Tag: law and political economy

Crypto, macro, and information law

Dogecoin is in the news this week because of Elon Musk’s pump and dump in the latest of notable asset bubbles fueled in small part by Internet-informed, perhaps frivolous, day-traders. The phenomenon reminds me of this curious essay about viral art. It concludes:

The doge meme is a Goldsmithian piece, passing ephemerally through a network of peers. In a LaBeoufian moment, Jackson Palmer invented Dogecoin, capturing the meme and using it to leverage networks of power. Now it is art post-LaBeouf in its greatest form: authorless art as economic power, transmitted over networks. As the synthesized culmination of the traditions of economics and Western literature, DogeCoin is one of the greatest achievements in the history of art, if not the greatest.

This paragraph is perhaps best understood, if at all, as an abstruse joke. The essay itself is most likely not written by “Niklos Szabo”, easily conflated with Nick Szabo, one of the deeper thinkers behind cryptocurrency more generally. The real Szabo has written much more seriously and presciently about culture and the economy. As an aside, I believe Szabo’s writings about book consciousness prefigure Hildebrandt’s work on the role of the printing press as a medium contributing to the particular character of text-driven law. However if the enduring success of cryptocurrencies validates Szabo’s economics more than his cultural theory. His 2002 paper “Shelling out: the origins of money” is a compelling history of currency. Notably, it is not a work of formal economic theory. Rather, it draws on historical and anthropological examples to get at the fundamentals of the role currency plays in society. This study leads to the conclusion that currency must be costly to created and transferable with relatively low transaction costs. Bitcoin, for example, was designed to have these qualities.

What Szabo does not discuss in “Shelling out” is the other thing Bitcoin is most known for, which is speculative asset bubble pricing. Cryptocurrency has lurched into the mainstream in fits of speculative enthusiasm followed by crashes and breakdowns. It is risky.

Salome Viljoen and I are writing about financial regulations as part of our “Data Market Discipline” project. One takeaway from this work is that the major financial regulations in the United States were responses to devastating financial crises, such as the Great Depression and the 2008 financial crisis, which were triggered by the collapse of an asset bubble. So while currency is an old invention and the invention of new currencies is interesting, the project of maintaining a stable financial system is a relatively more recent legal project and an unfinished one at that. It is so much more unfinished for cryptocurrencies, that are not controlled by a central banking system, than for national fiat currencies for which, for example, interest rates can be used as a calibrating tool.

These are not idle theoretical points. Rather, they are at the heart of questions surrounding the recovery of the economy from COVID-related setbacks. Money from stimulus checks going to people who have no reason to increase their consumption (cf. Carroll et al., 2020) is perhaps responsible for the influx of retail investment into equities markets and, in particular, Reddit-coordinated asset bubbles such as the ones we’re seeing recently with Gamestop and Dogecoin. The next stimulus package being prepared by the Biden administration has sounded alarms from parts of the Economics establishment that it will spur inflation, while Janet Yellen has argued that this outcome can be prevented using standard monetary policy tools such as the increase of interest rates. Arguably, the recent rising price of Bitcoin is due to this threat of macro-economic stability of the dollar-denominated financial system.

I don’t mean any of this conclusively. Rather, I’m writing this to register my growing realization that the myriad Internet effects on culture, economy, and the law are often much more motivated by movements in internationally coupled financial systems than “technology policy” specialists or “public interest technologists” are inclined to admit. We are inclined, because of our training in something else — whether it be computer science, environmental law, political philosophy, or whatever — to seek out metaphors from our own domain of expertise. But many of the most trenchant analyses of why the current technological landscape seems a bit off come down to failures of the price mechanism in the digital economy. I’m thinking of Kapczynski ‘s (2011) critique of the price mechanism in relation to intellectual property, and Strandburg’s (2013) analysis of the failure of pricing in on-line services. We have on the one hand the increasingly misconceptualized “Silicon Valley”‘s commitment to a “free market” and on the other hand few of the conditions under which a “free market” is classically considered to be efficient. The data economy does not meet even classically liberal (let alone New, more egalitarian, Liberal) standards of justice. And liberal legal theory is not equipped, Jake Goldenfein and I have argued, to grapple with this reality.

