34manage the launch (or bootstrap) phase. In the transition from an industrial to a digital economy, some large ﬁrms are industrial and some are digital. Almost all the digital ﬁrms are platforms, and the new blockchain ﬁrms are exclusively platforms in the form of protocols. Large industrial ﬁrms are a legitimate target for concern with respect to anticompetitive behavior, but a standard should still be met with respect to manifest harm. However, the large digital ﬁrms, many of which are very young (Google was founded in 1997, Facebook in 2004, and the Bitcoin protocol was written in 2008), are better understood as innovative new economic infrastructure. The transition from an industrial to a digital economy requires this infrastructure, and in almost every case, governments have utterly failed to provide it, while the private sector has produced, and continues to competitively produce, high-quality functional and operational digital infrastructure (what Davidson et al., 2018 call “institutional technologies”).

5 Conclusion

This chapter has offered a critique of Mazzucato et al.’s (2021) view of the platform economy. In particular, Mazzucato et al. argue that the entrepreneurial state should regulate big tech. The basis for this view is a combination of fallacy, error, and political choice. The combination of these factors drives toward a conclusion that the platform economy adds little or no value to the economy and subsequently should be heavily regulated in an internationally coordinated manner. For example, the European Union wishes to tax U.S. multinational corporations but is deploying competition policy in order to do so, and Australia has already gone down this path. To derive this perverse result, it is necessary to refocus competition or antitrust policy away from the concept of consumer protection and toward either targeting size per se, or introducing notions of unequal bargaining power among suppliers.

35The Entrepreneurial State and the Platform Economy

The notion that big tech platforms should be considered social infrastructure is code for very high levels of regulation, if not outright nationalization. These political outcomes are justiﬁed by the reintroduction of fallacy (i.e., classical rent) and error (i.e., that advertising does not beneﬁt consumers). Modern economic theory employs the concept of rent as being a gift from government. Classical economics viewed rent as a gift of nature. As a theoretical concept, rent explained away anomalies in the classical theory of value. In particular, classical rent masks the role of entrepreneurship in the modern economy. Platforms are an entrepreneurial innovation, not an exercise in harvesting classical rent that can then be taxed with no deadweight loss. Ignoring information costs in the economy leads to the error that advertising plays no efﬁciency role in the economy. Ultimately, Mazzucato et al. draw attention to the (digital) platform economy’s difference from the industrial economy, but then analyze it using outdated economic frameworks. Unsurprisingly, they fail to appreciate the value of the platform economy and view it with traditional hostility. To paraphrase Ronald Coase (1974), they have seen something they do not understand, or do not like, and have reached for a monopoly explanation.

References

Andreessen, M. (2011, 20 August) Why software is eating the world’. Wall Street Journal. Berg, C., & Davidson, S. (2017). Nudge, calculation, and utopia. Journal of Behavioral Economics

for Policy, 1, 49–52. Berg, C., Davidson, S., & Potts, J. (2019). Understanding the Blockchain economy: An introduction