sounding like David Friedman on SSC. Technological advancement (save warfare) has almost always been universally positive for the historical middle classes.
It’s not technological progress most of the anti-business are against, it’s the corporate governance extending itself into what was our prerogatives (such as the inalienable right to a jury trial under common law over a matter of >$20 – whoops, not anymore thanks to mandatory arbitration agreements. Where, oh where, was the constitutional amendment that overturned the 7th amendment!?).
The quality: cheaper. >:D
$30+/month (yeah, you *can* get it cheaper) + the price of a smartphone, just for access.
Business progress includes the permatemp culture and credentialism, which locks productive people out of advancement opportunities. I know you agree at least partly on this.
Robert EV
Jul 4 2019 at 2:04pm
“were our prerogatives”
RPLong
Jul 8 2019 at 7:48am
I can’t imagine that Bryan Caplan would be displeased by the prospect of “sounding like David Friedman.”
But your referring to him as “David Friedman on SSC” would suggest that you may not be familiar with his work. I strongly encourage you to familiarize yourself with Friedman’s formal writing. It is excellent.
Jon Murphy
Jul 4 2019 at 2:26pm
Some of the comments about the bad things of modernity supposedly undermining Dr. Caplans point (see Joseph and Alan Goldhammer’s comments above) remind me of a discussion I had with a family member regarding medical care.
This family member asserted that of course things are worse now. Humans are dying of cancer, Alzheimers, and the like more now than in the past. So, all this GMO and other “unnatural” food products, coupled with technology (and all promoted by faceless capitalism) must be bad.
I pointed out that humans will die. The fact that cancer and Alzheimers, diseases that typically develop later in life, are more prevalent now are due to the fact that people are living longer now to get those illnesses. No longer are our lives cut short by infant deaths, infections, cholera, TB, etc etc etc. No longer are people starving to death. And since we still owe that Pale Rider a debt, he collects in other ways.
The same reasoning can be applied here, as Dr. Caplan does. Yes, there will be issues and things like the Triangle Fire. Automated cars may crash. Hackers will steal data. All that will, of course, happen. That does not imply that modernity is bad, or these changes are bad or a step backward. Airplanes crash, but are there not benefits from being able to fly from Boston to Stockholm in a single day? Data gets stolen, but are there not benefits of not having to search for products for a need, but rather have the products search for you?
Populism does tend to see only costs (or overweigh the costs) and subsequently obscure benefits. Now, granted, some of this is because costs and benefits are subjective, and thus a populist may weigh the horrific death in a garment factory fire more highly than providing cheap, clean, and sturdy clothing to billions.
Alan Goldhammer
Jul 4 2019 at 3:09pm
Jon Murphy writes, “Populism does tend to see only costs (or overweigh the costs) and subsequently obscure benefits. Now, granted, some of this is because costs and benefits are subjective, and thus a populist may weigh the horrific death in a garment factory fire more highly than providing cheap, clean, and sturdy clothing to billions.”
Do you really mean that only populists are concerned about work conditions (whether in 1900 or today)? Is the whole reason for OSHA a result of the private sector failing in this regard? At one point in our nation’s history trade unions were focused on workplace conditions (this was one of the key things that John Lewis’s United Mine Workers fought for). Today we don’t have much in the way of industrial trade unions to carry out this mission. Let’s not even go into Boeing’s culpability in the two plane crashes as they hurried a model that was not ready to fly, fearing competition from Airbus. Tort law remedies are being eliminated left and right (have you read your latest bank disclosures?).
I think you misread my major point against Professor Caplan’s throw away comment. I have no issue at all with what he writes about technological advancement but do object to the opening of the post. To conflate damage or death to individuals with modernity is a false equivalence that I cannot accept.
Jon Murphy
Jul 4 2019 at 3:32pm
Alan-
I think you misunderstand me. I am not saying that populists are the only ones who care about working conditions (in fact, I contend precisely the opposite; they don’t care about working conditions. If they did, we wouldn’t have had all the muckracking and yellow journalism, such as Ira Tarbell and The Jungle, at the turn of the century. Working conditions are just a means to an end). Rather, I am saying populists like to point out some new problem (real or imagined) that arose from a change and use that to argue the change was bad.
Mark Z
Jul 5 2019 at 5:01am
I think you’re mistaken in implying that Caplan is conflating death or damage with modernity; rather, he’s arguing that the criticism of modern business is rooted in the mistaken belief that there is an alternative to be found (especially in the past) that yields less death and damage, and I think your airline example only proves his point. There’s a strong argument that almost any airline regulation that might have prevented the Boeing plane with the software issue from ever being put to use would have driven up the cost of air travel enough to result in a a net increase in death and damage from the substitution of road travel in its stead. Even flying in one of Boeing’s software-defective planes is almost certainly much safer per mile of travel than driving.
I think the point was: whenever people find themselves objecting to a particular practice by some business or industry, and demanding state action to punish said business or industry, they are usually upset over that business/industry’s performance relative to some hypothetical absolute reference point, not to the real alternative. People calling for increased regulation of air travel in response to the Boeing issue are a case in point. Air travel us actually much much safer than the alternative it has displaced, and trying to regulate it more to make it even safer (and more costly) will actually make people worse off by pushing them back into the more dangerous alternative. Labor regulations can work the same way: if a workplace regulation increases the cost of employment and reduces demand for labor, the end result may be fewer people being hired in factories, and more people stuck on farms. Most of the indignation expressed today on behalf of 19th century workers is quite presentist, of course, and seems to be entirely oblivious to the often worse conditions of the conditions of the workers who suffered the main alternative, working on a 19th century farm, which was quite possibly even worse than a 19th century factory.
