Regulatory Reform

Popular Good or Public Good? The Debate to Nationalize Facebook

Despite what history proves about the transient nature of the social media sector—who still uses Friendster or MySpace?—Philip N. Howard’s recent Slate column calls for regulation of the newest social media “monopoly” Facebook. In his article, entitled “Let’s Nationalize Facebook,” Howard proposes that the United States government seize the private company and regulate it as another “public good.”

Howard’s proposal to nationalize the social networking site is in part a reaction to recent poll data indicating nearly 50% of Americans believe Facebook will eventually fade away—a statistic he attributes to a lack of investor and user confidence in the company. According to Howard, nationalizing Facebook would “fix the company’s woeful privacy practices, allow the social network to fulfill its true potential for providing social good, and force it to put its valuable data to work on significant social problems.” In short, Howard asserts that government seizure of a private company is an effective way to improve management practices and satisfy consumers.

Adam Thierer of the Mercatus Center critiques the logic behind regulating the social media industry as a public good in his newest paper, “The Perils of Classifying Social Media Platforms as Public Utilies,” and directly responds to Howard’s proposal in his recent Forbes Op-Ed.  Thierer explains that heavy-handed regulation of industries participating in the digital economy is packaged as either government-led correction of economic market failure (commonly referred to as regulation of a ‘natural monopoly’), or government-led desire to realize a social value (universal provision of a service). In either case, the rationale for increased regulation or public ownership of a social media platform hinges on classifying the entity as a ‘natural monopoly’ and a ‘public good.’

Yet starting a social media site requires minimal physical infrastructure and, as a result, has low start-up costs. Citizens and consumers can attest to the fact that there is no shortage of social networking tools and that Facebook, while one such tool, is neither an essential facility nor a public good. When the Facebook site is down, consumers freely resort to communicating via telephone, text, IM, e-mail, snail mail, and even face-to-face conversation.

Putting aside the controversial argument that Facebook is in fact a public good or that government ownership would improve the company’s management practices, it is important to note that undue regulation of the social media industry writ large reduces incentive for further innovation, stifles existing competition, and, ultimately, stalls the growth of a vibrant sector of the economy. Generally, ALEC believes that government should allow the market to function properly by allowing industry to respond to the mechanisms of public pressure and consumer demand, for only consumer and industry-driven demands will effectively keep pace with the dynamic high-tech sector.


In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and…

+ Regulatory Reform In Depth