TILEC annual report 2023, interview, and TILEC, the film
The Tilburg Law and Economics Center has recently celebrated its 20th anniversary. For that purpose, we organized a great and very well-received conference and I gave an interview, looking back and forward. We also published TILEC’s annual report 2023 about acitivities in the last year. All this shows that and how TILEC is alive and kicking, both in the academic and in the policy sphere: 25 published journal articles, 17 book chapters, 2 policy reports, 21 TILEC Discussion Papers and 31 organized events, which are the backbone of the institute, document that TILEC’s 46 members and our network of 53 extramural fellows are not sitting idle.
Moreover, given the size of the institute, it is very remarkable that TILEC ranks in the top-10 of all Economics Departments & Research Centers globally and in the top-10 of International (read: non-US) Law Schools, measured by download statistics of research papers measured by the Social Science Research Network (SSRN). It is the only organization on the planet showing up on both of these lists, which documents the academic footprint we jointly have in the field of Law & Economics.
This footprint is complemented by more anecdotal evidence about the policy and societal impact that several TILEC researchers have, which has affected decisions at the European Court of Justice and the US Supreme Court, and legislative initiatives such as the EU’s Digital Markets Act and the Digital Services Act. We are especially happy that collaboration with the ACM is in the process of being intensified, which is also documented in a short video published on the TILEC website.
Summarizing, the world is changing around us, especially in the realm of technology, where AI is coming with a vengeance and raising gigantic questions that public authorities have to deal with. TILEC’s research program on the Governance of Economic Activity in the Digital Age will be adjusting along the way. TILEC researchers working on competition & regulation, institutions & governance, and standards & innovation stand ready to support them. This is an invitation.
Platform Regulation and AI in China
Both academic and policy-oriented research about online platform technologies and their regulation in North America and Europe is active and widespread. Especially many researchers from industrial organization (within economics), competition law (within jurisprudence), and information systems and computer science are active here. Given the high economic significance of the area, the European Commission established the independent expert group to the EU Observatory on the Online Platform Economy a few years ago, which should advise the Commission on the main trends of the online platform economy and analyze potentially harmful practices there (see here and links from there). Now, after several years of work and scrutiny, the first reports are ready and about to being published.
One of them is a report with a novel topic that looks in exploratory fashion beyond the realm of the Western digital sphere and beyond how the internet works in democratic countries: “Regulation of Digital Platforms and the State’s Use of Platform Technologies in China” (co-authored with Inge Graef and Doh-Shin Jeon). Platform technologies (Artificial Intelligence and Data Analytics) are not only used in the West but also in autocratic countries. While the major players in the West are privately-owned big tech firms, in autocratic countries the government assumes a much more active role. China is the most advanced of these countries. This report takes stock of China’s current state of digital platform markets and regulation of platform technologies, including a series of recent governmental interventions and a description of the Chinese Central Bank Digital Currency. It also offers a view on the current use of platform technologies by the Chinese government and the Chinese Communist Party (CCP), including Social Credit Systems and the surveillance state. Based on these insights, we identify key challenges for EU policy makers and formulate crucial questions for future (more quantitative) research.
As both the Chinese government and Chinese businesses are fully embracing digital technologies and, in particular, AI, this piece is set to be only a first (and qualitative) step. A scarce literature is being created. More knowledge is dearly needed if we want to better understand (and counter, where necessary) the Chinese approach to platform technologies.
20th Anniversary Conference of TILEC
For the past 20 years, the Tilburg Law and Economics Center (TILEC) has supported and stimulated academic research on the governance of economic activity. In its research themes competition & regulation, innovation, and institutions, TILEC members from law and economics study how interactions between users and firms, organizations and their members, public agencies and regulated entities, courts and litigants, as well as voters and political parties are governed. Therefore, on April 11 & 12, 2024, we are organizing an anniversary conference in Tilburg. It marks a time to gather outstanding researchers and policy makers in the domain of TILEC’s activities, to reflect and celebrate, to meet old friends and make new ones.
More background, a program, and a registration form are here.
Big Tech’s Entry and Expansion in Retail Financial Services: an AI & Data Story
The British regulator of financial services, the Financial Conduct Authority (FCA), is highly interested in understanding the potential competition impacts of entry by Big Tech firms (especially Alphabet, Meta, Apple and Microsoft) in retail financial service. In other words, what can high-powered AI and masses of data about users’ preferences and characteristics, paired with very deep pockets, do to existing banks and other financial intermediaries (and to fintech-startups)?
