Once tech’s favorite economist, now a thorn in its side
Paul Romer was once Silicon Valley’s favorite economist. The theory that helped him win a Nobel Prize — that ideas are the turbocharged fuel of the modern economy — resonated deeply. The
Wall Street Journal said the tech industry treated him “like a rock star.”
Not anymore.
Today, Romer, 65, remains a believer in science and technology as engines of progress. But he has also become a fierce critic of the tech industry’s largest companies, saying that they stifle the flow of new ideas. He has championed new state taxes on the digital ads sold by companies such as Facebook and Google, an idea that Maryland adopted this year.
He is hard on economists, including himself, for supplying the cover for hands-off policies and court rulings that have led to what he calls the “collapse of competition” in tech and other industries.
Romer’s current call for government activism, he said, reflects “a profound change in my thinking.” It also fits into a broader re-evaluation about the tech industry and government regulation among prominent economists.
They see markets — search, social networks, online advertising, e-commerce — not behaving according to freemarket theory. Monopoly or oligopoly seems to be the order of the day.
The relentless rise of the digital giants, they say, requires new thinking and new rules.
Their policy recommendations vary. They include stronger enforcement, giving people more control over their data and new legislation. Many economists support the bill introduced this year by Sen.
Amy Klobuchar, D-minn., that would tighten curbs on mergers. The bill would effectively “overrule a number of faulty, pro-defendant Supreme Court cases,” Carl Shapiro, an economist at the University of California-berkeley, wrote in a presentation to the American Bar Association.
Some economists, notably Jason Furman, a Harvard professor, chair of the Council of Economic Advisers in the Obama administration and adviser to the British government on digital markets, recommend a new regulatory authority to enforce a code of conduct on Big Tech companies that would include fair access to their platforms for rivals, open technical standards and data mobility.
Of all the economists now taking on Big Tech, though, Romer is perhaps the most unlikely.
He earned his undergraduate and doctoral degrees from the University of Chicago, long the high church of free-market absolutism, whose ideology has guided antitrust court decisions for years.
Romer, son of former Colorado Gov. Roy Romer, spent 21 years in the Bay Area, mostly as a professor first at Berkeley and then Stanford. While in California, he founded and sold an educational software company. In his research, Romer uses software as a tool for data exploration and discovery, and he has become an adept Python programmer.
His son, Geoffrey, is a software engineer at Google. His wife, Caroline Weber, a professor at Barnard College, is a friend of her Harvard classmate Sheryl Sandberg, Facebook’s chief operating officer.
In the Big Tech debate, Romer notes the influence of progressives such as Lina Khan, an antitrust scholar at Columbia Law School and a Democratic nominee to the Federal Trade Commission, who see market power itself as a danger and look at its impact on workers, suppliers and communities.
Romer’s specific contribution is a proposal for a progressive tax on digital ads that would apply mainly to the largest internet companies supported by advertising. Its premise is that social networks rely on keeping people on their sites as long as possible by targeting them with attention-grabbing ads and content — a business model that amplifies disinformation, hate speech and polarizing political messages.
So that digital ad revenue, Romer insists, is fair game for taxation. He would like to see the tax nudge the companies away from targeted ads toward a subscription model.
In February, Maryland became the first state to pass legislation that embodies Romer’s digital ad tax concept.
Romer says the tax is an economic tool with a political goal.
“I really do think the much bigger issue we’re facing is the preservation of democracy,” he said. “This goes way beyond efficiency.”