What progress can be made?

Maybe there is something somebody with enormous wealth or institutional power could do to change the situation. I’m not one of those people. However, there is some evidence to support the point that at the root of these problems is a conceptual, intellectual failing to understand what’s going on at the root of it.

In some recent work with Kathy Strandburg, we are examining the conceptual roots of the highly influential Law and Economics (L&E) branch of legal scholarship. This field absorbs the techniques of neoclassical economics and develops them into actionable policy proposals and legal rules of thumb. It has come under political criticism from the recently formed Law and Political Economy (LPE) movement. Interestingly, it has also been critique from a “Law and Macroeconomics” perspective, which argues that L&E should really be called “law and microeconomics”, because of its inability to internalize macroeconomic concepts such as the business cycle or changes in monetary policy.

Among the assumptions at the roots of L&E are notions of optimality and efficiency that make somewhat naive assumptions about the nature of price and money. For example, Kaldor-Hicks efficiency, a relaxation of Pareto efficiency used in welfare economics as applied to L&E, allows for transactions that alter the situations of agents so long as one agent, who gains, could theoretically compensate the other for their losses (see Feldman, 1998), . This concept is used to consider social welfare optimal, resolving the neoclassical problem of the incomparability of individual utilities through an implicit pricing mechanism. This leads L&E to favor “wealth maximizing” policies.

However, grounding legal theory in the idea of a robust price mechanism capable of subsuming all differences in individual preferences is quite naive in a digital economy that is always already at the intersection of many different currencies (including cryptocurrency), variable and politically vulnerable systems of credit and debt, and characterized by markets that do not that the legal scaffolding needed to drive them towards “true” prices. If Mirowski and Nik-Khah (2017) are correct and Economists have abandoned earlier notions of “truth” to faith in the market’s price as a “truth” derived from streams of information, something is indeed amiss. Data is not a commodity, and regulations that treat data flows as commodity exchanges not well matched to the reality. In the Hayekian model, price is the signal that combines available information. In the data economy, the complexity topology of real data flows belies simplistic views of “the market”.

What tech law needs is a new economic model, one that, just as general relativity in physics showed how classical mechanics was a special case of more complex universal laws, reveals how data, intellectual property, and price are connected in ways that go beyond the classical liberal imagination.


Benthall, Sebastian and Viljoen, Salome, Data Market Discipline: From Financial Regulation to Data Governance (January 27, 2021). J. Int’l & Comparative Law – (2021)

Carroll, C. D., Crawley, E., Slacalek, J., & White, M. N. (2020). Modeling the consumption response to the CARES Act (No. w27876). National Bureau of Economic Research.

Feldman, A. M. (1998). Kaldor-hicks compensation. The new Palgrave Dictionary of economics and the law2, 417-421.

Hildebrandt, M. (2015). Smart technologies and the end (s) of law: novel entanglements of law and technology. Edward Elgar Publishing.

Kapczynski, A. (2011). The cost of price: Why and how to get beyond intellectual property internalism. UCLA L. Rev.59, 970.

Mirowski, P., & Nik-Khah, E. (2017). The knowledge we have lost in information: the history of information in modern economics. Oxford University Press.

Shekman, David. “Gamestop and the Surrounding Legal Questions.” Medium, Medium, 5 Feb. 2021, medium.com/@shekman27/gamestop-and-the-surrounding-legal-questions-fc0d1dc142d7.

Strandburg, K. J. (2013). Free fall: The online market’s consumer preference disconnect. U. Chi. Legal F., 95.

Szabo, N. (2002). Shelling out: the origins of money. Satoshi Nakamoto Institute.

Szabo, Niklos. “Art Post-LaBeouf.” Medium, Medium, 22 Sept. 2014, medium.com/@niklosszabo/art-post-labeouf-b7de5732020c.

