Pasquale Distributive Justice Online

Distributive Justice Online New Metaphors for Value and Worth in the Digital Age Frank Pasquale Loftus Professor of Law, Seton Hall Law School

Fractal Inequality
A fractal is generally "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole.”
Patterns of income distributions replicate at various levels—what I call “fractal inequality”

Repeating Patterns of Distribution
Worldwide: About 80% of consumption done by 20% of individuals
“ The 2.7 billion people the World Bank counts as living below its . . . $2 per day international poverty line consume only 1.3 percent of the global product."
US Distribution of Wealth in 2004
Bottom 90%: 29%
Top 10%: 71%; about half of that held by top 1%
Within the top 1%, fractal patterns also hold up to the top 14,000 US households
Income shows similar patterns
“ From 1990 to 2002, for every added dollar made by those in the bottom 90 percent, those in the uppermost 0.01 percent (today around 14,000 households) made an additional $18,000.”

Rival narratives of inequality and innovation
Capital accumulation allows investment and progress as surplus funds innovation
Rising tide lifts all boats
The wealthy are powerful because of their productivity.
The buying power of the wealthy diverts resources from the nonwealthy—including innovation resources
Self-reinforcing process
Power, not productivity, explains the differential.

Rival Narratives Online?
Innovation reigns in online meritocracy
The virtuous Google beat out other search engines by offering truly “organic” links.
The virtuous eBay set up a fair reputation system.
The virtuous Facebook gave users an uncluttered, soothing interface.
Luck, power, and network effects drive success
Modeling these sites as
1) Cultural voting machines
2) Parable of the “lucky restaurant”
3) Utilities/carriers
4) Private health Insurers

1) Cultural Voting Machines
The labor of linking, friending, rating: votes for relevance
Black box voting?
Deep problems raised by ranking and rating systems that are
dominant
nontransparent
Personalized search/no accountability
“ for the waking there is one world, and it is common; but sleepers turn aside each one into a world of his own” (Heraclitus)

Sources: David S. Evans, Antitrust Issues Raised By The Emerging Global Internet Economy, 102 Nw. U. L. Rev. Colloquy 285 (April 28, 2008) citing comScore, MyMetrix Key Measures Report (Dec. 2007); comScore, My-Metrix qSearch 2.0 Key Measures Report (Dec. 2007) . Shares of Market Leaders in Major Internet Platforms Measure Auctions Page Views Search Searches Social Networking Page Views Leading Platform Second Platform Leading Platform Second Platform Leading Platform Second Platform Countries Argentina Google 91% Yahoo! 4% Australia Google 79% eBay 6% MySpace 43% Bebo 25% Brazil Google 90% Yahoo! 2% Google 98% Fotolog 1% Canada Google 78% Microsoft 6% China Baidu 54% Google 19% France eBay 99% Delcampe 0% Google 82% Microsoft 3% Skyrock 78% Facebook 7 Germany eBay 99% Yatego GmbH 0% Google 80% eBay 6% StudiVZ 43% Schueler 12 Hong Kong Facebook 50% Xanga 30% India Google 81% Yahoo! 11% Google 87% Facebook 6% Italy eBay 99% Bidplaza 0% Google 85% Telecom Italia 3% Netlog 27% Badoo 23% Japan Yahoo 49% Google 41% Mixi 62% Google 14% Malaysia Friendster 58% MySpace 25% Mexico Google 89% Microsoft 4% New Zealand Bebo 81% Facebook 7% Russia Yandex 52% Google 32% Singapore Friendster 54% Facebook 15% Spain eBay 94% MercadoL ibre 3% Google 93% Microsoft 2% Fotolog 50% Metro-flog 9% South Korea NHN 65% Lycos 16% CyWorld 97% Paran.co m Club 0% Taiwan Microsoft 23% Yahoo! 16% UK eBay 98% Price-drop tv 0% Google 74% eBay 6% Bebo 40% Facebook 28% USA eBay 96% Bidz 1% Google 53% Yahoo! 17% MySpace 62% Facebook 21% Worldwide eBay 57% Taobao 14% Google 62% Yahoo! 13% MySpace 17% Facebook 15%

