Economic growth: inclusive, green, no-cost.

About legal frameworks for new technologies

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Capitalism has always needed facilities it can’t itself provide. Legal frameworks turn new technologies into infrastructure for growth.

 

Water story

In the 1830’s, pumping was cutting edge technology in Britain. Ambitious start-ups built competing pipe systems to get water from urban rivers to well-off homes. Their product was dirty and only available for 2-3 hours a day around high tide. But in-home water was better than trekking to the riverbank or waiting in line with a bucket. Profits soared. Meanwhile in poor areas, cholera was killing thousands, often within hours of infection. Charities sprang up to care for the dying, tend orphans and isolate the healthy.

Seeing a connection in these events, Edwin Chadwick, a civil servant, came up with a different vision for pumping. He envisaged universal supply of clean water. That was only possible if local governments instigated reservoirs, controls on sewage dumping and installation of trunk pipe networks.

Even the most ambitious start-up couldn’t evict homeowners to dam valleys, jail citizens emptying toilets into water sources, or impose unified piping networks. But the outlandishness of Chadwick’s concept, and opposition from for-profit operators, kept it marginal for years. He persisted, until the 1848 Public Health Act made city authorities responsible for public health.

Universal clean water, available 24/7, eradicated cholera in the UK. Every country copied Chadwick’s model.

 

Net an exception

When a genuinely potent technology emerges it typically develops first as a way of serving the wealthy. Then, wider possibilities emerge and a legal framework for the new technology takes shape. A first jurisdiction gets implementation of that right, and the rest rush to catch-up. Our table below shows some landmark frameworks in two countries.

In each case, the framework brought facilities only government can provide to the emerging technology. So, for example, unfettered capitalism couldn’t deliver a streamlined road network for cars; only a patchwork of incompatible, tracks set up by competing toll-charging landowners. It took compulsory land purchase and legal enforcement of consistent rules to create highways as we know them.

The Internet does not appear on this list. Government in the US and elsewhere, funded and directed its development directly. US authorities then simply gave Verisign Inc. an astonishing monopoly on the domain infrastructure. So, the most impactful new technology of our lifetimes did not get a legal framework. Older technologies reached ubiquity in more cost effective, accountable, ways.

 

A very British solution

Some of these frameworks covered one specific technology (electricity), others initiated possibilities stemming from a confluence of new technologies (universal postage ultimately required railways and roads). There are five broad themes they share:

  • Ambition: Pioneers of public infrastructure thought far beyond existing assumptions about what’s possible. No-one had moved liquids in the quanties Edwin Chadwick envisaged. Laying rails all over Britain’s rugged terrain created engineering challenges that in some cases weren’t solved until lines converged on a gorge, with inventions like box girder bridges coming at the last minute.

 

  • Antagonism: When officialdom claimed the right to legislate skyways it was widely seen as overreach. Why shouldn’t the early airlines run air traffic control rather than be forced into a system equally open to newcomers? Opponents of “government roads” made their point with pickaxed potholes. Water companies bought control of newspapers to attack the public option, even after it was law.

 

  • Standardization kick-starts innovation: Cheap, universal, electricity demanded one model for supply. Britain settled on 230 volts, the US opted for 110. Each is a compromise; American power lines were cheaper. British ovens heated faster. But the certainty in each case spawned appliances and services unthinkable when everyone had to buy their own generator.

 

  • Bipartisan progress: “Penny Postage” proposed by school teacher Rowland Hill, started its legislative journey in a Tory government. After an election, rivals The Whigs continued it to fruition. Standardized delivery of letters isn’t ideological.

 

  • Central failure points: A public option can be superior, so alternatives fade. That’s disastrous when something goes wrong. Ask anyone who survived the 2014-on water crisis in Flint, Michigan. This vulnerability explains heavy regulation of public options.

 

There’s no single funding model for infrastructure emerging from a legal framework. Water supply started in the heyday of municipal socialism, so local ratepayers funded the first reservoirs. At the other end of the spectrum; private operators granted a place in the mobile telephony infrastructure typically paid government billions.

The key takeaway from an introduction to legal frameworks for a new technology is: regional advantage. Little Britain was first with coherent railways, water supply and postage. We could transit goods and urbanize with a literate workforce while larger nations were wondering if industrialization was yet a thing. Insensitively, Britons used their lead to build the world’s biggest ever empire.

 

Passing the test

New technologies come along all the time. Only a handful have merited their own legal framework. What’s the criteria?

  • Government has a problem: The technology could tackle a pressing issue facing policymakers but isn’t. An underperforming economy, diseases among people unable to pay for a cure, social upheaval or danger to the public aren’t a route to profits for tech. start-ups. They are challenges for policymakers.

 

  • Government controls relevant facilities: To achieve its full potential, the technology needs something only government can offer. Compulsory land purchase enabled optimal reservoirs and rail routes. Granting of a state-sanctioned monopoly induced AT&T to cable America with coherent telephone landlines. Legal controls on rogue transmitters made the broadcasting and mobile telephony spectrum dependable.

 

Nearly all today’s key technology challenges fail this test. The battle between competing protocols for audio downloads, for example. Incompatibilities cause inconvenience for music consumers while hindering the entertainment industry and appliance makers. But that’s not a problem for politicians in any one country or region. Even if it was, governments are peripheral as a buyer, seller or regulator of recorded music. They have negligible leverage.

But markets are pivotal in economic growth, social stability, individuals’ ability to support themselves and limiting illegal activity; all key issues for policymakers. At the bottom of the economy, government is typically the biggest buyer of labor (directly or indirectly), it controls crucial registries, marketing channels, regulatory powers and facilities for maintaining activity.

Governments have always intervened to shape the best possible markets, going back to Roman authorities designating public spaces for selling of different commodities. Now we have potent new markets technologies that could deliver so much if pointed towards what regular people and local businesses sell. Modern Markets meet the historical criteria for a legal framework.

 

→ A legal framework for Modern Markets