Tech Law and Political Economy

It has been an intellectually exciting semester at NYU’s Information Law Institute and regular, more open research meeting, the Privacy Research Group. More than ever in my experience, we’ve been developing a clarity about the political economy of technology together. I am especially grateful to my colleagues Aaron Shapiro, Salome Viljoen, and Jake Goldenfein for introducing me to a lot of very enlightening new literature. This blog post summarizes what I’ve recently been exposed to via these discussions.

  • Perhaps kicking off the recent shift in thinking about law and political economy is the long-time-coming publication of Julie Cohen’s book, Between Truth and Power. While many of the arguments have been available in article form for some time, the book gives these arguments more gravitas, and enabled Cohen to do a bit of a speaking tour in the NYC area some months ago. Having a heavy-hitter in the field deliver such authoritative and incisive analysis has been, in my opinion, empowering to my generation of scholars whose critical views have not enjoyed the same legitimacy. Exposure to this has sent my own work in a new direction recently.
  • In a complementary move inspired perhaps by the political climate around the Democratic primary, the ILI group has been getting acquainted with the Law and Political Economy (LPE) field/attitude/blog. Perhaps best described as a left wing, institutionalist legal realist school of thought, the position is articulated in the referenced article by Britton-Purdy et al. (2020), in this manifesto, and more broadly on this blog. The mastermind of the movement is apparently Amy Kapczynski, but there are many fellow travelers–some internet luminaries, some very approachable colleagues. The tent seems inclusive.
  • LPE is, of course, a response to and play on “Law and Economics”, the once-dominant field of legal scholarship that legitimized so much neoliberal policy-making. What is nice about LPE is that beyond being a rehash of “critical” legal attitudes, LPE grounds itself in economic analysis, albeit in a more expansive form of economic understanding that includes social structures that affect, for example, social group inequalities. This creates room for, by providing a policy-oriented audience, heterodox economic views. Jake Goldenfein and I have a paper that we are excited to publish soon, “Data Science and the Decline of Liberal Law and Ethics”, which takes aim at the individualist assumptions of liberal regulatory regimes and their insufficiency in regulating platform companies. I don’t think we had LPE in mind as we wrote that article, but I believe it will be a fresh complementary view. Unfortunately, the conference where we planned to present it has been delayed by COVID.
  • Once the question of the real political economy of technology is raised, it opens up a deep theoretical can of worms that is as far as I can tell fractured across a variety of fields. One major source of confusion here is that Economics itself, as a field, doesn’t seem to have a stable conclusion about the role of technology in the economy. An insightful look into the history of Economics and its inability to correctly categorize technology–especially technology as a facet of capital–can be found in Nitzan (1998). Nitzan elucidates a distinction from Veblen (!) between industry and business: industry aims to produce; business aims to make money. And capitalism, argues Nitzan, winds up ultimately being about the capacity of absentee owners to claim sources of revenue. The distinction between these fields explains why business so often restricts production. As we noted in our ILI discussion, this is immediately relevant to anything digital, because intellectual property is always a way of restricting production in order to make a source of revenue.
  • I take a somewhat more balanced view myself, seeing an economy with more than one kind of capital in it. I’m fairly Bourdieusian in this way. On this point, I’ve had recommended to me Sadowski’s (2019) article that explicitly draws the line from Marx to Bourdieu and connects it with the contemporary digital economy. This is on a new short list for me.


Benthall, S, and Goldenfein, J., forthcoming. Data Science and the Decline of Liberal Law and Ethics. Ethics of Data Science Conference 2020.

Britton-Purdy, J.S., Grewal, D.S., Kapczynski, A. and Rahman, K.S., 2020. BUILDING A LAW-AND-POLITICAL-ECONOMY FRAMEWORK: BEYOND THE TWENTIETH-CENTURY SYNTHESIS. Yale Law Journal, Forthcoming.

Nitzan, J., 1998. Differential accumulation: towards a new political economy of capital. Review of international political economy5(2), pp.169-216.

Sadowski, J., 2019. When data is capital: Datafication, accumulation, and extraction. Big Data & Society6(1), p.2053951718820549.