These Trends Will Likely Continue
Barriers to entry in the search market
Ever more expensive to map the web
Network power
“ chicken and egg” problem of platforms
Licensed content/exclusive deals
Protected algorithms
Innovation powered by use
Users “train” search engine; virtuous cycle
Some similar dynamics in social networks, auction sites, though less profound lock-in problems

2) Self-reinforcing dominance
Parable of the two restaurants
Alperovitz & Daly, Unjust Deserts
“ Warren Buffett is worth nearly $50 billion. Does he ‘deserve’ all this money? Buffett himself will tell you that ‘society is responsible for a very significant percentage of what I’ve earned.’”
Even if the money is small for online tycoons (relative to the larger economy), the cultural power is not

Legal Realism Online
Shell, Make the Rules or Your Rivals Will
James K. Galbraith, The Predator State

Common Carrier Analogies
From net neutrality to search neutrality
From Zittrain’s Future of the Internet (67)
physical layer: “actual wires or airwaves over which data will flow.”
application layer: “representing the tasks people might want to perform on the network.”
content layer: “containing actual information exchanged among the network's users.”
social layer: “where new behaviors and interactions among people are enabled by the technologies underneath.”

Should Google be able to . . .
Tier access to Google Books?
Imagine Harvard gets everything for an undisclosed sum, and schools that can only pay $100,000 a year get “disabled version”
Manually change rankings?
Downrank sites that sue it?
That criticize Google executives?
Uprank sites of business partners?
Eliminate sites from its index?
As punishment?
As reward? (Doctorow’s Scroogled)
Even if you think it should have all these prerogatives--should it have to disclose?

Should eBay be able to favor certain sellers? Meg Whitman on the special Disney deal: “We’ve concluded that eBay has to be a level playing field . That is a core part of our DNA, and it has to be going forward.” In 2000, eBay granted special perks to Disney on a platform within its auction site. After howls of protest from “the community,” the perks ceased. Should law force that decision to be taken? Or at least the disclosure of favoritism?

Should Facebook be able to . . .
Kick members off without due process?
Gossip blogger banished!
One blogger says: “ Facebook is shutting down accounts of users who are exhibiting any behavior it finds remotely suspicious.”
Close access to your data?
Noticeably cool to proposals for “OpenSocial” protocols
Compare Dataportability.org
Google has also been criticized for reducing portability of AdSense data

Meditating on Middlemen
By understanding the positive and negative roles of other middlemen, we can better understand how to regulate online intermediaries:
Work on common carrier analogy: Internet Nondiscrimination Principles; Federal Search Commission
Cultural Voting Machine: The Troubling Trend Toward Trade Secret Protection of Rankings and Ratings
Insurer analogy: From Managed Care to Managed Knowledge?

Temptations of the Middlemen
Troubling Insurer Practices
Charge the sick a great deal
Squeeze providers, but keep the profits
Bait & Switch; pre-existing conditions
Trade secrecy in pricing
Temptations for Google/Registry?
Tiered access schemes
Gradual price increases
Darnton on “cocaine pricing”
Opaque price discrimination

How Health Law Responds
A Public Alternative
From Medicare to A2K for all
Digital deposit
Mandatory Disclosure
From NY Doctor Rating Settlement to Required Reporting of Pricing/Ranking practices

Medicare as Model
Provides care to all in a certain vulnerable population.
Sets a baseline of pricing in case of tacit collusion of providers/insurers.
Compulsory license on works in a government database of digitized works could be parallel to price-making role of MedPAC.

Rival Narratives of Digitized Books
Responsive regulation that balances
Incentives for private companies to innovate
Public interest in universal access to knowledge
Medicare and private insurers coexist; so can a public and Google-run option.
Faith in
Market forces
Proprietary black box algorithms subject to manipulation

Closing Thoughts
Eternally golden brands?
Google
Goldman
Ingenix
Deconstructing entitlement at the top, to preserve it at the bottom
Makers, takers, and fakers

Pasquale Distributive Justice Online

by Seton Hall Law on Nov 10, 2009

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