Preserving Permissionless Innovation

In the mid-1990s, the Clinton administration made a very wise decision. They declared the internet a “market-driven arena,” not a “regulated industry,” and limited government involvement only to that necessary “to support and enforce a predictable, minimalist, consistent and simple legal environment.”

This hands-off, permissionless innovation approach succeeded. Today, the United States hosts the world’s most vibrant and creative internet-based companies, bringing countless benefits to consumers and small businesses. Despite this success, many people today fear that technology is out of control and call for government to regulate. Legislators should resist these calls because regulation requires entrepreneurs to first seek government permission and will slow or even stop the broad prosperity technological innovation has provided.

A permissionless policy framework allows people to innovate by default, except in the very rare cases where developing a technology will likely cause tangible, immediate, irreversible, and catastrophic harm. Of course, the government should continue to protect individual rights and redress harm through case-by-case, ex post enforcement. But so long as they do not violate others’ rights, innovators and consumers should be free to exchange ideas, products, and services. The Clinton administration called this approach a “decentralized, contractual model of law rather than one based on top-down regulation.”

Thanks this light touch regulatory approach, the internet grew from an academic experiment to an indispensable tool in only a few decades. Today, new companies allow anonymous donors to assist needy families, help likeminded individuals petition their government online, and connect a contractor in Nashville with an employer in Singapore.

But this approach is under threat today. Some worry technology could harm consumers, eliminate jobs or be abused by criminals or foreign adversaries. Academic research in technology policy increasingly focuses on how new technologies such as artificial intelligence and social media might harm people. Populists on the left and right are attacking large technology companies because of their size and success, as a backlash against past political engagement, and as a solution for alleged platform bias. Some companies have joined forces with these advocates, seeking to use antitrust and data regulation law to hinder their competitors.

Together, this coalition of convenience wants the government to replace permissionless innovation with precautionary regulation. For every problem they identify, their solution is more government regulation. In total, their proposals – whether net neutrality rules on broadband providers, content moderation obligations on web platforms or strict data regulation rules – would impose government-specified designs on the internet.

Despite these calls for increased government involvement, policymakers should stick with the existing permissionless approach, which remains fully capable of dealing with current and future challenges and avoids prescriptive regulation’s obvious problems.

When entrepreneurs must get government permission before offering a new product or service, experimentation and spontaneity slows and consumers miss out. But when people can focus on building new products and services instead of becoming regulatory experts, more innovation happens.  Real world experience bears out this intuition. The United States hosts 7 of the 10 largest tech companies while Europe, which imposes precautionary regulations, has zero. In the United States, the dynamic growth of the internet is hugely contrasted with heavily regulated industries like healthcare and technology, which as a result are much slower to evolve. Do we really want to regulate technology like Europe or like those less innovative industries?

Harm to innovation is bad enough, but free speech is also at risk. Some seek to directly undermine the U.S.’s strong legal protections for online speech. Other threats are more indirect: under political pressure to perfectly moderate their services, Google and Facebook have hired more than 30,000 people to review users’ and advertisers’ posted content.

Every new technology has detractors who fear change. But as legislators and regulators evaluate promising new technologies — social media, AI, blockchain, autonomous vehicles, unmanned aircraft and more — they should conquer fear and embrace the permissionless approach’s proven success. Indeed, regulators should free existing sectors, such as health care and housing, that desperately need more innovation. If government instead adopts precautionary regulation, it will tie innovators’ hands, undermine U.S. tech leadership, and weaken online free speech. We should heed technology and innovation scholar Adam Thierer’s warning: If we fearfully regulate to prevent hypothetical worst-case scenarios, we also will eliminate new technology’s best-case scenarios.

Neil Chilson is a senior fellow of technology & innovation at the Charles Koch Institute.