From Territorial to Functional Sovereignty: The Case of Amazon

Frank Pasquale

Economists tend to characterize the scope of regulation as a simple matter of expanding or contracting state power. But a political economy perspective emphasizes that social relations abhor a power vacuum. When state authority contracts, private parties fill the gap. That power can feel just as oppressive, and have effects just as pervasive, as garden variety administrative agency enforcement of civil law. As Robert Lee Hale stated, “There is government whenever one person or group can tell others what they must do and when those others have to obey or suffer a penalty.”

We are familiar with that power in employer-employee relationships, or when a massive firm extracts concessions from suppliers. But what about when a firm presumes to exercise juridical power, not as a party to a conflict, but the authority deciding it? I worry that such scenarios will become all the more common as massive digital platforms exercise more power over our commercial lives.

A few weeks ago, the Friedrich Ebert Stiftung (a think tank affiliated with the Social Democratic Party in Germany) invited me to speak at their Conference on Digital Capitalism. As European authorities develop long-term plans to address the rise of powerful platforms, they want to know: What is new, or particularly challenging, in digital capitalism?

My answer focused on the identity and aspirations of major digital firms. They are no longer market participants. Rather, in their fields, they are market makers, able to exert regulatory control over the terms on which others can sell goods and services. Moreover, they aspire to displace more government roles over time, replacing the logic of territorial sovereignty with functional sovereignty. In functional arenas from room-letting to transportation to commerce, persons will be increasingly subject to corporate, rather than democratic, control. Continue reading

The Epicycles of Health Care Market Design: Time for a Paradigm Shift in Health Policy

Frank Pasquale – 

Back in June, I attended the annual conference of health law professors held by the ASLME. This conference is a real intellectual feast for anyone interested in political economy. National experts describe the latest developments in the Affordable Care Act’s exchange marketplaces. Antitrust scholars consider the proper balance between delivery system integration and competition in accountable care organizations. The role of the state in structuring economic activity is critical to nearly every panel on insurance markets, licensure, and access to care.

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But there was very little buzz about what has become one of the hottest topics in progressive health policy in 2017: state efforts to develop single-payer health care systems or public options (like a Medicaid buy-in). Politicians and activists appear to be leading this charge, pushing proposals in California, Nevada, and New York. They have generated a lot of enthusiasm, and they will get more attention if the GOP manages to repeal the individual mandate and further damage insurance markets. Even self-described neoliberal Matt Yglesias has called on experts to further develop ideas here. And yet the academy seems slow off the mark. What explains this tardiness?

I think part of the problem is the sheer complexity—and thus intellectual challenge—of market design in a neoliberal era. Sarah Kliff recently eulogized the great health care economist Uwe Reinhardt by memorializing the “joy he always took in trying to understand the maddening, baffling inner-workings of the American health care system.” “Joy” seems like an odd emotion to express, upon encountering the complexities of ERISA, MedPAC, MACRA, MIPS, and the rest of the health care finance alphabet soup. But once you teach in these areas, the incrementalism of the well-informed is hard to shake. Continue reading

Entrepreneurship Can Be Unproductive or Destructive

Frank Pasquale –

rifles-to-be-burned-in-kenya-2016

Entrepreneurship in the international arms trade leaves everyone (except the entrepreneur) worse off.

In contemporary American law, few figures are as lionized as the “entrepreneur.” Lobbyists evoke entrepreneurship as a cornucopia of better goods and services at lower prices. Even ostensibly academic business law courses tend to offer a narrative of wise incremental development of legal doctrine toward enabling disruption, easy entry into markets, and ultra-flexible corporate forms. The lawyer is ideally, in this view, a fixer capable of profit-maximizing distributions of responsibility and liability. Some even dream of automating this role via smart contracts, to ensure even more rapid entrepreneurial activity.

Professional Responsibility courses also tend to adopt a similarly reverential attitude toward the business client, instilling an ethic of “zealous advocacy” in generations of students. Few question whether the near-evacuation of ethical self-reflection from advocacy roles systematically advantages dubious (or worse) business propositions.

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