The Doctrine of Moral Hazard

When it comes to self-preferencing, right wing economists are right: incentives matter.

Last week, the House Judiciary Committee spent 23 hours debating a historically unprecedented package of tech competition bills, surprising observers by passing all six of the legislative proposals under consideration, with bipartisan support.

Each of the six bills is interesting in its own ways — for example, the ACCESS Act (HR 6487) uses interoperability and standards to reduce the costs we bear when we leave monopoly platforms behind, by letting us stay in touch with the friends who stay.

But while ACCESS uses a digital solution to tackle digital problems, another bill, Pramila Jayapal’s Ending Platform Monopolies Act (HR 3825), hearkens back to the golden age of trustbusting, by breaking up large platform companies and forcing them to divest of subsidiaries that compete with the companies that rely on their platforms.

The philosophy here is simple: a platform makes a marketplace, sets its rules, and mediates between buyers and sellers to keep everyone honest. If the platform also competes with the sellers who rely on it, they will be tempted to cheat, to engage in “self-preferencing” that pads the company’s bottom line by steering its users to buy or use its own products…