Meta Shrugs

The Canadian Parliament passed Bill C-18, which will require Meta to pay whenever it links to a Canadian news source.

Canadian news publishers, like Kiwi news publishers, managed to convince both themselves and the government that it's the platforms who benefit from those links - not the linked-to site.

And they were, of course, wrong. 

The deal did not meet the participation constraint, and Meta has shrugged. 

The CBC reports:

The social media giant Meta has confirmed that it will end access to news on its social media sites for all Canadian users before Bill C-18, the Online News Act, comes into force.

The tech company made the announcement Thursday, the day after Parliament passed Bill C-18. The law will force tech giants like Meta and Google to pay news outlets for posting their journalism on their platforms.

Meta said it will begin to block news for Canadian users over the next few months and the change will not be immediate.

"We have repeatedly shared that in order to comply with Bill C-18 … content from news outlets, including news publishers and broadcasters, will no longer be available to people accessing our platforms in Canada," said Meta in a media statement.

As expected, Andrew Coyne's roundup on this one is best [Canadians should subscribe to the Globe & Mail. But if you're not based there and would only be reading this one column....].

He's trenchant. 

First, we gave away all our content online, without charge. Then we built unreadable, positively user-hostile websites. We were slow to react as advertisers deserted us for Facebook and Google, and when it finally dawned on us that this was a competition we couldn’t win – the platforms had simply built a better mousetrap, as far as advertisers were concerned – we went whining to government to save us: as if we were the only industry the internet had upended; as if the taxpayers were obliged to pay for our mistakes; as if we could so conspicuously prostitute ourselves to the thing we spend most of our time covering – government – without anyone noticing, or without in fact being prostitutes.

But of all the lies we told ourselves and others, the most preposterous was the lie that “the platforms stole our content.” They didn’t steal it. For the most part, they don’t even use it. What they do is link to it. How does a link work? You click on it, and you are taken to the address embedded in it – that is, to one of our pages. Far from stealing our content or our readers, the platforms have been sending readers our way by the millions, there to read our content and see our ads.

They perform a service for us, in other words, the proof of which is the profusion of “Share this” and “Link to this” buttons we plaster all over our stories. We want readers to post our stories to Facebook, Twitter and the rest. As, in fact, we do ourselves, and for the same reason: because we know it benefits us. Because we need the platforms, far more than they need us. 

 

The Value-Added Fallacy

Andrew Coyne is great on Canada's Value-added fallacy:

Just now, Practical Men are quite convinced that, rather than pipe crude oil south or west for refining in foreign lands, we should be refining it here at home. How do they know this? Well, it’s obvious, isn’t it? We ship them bitumen, they ship us saran wrap and pantyhose. What we should be doing is moving into higher value-added activities….

You hear a lot of this sort of thing. We ship them coal, they ship us steel. We ship them logs, they ship us dining-room sets. At best, it betrays a basic confusion of concepts — what is sometimes called the value-added fallacy. What companies want are higher profits. What workers want are higher wages. What both want is higher productivity. It’s productivity that ultimately determines wages and living standards — not where you happen to be in the value-added chain.

This value-added fetish is often rooted in a kind of “techno-aesthetic intuition” (to use the economist David Henderson’s phrase) that certain activities — manufacturing rather than resource extraction, high technology rather than low — are more befitting of an advanced economy. Hence that most Canadian of fears, being “hewers of wood and drawers of water,” in a country with one of the world’s richest supplies of both.

We hear this a lot in New Zealand as well - even from Alan Bollard when he came back to visit from Singapore last year:

During a flying visit home to Wellington former Reserve Bank governor Alan Bollard has reflected on New Zealand's response to rising incomes in East Asia and the risk of remaining stuck at the low-tech, low-return end of the value chain by just pumping out more primary production.

I was more than a little sceptical:

I asked him there what's stopping Kiwi businesses from picking up the $20 notes laying on the sidewalk if there are such great returns in those activities: whether Kiwis are just stupid; whether there are regulatory impediments to their being able to realise returns; whether they're already innovating and he's not noticed it; or whether a lot of that work is really better done elsewhere and that pushes for value-added here might not be value-destroying.

He noted that Fonterra is constrained by its cooperative structure and that capital markets here might not be deep enough. I note that Fonterra is investing into Chinese dairy to have better understanding of and access to Chinese markets, that they're already doing a lot of milk processing beyond straight powder drying, and that opening to greater foreign investment seems a decent idea. I'm pretty agnostic about Fonterra's governance structure, but that too would seem a $20 note on the sidewalk: if they could be so much more valuable under a fully corporate structure, they will eventually convince their farmer-members of it.

