A General Critique of Potential “Behavioral Economics” Rationales for Regulating Big Tech: and Specific Possibilities

While most regulatory scrutiny of the big tech sector is couched in terms of competition or lack thereof, behavioral economics may provide rationales outside that framework.  Behavioral economics is generally problematic as a policy guide, as it undercuts the basis for benefit cost analysis and invites policy makers to substitute their preferences for those of the public they presumably serve.  However, it suggests some potential rationales based on thinking being costly and weakness of will.  Beyond behavioral economics, the psychology of preference formation could motivate policy — consider public education — but its application to big tech is amorphous.  The potentially most severe concern, that a tiny but violent minority enabled by big tech to organize destructive actions, likely lies outside both behavioral economics and the ability of any regulator or legislature to prevent.

By Timothy Brennan^[1]

Across the globe, many see the “big tech” sector of the economy as a bad actor. Much of that criticism is expressed in terms of insufficient competition in platform markets allegedly dominated by a handful of familiar names — Amazon, Google, Facebook, and Apple. In some of these sectors, one-sided network externalities — people want to use a common service — can lead to most users signing up for the same service, Facebook being a leading example. In others, multi-sided externalities, where for example buyers want to be where most sel