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Permissionless Innovation The Continuing Case for Comprehensive Technological Freedom Revised and Expanded Edition BY ADAM THIERER Arlington, Virginia ABOUT THE MERCATUS CENTER AT GEORGE MASON UNIVERSITY The Mercatus Center at George Mason University is the world’s premier university source for market-oriented ideas—bridging the gap between aca- demic ideas and real-world problems. A university-based research center, Mercatus advances knowledge about how markets work to improve people’s lives by training graduate students, conducting research, and applying economics to offer solutions to society’s most pressing problems. Our mission is to generate knowledge and understanding of the institutions that affect the freedom to prosper and to find sustainable solutions that overcome the barriers preventing individuals from living free, prosperous, and peaceful lives. Founded in 1980, the Mercatus Center is located on George Mason University’s Arlington and Fairfax campuses. Mercatus Center at George Mason University 3434 Washington Blvd., 4th Floor Arlington, VA 22201 www.mercatus.org 703-993-4930 © 2014 and 2016 by Adam Thierer and the Mercatus Center at George Mason University. All rights reserved. Printed in the United States of America Cover and interior designs by Joanna Andreasson Editing and typesetting by EEI Communications Index by Connie Binder Library of Congress Cataloging-in-Publication Data Names: Thierer, Adam D., author. Title: Permissionless innovation : the continuing case for comprehensive technological freedom / Adam Thierer. Description: Revised and expanded edition. | Arlington, Virginia : Mercatus Center at George Mason University, [2016] Identifiers: LCCN 2016009785 (print) | LCCN 2016011132 (ebook) | ISBN 9781942951247 (pbk.) | ISBN 9781942951254 (Kindle e-book) Subjects: LCSH: Technology and state. | Research--Government policy. | Freedom of information. | Technology and law. Classification: LCC T14 .T443 2016 (print) | LCC T14 (ebook) | DDC 338.9/26--dc23 LC record available at http://lccn.loc.gov/2016009785 CONTENTS Preface: Which Policy Vision Will Govern the Future? ..........................................................1 About the New Edition ......................................................................................6 Chapter I: Why Permissionless Innovation Matters ..................................................................7 A. From Scarcity to Abundance .....................................................................7 B. What Is Permissionless Innovation? .........................................................8 C. How Permissionless Innovation Powered the Information Revolution .............................................................................. 12 D. Toward the Next Great Technological Revolution ..............................16 Chapter II: Saving Progress from the Technocrats ..................................................................23 A. Those Who Fear the Future ......................................................................23 B. The Technocrat’s Tool: The Precautionary Principle ......................... 26 C. Why Does Doomsaying Dominate Discussions about New Technologies? .................................................................................... 29 D. When Does Precaution Make Sense? ....................................................33 Chapter III: Why This Clash of Visions Matters ......................................................................... 39 A. A Very Brief History of Technological Criticism ................................. 39 B. Answering the Tech Critics: The Case for “Rational Optimism”..... 42 C. The Connection between Innovation, Economic Growth, and Human Flourishing.............................................................................44 D. The Real-World Impact of Permissionless Innovation ...................... 51 E. Global Innovation Arbitrage ....................................................................56 v Chapter IV: How We Adapt to Technological Change ............................................................ 63 A. From Panic to Eventual Adaptation ...................................................... 63 B. Resiliency and Its Benefits ....................................................................... 66 C. Overcoming Technopanics: Some Case Studies ................................68 D. How Norms “Regulate” ..............................................................................74 Chapter V: What Issues Prompt Precautionary Thinking and Policy Today? ...................81 A. Planning for Every Worst Case Means the Best Case Never Comes About.................................................................................... 81 B. Privacy and Discrimination Concerns ...................................................82 C. Safety and Speech Concerns .................................................................. 88 D. Security Concerns ........................................................................................ 91 E. Economic Disruption and Automation Concerns ..............................99 F. Summary: Openness to Change Is Essential for Progress .............102 Chapter VI: A Blueprint for Preserving Permissionless Innovation ....................................105 A. Appreciate the Virtues of Patience and Forbearance (or, “First, Do No Harm”) .........................................................................108 B. Liberalize Markets by Applying Moore’s Law to Policy ..................109 C. Level the Playing Field by “Deregulating Down,” Not Regulating Up.......................................................................................111 D. Embrace “Educate and Empower”–Based Solutions .......................112 E. Encourage Privacy, Safety, and Security “By Design” Efforts ........115 F. Rely on “Simple Rules for a Complex World” When Regulation Is Needed ...................................................................120 G. Protect Online Intermediaries from Punishing Liability..................125 H. Quantify Opportunity Costs by Requiring Strict Benefit-Cost Analysis ....................................................................126 I. Summary: Policy Must Be Flexible and Adaptive .............................129 vi Conclusion: It’s about Freedom, Progress, and Prosperity ....................................................131 Appendix: Additional Readings from Adam Thierer.............................................................135 Notes ............................................................................................................................. 137 Index .............................................................................................................................. 189 About the Author ......................................................................................................205 “Innovation Opportunity” Essays “Big Data” and the Data-Driven Economy .............................................................11 The “Internet of Things” ............................................................................................. 18 Private Drones .............................................................................................................60 Wearable Technologies ..............................................................................................72 Immersive Technology .............................................................................................. 78 Autonomous Vehicles and “Smart Cars” ..............................................................98 The “Sharing Economy” ...........................................................................................103 3-D Printing and Additive Manufacturing ............................................................118 vii “What matters is the successful striving for what at each moment seems unattainable. It is not the fruits of past success but the living in and for the future in which human intelligence proves itself.” —F. A. Hayek, The Constitution of Liberty (1960) PREFACE WHICH POLICY VISION WILL GOVERN THE FUTURE? he central fault line in innovation policy debates today can be thought of as the “permission question.”1 The permission Tquestion asks, Must the creators of new technologies seek the blessing of public officials before they develop and deploy their inno- vations? How that question is answered depends on the dispo- sition one adopts toward new inventions and risk-taking more generally.2 Two conflicting attitudes are evident. One disposition is known as the “precautionary principle.” Generally speaking, it refers to the belief that new innovations should be curtailed or disallowed until their developers can prove that they will not cause any harm to individuals, groups, specific entities, cul- tural norms, or various existing laws, norms, or traditions. The other vision can be labeled “permissionless innovation.” It refers to the notion that experimentation with new technologies and business models should generally be permitted by default. Unless a compelling case can be made that a new invention will bring serious harm to society, innovation should be allowed to continue unabated and problems, if any develop, can be addressed later. In this book, I will show how precautionary principle thinking is increasingly creeping into modern technology policy discussions, explain why that is dangerous and must be rejected, and argue that 1 2 PERMISSIONLESS INNOVATION policymakers should