The FCA published a first discussion paper on the state of the market in fall 2022 and opened a public consultation, to which I reacted together with my UEA-colleague Andrea Calef a year ago.
After an assembly of the feedback received, the FCA updated the discussion paper and asked specific open questions, such as:
- To what extent does this data asymmetry hold between Big Tech firms and financial services firms in retail financial services markets?
- Do you expect that data asymmetry to become more significant over time? If so, how?
- Should wholesale markets be scrutinized as well by the regulator, next to retail markets?
- Where is the evidence for what we think we know?
Now, in a team of researchers at the Centre for Competition Policy, we reacted and tried to answer the questions posed.
It is great to see how open-minded the FCA is. Now, we hope very much that they will take the received feedback on board and move forward to action. Economically, the big problem is that financial retail markets are most likely “data-driven markets.” If that is true, these markets will most likely tip and be dominated by the firm that has the most data about users’ preferences and characteristics and draws the most valuable insights out of it. Without proper regulation, which we discuss in the response, prospects look dim for traditional financial services firms; in the UK and elsewhere.
“Microtargeting, Voters’ Unawareness, and Democracy” to be published in Journal of Law, Economics, and Organization
Together with Wieland Müller and Freek van Gils, I have studied the consequences of digitization and datafication for democratic elections since early 2016. Inspired by news resports right after the Brexit referendum and the U.S. Presidential elections 2016, which claimed that those votes had been influenced, if not tilted, by misinformation spread via social media, we first asked whether and how this is possible theoretically. Notably, our thinking went, if voters do not trust election outcomes anymore, they may also lose trust in democracy as a political system in the first place. Indeed, there is a strong decline of public trust over the past 20 years, which at least correlates with the rise of social media, the main source of political information for many voters (proving causality is more difficult).
Now, this first paper, titled “Microtargeting, Voters’ Unawareness, and Democracy,” is forthcoming in the Journal of Law, Economics, and Organization. There, we study how two recent technological developments have raised concerns about threats to democracy because of their potential to distort election outcomes: (a) data-driven voter research enabling political microtargeting, and (b) growing news consumption via social media and news aggregators that obfuscate the origin of news items, leading to voters’ unawareness about a news sender’s identity. We provide a theoretical framework in which we can analyze the effects that microtargeting by political interest groups and unawareness have on election outcomes in comparison to “conventional” news reporting. We show which voter groups suffer from which technological development, (a) or (b). While both microtargeting and unawareness have negative effects on voter welfare, we show that only unawareness can flip an election. Our model framework allows the theory-based discussion of policy proposals, such as to ban microtargeting or to require news platforms to signal the political orientation of a news item’s originator.
The second paper of this co-author team, which is described here and features a large lab experiment testing the theory empirically, is still in the reviewing process.
Director of Tilburg Law and Economics Center
TILEC, the Tilburg Law and Economics Center, is a fascinating and very successful interdisciplinary research center at Tilburg University. Gathering more than 40 legal scholars and economists and over 50 extramural fellows mainly working at other organizations, TILEC was named a “global leader in its field of law and economics” by an external assessment committee.
I am very happy to announce that, as of September 2023, I have taken over the TILEC directorship from Panos Delimatsis, who performed the job over an impressive 12-year period. Here is my take on the Center, as published on TILEC’s website:
“TILEC’s main purpose is to organize interdisciplinary academic events related to the governance of economic activity in the digital age. It serves as a platform of exchange, especially between lawyers and economists. TILEC also strives to support policy-relevant, well-founded research of its members and to connect TILEC members with other researchers and decision makers in politics, firms, public agencies, and society at large. I am very grateful to be connected to this globally renowned research center, which has attracted attention from highest-level policy makers, judges, regulators and academics. Truly interdisciplinary research is the unique feature of the Center: it enriches a scholar’s life to see different perspectives on a “well known” subject, and it keeps us humble and awake to know that there is always somebody in the room who knows more. If you feel similarly, please do not be shy but get in contact with us!”