Back to Coyne:

By contrast, the strange, unworldly theory to which economists so stubbornly adhere is merely to suggest that, rather than issue grand pronouncements on what sectors “we should” be investing in, based on little more than hunches, we would do better simply to compare the relative costs and benefits of each. If there are greater returns to be had from producing raw materials, then raw materials it is. Which offers the better returns: to sell crude whatsit for $6 that costs you $2 to produce, or to “move up the value-added chain” and sell refined whatsit for $8 that cost you $6?

And who better to make these comparisons than the people whose money is actually at risk? Refining bitumen is an expensive, capital-intensive business. If it were really wiser to refine it here than sell it to refiners elsewhere, investors are at least as capable of realizing it as anyone else. If instead they choose to export, why not trust their judgment — why, other than the sort of divine dogma the Practical Man claims to disdain?

The fox, it is said, knows many things, but the hedgehog knows one thing. The Practical Man knows nothing. But he knows it with utter certainty. [emphasis added]

The University of Calgary's Trevor Tombe warns of the consequent dangers:

This misunderstanding can have serious economic consequences. The first and most obvious consequence is that public subsidies to so-called value added activities expose governments (and taxpayers) to financial risks. Projects may or may not work out, leaving government to pick up the tab. These costs can add up. The Canadian Taxpayers Federation reckons the Government of Alberta under premiers Peter Lougheed and Don Getty blew roughly $2.3 billion by the early 1990s on failed attempts at diversifying Alberta’s economy (not adjusting for inflation). The biggest failure was NovaTel – a joint telecommunications venture between the Nova Corp. and Alberta Government Telephones, Telus’ predecessor – which eventually cost taxpayers over half a billion dollars. Not all of the Alberta government’s diversification efforts were failures, but as Ted Morton and Meredith McDonald found in their comprehensive review for University of Calgary School of Public Policy titled The Siren Song of Economic Diversification, the losers far outstripped the winners.

A broader consequence of subsidizing firms on the basis of their supposed value added is lower productivity in the overall economy. Suppose for a moment that labour markets function perfectly. In this case, the economic value of a worker is revealed in the going wage rate. Firms that have valuable jobs will be willing and able to pay this wage; those that don’t, won’t. A subsidy distorts this decision. With access to government funding, a firm could afford to hire the worker even if the underlying value of the job is low. This will deny the worker to other firms and the overall economy suffers. Simply put, a subsidy can shift employment towards subsidized activities that are potentially less valuable than others.

I expect I'll be picking up Tombe's primer on value-added fallacies when next the NZ government worries about too much hewing of wood and drawing of milk. HT: @StephenGordon

Quebec student thugs

Andrew Coyne takes on the Quebec student thugs who have been rioting against tuition increases.

What they have to offer is violence and lawlessness. Which is what this is about. It isn’t about the poor: the enriched bursaries that accompany the fee increase ensure nobody on low income would pay another nickel. It isn’t about accessibility: a smaller proportion of Quebecers attend university than elsewhere in the country, notwithstanding fees that are a fraction of the national average. It isn’t even about students, really, two-thirds of whom are not participating.

Rather, it is about how we distribute resources in a society.
...

A civilized society distributes resources in two ways. One is through the market, based on mutually beneficial exchange. The other is through the state, based on need: the only moral basis of redistribution.

But the coercive power of the state is all too easily diverted into other, less savoury schemes of redistribution: on the one hand, by lobbying, connections or outright bribes; on the other hand, by threats, whether of the lawful, pressure-group kind, or the unlawful, violence-and-mayhem kind. In either case the aim is the same: to enlist the state to extract from others what we could not persuade them to give us freely. This has nothing to do with need, and everything to do with raw power.

Let's not forget that Canadian tuition subsidies are largely a transfer to the upper middle class. The Quebec thugs are rioting not for the poor but for a transfer to themselves.

Roger's world

Tyler pointed to an innovative agricultural sector as evidence of Roger's influence.

Here's Andrew Coyne's lauding of New Zealand's system of public administration, in contrast to Canada's.

