Net Neutrality: The FCC Chair Is Drunk on Ideology

Ajit Pai is drunk on free market economics. There’s no other way to explain his decision as chairman of the Federal Communications Commission’s to tear up the nation’s net neutrality rules for no good reason.

Knowing this won’t change the outcome of yesterday’s FCC vote, which lets Internet providers give special treatment to some websites over others. But it’s still helpful to know why Pai did what he did.

Contrary to the view of some critics, Pai is not corrupt. Yes, he was a lawyer for Verizon, a fierce opponent of net neutrality, but his decision to scrap the rules was not motivated by a desire to win favor with his former bosses in the telecom industry.

Instead, the problem is that Pai is a zealot. Pai’s speeches and tweets, described below, reveal how he’s in thrall to an ideology that places economic principles over people. In this way, he’s a bit like Latin American socialists who cling to theories no matter the real world harm they wreck.

In Pai’s case, though, the source of indoctrination is not Marxism, but the University of Chicago, which is the standard bearer for law and economics. This school of thought, made famous by scholars like Richard Posner and Milton Friedman, holds that law should be responsible for promoting efficient economic outcomes.

In the Chicago school, society is best served if people are allowed to freely contract in the market, which in turn helps to guarantee prosperity and freedom. Conversely, the law and economics movement (yes, it’s a political platform as much as an academic one) takes a decidedly dim view of government and regulation, treating those things as sand in the gears of the market.

Pai studied law at the University of Chicago, and it’s apparent he imbibed heavily from the ideas around him. This is reflected in part by his Twitter feed, which includes messages like this one, which he retweeted last week:

His zealousness for Chicago-style ideals is also apparent in his public speeches, including one he made this spring at the conservative Hudson Institute. In the address, Pai gushed about his hometown Kansas City Royals’ use of money-ball tactics to win the World Series, and also explained his vision to bring economic analysis to every facet of the FCC’s operations.

More conspicuously, Pai has made repeated avowals to take a “weed-wacker” to regulation as the FCC’s chair. The metaphor speaks for itself—regulations (including those enshrining net neutrality) are intrinsically harmful and should be chopped down.

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There’s nothing wrong, of course, with drawing on the ideas of law-and-economics. The school has had an enormous influence on the U.S. Treasury and the judiciary, and its advocates are correct that misguided regulation can choke the economy and diminish the prosperity of everyone.

In Pai’s case, however, he’s embraced the Chicago school not as a source of policy ideas as but an ideology in its own right. Gripped by the fever of a true believer, he evinces a hostility to all regulations—not just the bad ones. What else explains his impulse to gut neutrality in the absence of credible evidence that the rules, imposed in 2015, have stunted investment? And what besides zealotry would lead him to tear up a policy that is widely popular with the American public who, understandably, are wary of increasing the power of companies like Comcast?

This is not even the worst of it. Instead, what makes Pai’s pig-headedness so intolerable is that he appears to overlook an important element of the free market theory he so adores. Namely, as any economist will tell you, free market theory is predicated on the idea the market is subject to competition—something that is plainly not the case in the market for Internet services.

I’d be okay with Pai’s vision of an unregulated Internet provided I could choose among broadband services the same way I can pick where I buy shoes or lollipops. In this scenario, broadband providers would have an incentive not to mistreat their customers—through throttling websites or sudden price hikes—because those customers would choose a competitor in the market.

But broadband doesn’t work that way. It’s not like shoes or lollipops, which are sold by hundreds of vendors in any given city. Instead, there is often a single monopoly provider that is much akin to the water company or the electric company. In the same way governments don’t allow the electric company to dictate what appliances we buy, Internet companies should not be allowed to favor one website over another.

But Pai’s fixation with his “weed-whackers” means he’s incapable of distinguishing between good regulations and bad ones, or recognizing that the free market that so informs his thinking doesn’t even exist when it comes to Internet services.

As I said, Pai is drunk on market ideology, and the rest of the country is about to suffer the consequences of his bender.

Blockchain Consortium Hyperledger Loses Members, Funding

More than 15 members of blockchain consortium Hyperledger have either cut their financial support for the project or quit the group over the past few months, according to documents seen by Reuters.

Exchange operators CME Group and Deutsche Boerse have decided to downgrade their membership for the consortium starting at the end of January 2018, according to slides titled “member attrition” from a board meeting presentation held on Friday.

Led by the Linux Foundation, Hyperledger was launched in 2015 to develop blockchain technology for businesses. Blockchain, which first emerged as the system powering cryptocurrency bitcoin, is a shared record of data that is maintained by a network of computers on the internet.

CME Group and Deutsche Boerse were premier members of the group and will downgrade to a general membership.

Premier members are given board seats in the consortium and pay a fee of $250,000 a year. General memberships range from $5,000 to $50,000 based on the size of the companies, according to Hyperledger’s website.

Blockchain consortium R3 has also decided to downgrade its premier membership next year, according to the documents.

Spokespeople for CME Group and R3 confirmed the companies had downgraded their membership. Deutsche Boerse declined to comment.

Hyperledger executive director Brian Behlendorf said in a written statement that the group has seen “tremendous growth in membership” in 2017.

“We have seen some members who were part of the initial December 2015 cohort shift their spending priorities but remain members of the organization,” Behlendorf said. “We have seen others who never really engaged decide not to renew. This is normal and expected.”

Banks and other large corporations have been investing hundreds of millions of dollars in developing blockchain technology in the hopes it can help them simplify their costly record-keeping processes.

To speed up development many large companies have formed or joined industry groups including the Enterprise Ethereum Alliance and R3.

The weakening support for Hyperledger from some large members highlights how large firms have become more selective with their blockchain efforts as the technology matures. Earlier this year JP Morgan Chase left R3, following the departure of Goldman Sachs, Banco Santander and others.

It comes amid an investing frenzy in cryptocurrencies and blockchain startups. The price of bitcoin hit a record of almost $18,000 on the Bitstamp exchange on Friday.

Despite the excitement, blockchain is not yet used to run any large scale projects

Hyperledger, which counts more than 180 members, of which 18 will be premier at the end of January 2018, released its first enterprise grade blockchain this year. Membership in Hyperledger also requires a separate membership with the Linux Foundation.

Thomson Reuters, the parent group of Reuters, is a member of Hyperledger, R3 and the Enterprise Ethereum Alliance.