Roundtable on international effects of the EU’s Digital Services Act (video)
The European Commission recently held a large conference on the Digital Services Act (DSA), where they gathered perspectives on this monumental piece of legislation, the sister of the Digital Markets Act. One of the sessions asked: “What are the implications of the EU’s new social media rules for the rest of the world?” As envoy of the EU Observatory on the Online Platform Economy, I participated in the roundtable alongside delegates from the UN, UNESCO, LIRNEasia (a Sri Lankan think tank), and the EU’s “ambassador” to Silicon Valley. Here is the video of the session:
New working paper: “Social Media and Democracy: Experimental Results”
Western-style representative democracy is under pressure. Both US President Biden and EU-Commission President von der Leyen, as well as US Secretary of State Blinken and EU-Commission Vice President Vestager recently declared: “Democracies must deliver.” A key problem is the deteriorating trust of many voters in political institutions and the democratic system itself. Correlational evidence suggests that the information distributed via social media platforms contributes to this problem. Two technology-rooted characteristics of social media appear to be main drivers of the issues: political interest groups have the ability (i) to microtarget news based on individual-level voter data and (ii) to obfuscate their identities, which can be exploited to spread disinformation.
Social media platforms and legislators on both sides of the Atlantic have started to take action in order to mitigate the perceived negative effects. Specifically, discussions are about a ban on microtargeting and mandatory disclosure of politcial interest groups/advertisers’ interests. For instance, the EU’s Digital Services Act (DSA) mandates Very Large Online Platforms to fight disinformation: they have to deliver (public) annual risk-assessment reports and risk-mitigation reports, including annual audits by independent parties.
However, a solid empirical foundation for the suggested interventions is missing.
Together with Freek van Gils and Wieland Müller, in new working paper “Social Media and Democracy: Experimental Results” I develop, theoretically analyze and experimentally test a series of games to study the effects of two interventions, a ban on microtargeting and mandatory disclosure of senders’ interests, on individual voting behavior and election outcomes. The games are implemented in a laboratory setting that follows key features of a social media environment. This approach can both mimic the behavior of political interest groups and voters, in a stylized and framing-free environment, and thereby “look” behind the curtain of proprietary data of social media firms. It also suggests causal relationships that are in line with the evidence, which are necessary to inform policy implications.
We find that mandatory disclosure of interests, with or without a microtargeting ban, increases the efficiency of aggregate voter decision-making. However, only the combination of disclosure of interests and a microtargeting ban counteracts election manipulation. The implementation of a microtargeting ban without disclosure requirements has adverse effects. The latter result, in particular, should be of interest to legislators and regulators.
Annual Research Conference of EU Commission on Institutions
On November 13-15, 2023, the European Commission will organize a large conference, called Annual Research Conference (ARC 2023), which aims at bringing together academic research(ers), Commission staff members, and policy makers. This year’s conference should be especially interesting for researchers studying institutions and organizations because:
- The topic is “European integration, institutions and development.”
- The EU Commission took initiative and expressed strong interest in getting in touch with the research community on Institutional and Organizational Economics.They realize a deficit of knowledge in these areas and are very open to scholarly and policy-oriented input. This is reflected by “satellite events” around the main conference day, which offer researchers and Commission staff members and policy makers various forms of interaction.
- Some selected papers will be published in a special issue of the Journal of Comparative Economics.
- There will be a keynote lecture by Tim Besley (LSE).
- A row of highly knowledgeable scholars of institutions, all with an eye on policy making, are involved in the selection of papers.
The submission deadline for research papers is May 31, 2023. A full call for papers is here.
“Membership, Governance, and Lobbying in Standard-Setting Organizations” forthcoming in Research Policy
Standard-setting organizations (SSOs) are collectively self-governed industry associations, formed by innovators and implementers. They are a key organizational form to agree on and manage technical standards, and form the foundation for many technological and economic sectors. Together with Clemens Fiedler and Maria Larrain, we develop a model of endogeneous SSO participation that highlights different incentives for joining (namely licensing, learning, and implementation). We analyze equilibrium selection and conduct comparative statics for a policy parameter that is related to implementer-friendly Intellectual Property Rights policies, or alternatively, minimum viable implementation. The results can reconcile existing evidence, including that many SSO member firms are small. The extent of statutory participation of implementers in SSO control has an inverted U-shape effect on industry profits and welfare.
The former TILEC Discussion Paper is now forthcoming in Research Policy. More background is here.
Jens Prüfer 