Many of the worst political scandals of recent years, from sponsorships to the G8 mess, have stemmed in one way or another from ministers meddling in their departments’ affairs, whether to the benefit of their party, their constituents, their friends or themselves. That ministers will meddle may be thought of as a given. But ministers would be a lot less tempted to meddle if they did not actually have the power to do so: if they were removed from any role in the day-to-day management of departments, by means of a statutory separation of the two.

If that sounds like an unpardonable limit on the discretion of elected officials, recall that we already do this in many areas of government. It’s why the courts are insulated from political influence, at least after the judges have been appointed. It’s also why we set up Crown corporations, at arm’s length from their departments. So why don’t we apply the arm’s length model more broadly—making departments less the plaything of their ministers, and more organizations devoted to delivering the best service for the lowest cost?

I’m hardly the first to suggest this: in fact, I’m pretty much describing the system already in effect in New Zealand. As part of a program of reforms in the 1980s, New Zealand turned every government department into something resembling a Crown corporation. Deputy ministers became CEOs, hired on fixed five-year terms. Instead of simply issuing directives to his deputy minister, the responsible minister negotiates an annual contract with the department CEO, setting out broad policy objectives, together with benchmarks for measuring progress. Then the CEO is left to get on with the job, with broad powers to hire and fire and otherwise manage the department as he sees fit.

In effect, the minister becomes the purchaser of services on the public’s behalf, rather than the provider. He is still accountable for the mandate the department is given, and for seeing that it is met: indeed, since the terms of the contracts are public, the effect is to greatly clarify expectations and responsibilities. But he no longer has any role in how they’re delivered. So the minister of transport still sets the broad outlines of transport policy: he just doesn’t get to decide which roads go through whose ridings. Conscientious ministers ought to find this quite liberating. It frees them to focus on their proper role: setting policy for the country, rather than skulking around in their departments’ backrooms, deciding where to place gazebos and the like.

British Columbia decides whether to muck up its electoral system

Andrew Coyne again is stumping for changes in British Columbia's electoral law. BC dodged the bullet in 2005 but is giving the revolver another spin on Tuesday.

The best argument for Canada's shifting to Proportional Representation would be that it might weaken some otherwise pretty persistent regional voting patterns that reward regional bloc parties. BC's adopting the system could help push it to be put in place nationally. But that doesn't outweigh the costs.

Foremost among the costs of PR is that it consistently delivers minority governments. Canada's had a few of these lately, mostly because Duverger's Law doesn't hold well when there are strong regional cleavages: it predicts two-party races at the district level, but when there's strong heterogeneity across the country, you can get Bloc Quebecois/Liberal fights in Quebec, Conservative/Liberal fights in the Prairies, Conservative/NDP fights in BC, Liberal/Conservative fights in some parts of Ontario and NDP/Liberal fights in others leading to a multi-party parliament. This is by no means set in stone: Canada usually produces single party governments. But a move to PR would entrench coalition governments. Torsten Persson and Guido Tabellini have shown that PR tends to lead to increases in government spending because of the payoffs to small parties necessary for forming coalition governments.

Coyne says the STV system will be simple for voters to understand. As he says, voters just need to be able to count to five. Yeah. Here in New Zealand, we have an even simpler form of PR: Mixed Member Proportional. Voters give one tick for a local candidate to be the local MP, the other for the Party they wish to get more seats in Parliament overall. The Party Vote determines the composition of Parliament, with first call on seats going to district-elected MPs. The system's been in place since 1996, but only about half of all voters understand which vote (Party or District) does more to determine the composition of Parliament. So here all they need to do is count to two, and they can't manage it. Counting to five would be right out.

PR is great for folks who like process for the sake of process. The composition of Parliament under PR reflects proportionate support for various parties. But it's a terrible way to form a government and hold it accountable. It yields bad policy outcomes. First Past the Post, on the other hand, is procedurally ugly. The composition of Parliament can be at large variance from aggregated national voter preferences. But at least it gives voters an easy way to throw out an underperforming government: vote for the other guy. Under PR, voters can't tell who to blame for policies they don't like and don't know for whom to vote to punish that party. My bottom line on evaluating electoral systems is to look at the results they've produced elsewhere (see Persson and Tabellini, above) and to think through how easy it is for the median voter to cast a ballot turfing out the incumbent. The latter is, to my mind, the most critical feature of a democratic system. If all else fails due to voter ignorance, we might hope that retrospective voting can form a simple rule to follow: support the incumbent if you're happy, and vote for the Opposition if not. It's tough to do even that under PR.