Don larson
Jul 4 2019 at 5:04pm
Thank you, Professor Caplan, for talking me down off my high horse about Google, Facebook et al, and thank you, commenters (or most all of you), for your refinements on the points made in the original post.
For what it might be worth as an historical parallel, this post (and the comments) brought to mind an historian’s observation that, back in the days of the Jim Crow south, Sears Roebuck’s mail order model undermined the control that local shopkeepers (and, by extension, others in the white community) exercised over Blacks.
Jameson Donaghy
Jul 5 2019 at 8:18am
I don’t think the argument of the modern techno-populist has ever been about monopolies – outside of utility services such as gas, electricity, cable/internet; nor have they been oblivious to the consumption of data that these companies use to make money off of said free services.
I think the grievance lies more in the handling of that data and the eventuality that said data will be individualized and sold to services that are not free, but instead necessary [healthcare in the U.S.], or where law enforcement can work around warrants for a subscription fee. I don’t want to be charged more for my health insurance because of my grocery order. I don’t want someone in Texas to be arrested because they bought 7 dildos online for a bachelorette party. In a justice system where a prosecutor could get a grand jury can indict a ham sandwich, are we sure we want our search histories available to whomever is willing to pay for it? How long until these free services literally start becoming responsible for taking away our actual freedom? In a country that loves to turn a blind eye on its prison system, is this the cost we want to pay for convenience? Do we want some company to alter the way we think or live our lives based on a profit motive?
I don’t want to stifle the progression of technology by any means. America is a country that loves to hold on to obsolescent jobs. I do think that fast food employees deserve $15. I also think that employers can replace said employee with automation, if ideal. Personally, I prefer a kiosk/tablet/app to a person if it comes to ordering food at a restaurant. It reduces the miscommunication when ordering. Food is wrong? You don’t have to wonder who to blame – the person taking your order, the person making it, or yourself? If we have self-driving cars, do I really need a taxi driver anymore? Not really. However, there’s a lot more in economic and social drawbacks to that progress such as unemployment.
Technology was supposed to increase our productivity while reducing our workload. Instead we work 10-20 hours more per week while production increases exponentially. We can’t address one issue without addressing all issues, but we tend to focus on one particular piece and ignore the rest. We need to be more comprehensive in the arguments, but it’s much for a single article or a reply in the comments section.
Which is why we need more memes.
That last part is a joke. Or was it?
Enoch Lambert
Jul 7 2019 at 8:56am
Well overstated. Isn’t it economists who preach that there’s no such thing as a free lunch? That there are always costs?
To the contrary, anyone who thinks big tech is an unalloyed good is motivated purely by ideology. Does Caplan really think there can be NO risk whatsoever to companies controlling such large amounts of information about each of us and power to act on it beyond anything comparable that each of us has?
It’s one thing to argue that many overreact and fail to appreciate how much good big tech has brought. It’s another to engage in reactionary utopianism of this sort
Then again, I suppose there is a certain strain of economist who has always been excellent at teaching the populace to ignore specific kinds of externalities. Especially those that might possibly constrain the power, excuse me, “freedom”, of corporations, owners, ceo’s, etc.
Michael Stack
Jul 7 2019 at 9:21am
Brilliant piece. It’s clear nobody really cares about the type of privacy we lose when using tools like Google, since it passes the market test. It’s easy enough to opt out of using those tools, if you want.
Kurt Schuler
Jul 7 2019 at 2:19pm
“For practical purposes, we have more privacy than ever before in human history.”
Baloney. On the Internet these days, everyone knows you’re a dog. If you don’t think the ability to see all your online behavior isn’t a problem, you probably have a sanguine view of China’s “social credit” system, too.
The comments over at Marginal Revolution, where Tyler Cowen linked to this post, are generally more skeptical and more perceptive than those here.
Mark Brophy
Jul 7 2019 at 6:11pm
I was in Santiago, Chile in 2011 during the big earthquake and didn’t tell anyone where I was. Nevertheless, the government found me. How? I have no idea but I doubt anyone can hide from the government. On the contrary, Leigh Montville wrote a book about the life and times of Babe Ruth, a very famous man, and found that there was little info available because most of his life was private.
Thaomas
Jul 8 2019 at 7:47am
All of this is quite true, but however silly the “populist” notions that Kaplan has his sights on, it seems pretty irrelevant to most of the actual issues that are in play. Capitalism is definitely awesome compared to all the alternatives but how does that bear on whether we should collect more taxes from upper income people, reduce the structural Federal deficit, give tax credits for working and child care, enter more or fewer) international agreements to reduce trade restrictions, attract more young well educated immigrants, forgive or turn all or part of college debt into equity, regulate rents, tax net emissions of CO2, reduce restrictions on building housing in large cities, regulate the sale of firearms, allow firms to defer taxes on profits earned abroad, regulate minimum wages, impose use and congestion charges on vehicular traffic and parking on city streets, subsidize the purchase of health insurance, deport undocumented immigrants for no other reason than their being undocumented, etc.? invest in more (what kind?) infrastructure to make unauthorized border crossing more difficult, etc.?
I just do not think that some kind of generalized anti-market sentiment occasionally boils over into specific policy mistakes and that Kaplan trying to gen up more pro-market sentiment would solve many problems or that it is cost effective compared to empirical research on the costs and benefits (and to whom) of specific economic policies.
A Country Farmer
Jul 12 2019 at 10:34pm
I’m not one of these people, but I think most populists are worried about tech “censorship” more than privacy “invasions”. However, even assuming their premise that people deserve to be on those free platforms, the ability of some Joe Blow to broadcast to the world and gain a sizable audience – even if temporarily – is amazing, historically (a point Michael Malice makes).
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