Volume 7, Issue 1

With a concentrated supply of broadband Internet access, will the future of the Internet be as innovative as the past? This essay reconsiders contemporary debates that view broadband providers as gatekeepers. Instead, it offers an alternative perspective, viewing carriers as platform leaders. That framework focuses attention on the importance of platforms for innovation, and highlights issues missed in contemporary debates. The essay stresses the differences between open and proprietary systems, and between systems with overlapping but competing leadership. Viewed through this lens, platform leadership leads to lower transactions for affiliated partners, but a narrowing of the range of innovation by young firms in comparison to an open and unrestricted structure, a process labeled as “entrepreneurial truncation.” Platform leaders with market power also provide uneven degrees of transparency, use more discriminatory practices, and put unaffiliated business partners at disadvantages, which can deter entrepreneurial innovation as well. The essay concludes that innovation arises in all systems, so the exaggerated claims of contemporary debate lack merit. However, contemporary debate also misses the key point addressed by this essay: that open platforms are superior at addressing a wider and unexpected set of exploratory activities, and that policy can, and should, play an important role in fostering openness.

Why is it that the wealthiest people are not the most materialistic; that the most successful businesses are not the most profit-oriented; and that the happiest people do not directly pursue happiness? Using a diverse range of examples, from the Messenger spacecraft to French architecture, this essay explains why complex goals are best achieved when they are pursued indirectly; this is the concept of obliquity.

For capital markets to function, political institutions must support capitalism in general and the capitalism of financial markets in particular. Yet the shape, support, and extent of capital markets are often contested in the polity. Powerful elements — from politicians to mass popular movements — have reason to change, co-opt, and remove value from capital markets. And the competing capital markets’ players themselves have reason to seek rules that favor their own capital channels over those of others. How these contests are settled deeply affects the form, extent, and effectiveness of capital markets. And investigation of the primary political economy forces shaping capital markets can lead us to better understand economic, political, and legal institutions overall. Much important work has been done in recent decades on the vitality of institutions. Less well emphasized, however, is that widely-shared, deeply-held preferences, often arising from the interests and opinions that prevail at any given time, can sometimes sweep away prior institutions, establish new ones, or, less dramatically but more often, sharply alter or replace them. At crucial times, preferences can trump institutions, and how the two interact is well-illustrated by the political economy of capital markets. Since North’s (1990) famous essay, academic work has focused on the importance of institutions for economic development. Here, I emphasize the channels by which immediate preferences can trump institutional structure in determining the shape and extent of capital markets.