Microsoft Word - Hurwitz-Manne-Classical-Liberalism-Copy-Edits-2018-04-05 (1).docx

ICLE | 2117 NE Oregon St. Ste 501 | Portland, OR 97232 | 503.770.0652

icle@laweconcenter.org | @laweconcenter | www.laweconcenter.org

Classical Liberalism and the Problem of

Technological Change

Justin “Gus” Hurwitz & Geoffrey A. Manne

ICLE Innovation & the New Economy Research Program

White Paper 2018-1

Classical Liberalism and the Problem of

Technological Change

Justin'(Gus)'Hurwitz'and'Geoffrey'A .'M a n n e'

Introduction

The'relationship'between'classical'liberalism'and'technology'is'surprisingly'

fraught.'The'common'understanding'is'that'technological'advance'is'

complementary'to'the'principles'of'classical'liberalism'–'especially'in'the'case'of'

contemporary,'information-age'technology.

'This'is'most'clearly'on'display'in'

Silicon'Valley,'with'its'oft-professed'libertarian'(classical'liberalism’s'kissing'

cousin)'affinities.'The'analytical'predicate'for'this'complementarity'is'that'

classical'liberalism'values'liberty-enhancing'private'ordering,'and'technological'

advance'both'is'generally'facially'liberty-enhancing'and'facilitates'private'

ordering.'

'This'chapter'focuses'on'“contemporary'technology.”'That'is,'generally,'

those'technologies'associated'with'the'information'revolution'of'the'past'

generation:'computers,'the'Internet,'and'related'information'communications'

and'processing'technologies.'A'treatment'of'the'relationship'between'classical'

liberalism'and'a'more'generalized'concept'of'technology'is'beyond'the'scope'of'

this'chapter.'It'is,'however,'the'authors’'view'that'the'discussion'offered'here'is'

relevant'to'such'a'broader'conceptualiza t ion.'

This'analysis,'however,'is'incomplete.'Classical'liberalism'recognizes'that'

certain'rules'are'necessary'in'a'well-functioning'polity.

'The'classical'liberal,'for'

instance,'recognizes'the'centrality'of'enforceable'property'rights,'and'the'

concomitant'ability'to'seek'recourse'from'a'third'party'(the'state)'when'those'

rights'are'compromised.'Thus,'contemporary'technological'advances'may'

facilitate'private'transactions'–'but'such'transactions'may'not'support'private'

ordering'if'they'also'weaken'either'the'property'rights'necessary'to'that'

ordering'or'the'enforceability'of'those'rights.'

This'chapter'argues'that'technological'advance'can'at'times'create'(or,'

perhaps'more'accurately,'highlight)'a'tension'within'principles'of'classical'

liberalism:'It'can'simultaneously'enhance'liberty,'while'also'undermining'the'

legal'rules'and'institutions'necessary'for'the'efficient'and'just'private'ordering'of'

interactions'in'a'liberal'society.'This'is'an'important'tension'for'classical'liberals'

to'understand'–'and'one'that'needs'to'be,'but'too'rarely'is,'acknowledged'or'

struggled'with.'Related,'the'chapter'also'identifies'and'evaluates'important'

fracture'lines'between'prevalent'branches'of'modern'libertarianism:'those'that'

tend'to'embrace'technological'anarchism'as'maximally'liberty-enhancing,'on'the'

one'hand,'and'those'that'more'cautiously'protect'the'legal'institutions'(

for'

example

,'property'rights)'upon'which'individual'autonomy'and'private'ordering'

are'based,'on'the'other.'

See,'for'example

,'JOHN'LOCKE,'TWO'TREATISES'ON'GOVERNMENT'at'§57'

(“[T]he'end'of'the'law'is,'not'to'abolish'or'restrain,'but'to'preserve'and'enlarge'

freedom.'For'…'where'there'is'no'law'there'is'no'freedom.”);'FRIEDRICH'A.'HAYEK,'

LAW,'LEGISLATION'AND'LIBERTY,'VOLUM E'1:'RULES'AND'ORDER'(1978)'at'33'

(“Liberalism'…'restricts'deliberate'control'of'the'overall'order'of'society'to'the'

enforcement'of'such'general'rules'as'are'necessary'for'the'formation'of'a'

spontaneous'order,'the'details'of'which'we'cannot'foresee.”).'

This'chapter'proceeds'in'four'parts.'Part'I'introduces'our'understanding'

of'classical'liberalism’s'core'principles:'an'emphasis'on'individual'liberty;'the'

recognition'of'a'limit'to'the'exercise'of'liberty'when'it'conflicts'with'the'

autonomy'of'others;'and'support'for'a'minimal'set'of'rules'necessary'to'

coordinate'individuals’'exercise'of'their'liberty'in'autonomy-respecting'ways'

through'a'system'of'private'ordering.'Part'II'then'offers'an'initial'discussion'of'

the'relationship'between'technology'and'legal'institutions'and'argues'that'

technology'is'important'to'classical'liberalism'insofar'as'it'affects'the'legal'

institutions'upon'which'private'ordering'is'based.'Part'III'explores'how'

libertarian'philosophies'have'embraced'contemporary'technology,'focusing'on'

“extreme”'and'“moderate”'views'–'views'that'correspond'roughly'to'liberty'

maximalism'and'autonomy'protectionism.'This'discussion'sets'the'stage'for'Part'

IV,'which'considers'the'tensions'that'technological'change'–'especially'the'rapid'

change'that'characterizes'much'of'recent'history'–'creates'within'the'classical'

liberal'philosophy.'The'central'insight'is'that'classical'liberalism'posits'a'set'of'

relatively'stable'legal'institution s' as'the'basis'for'liberty-enhancing'private'

ordering'–'institutions'that'are'generally'developed'through'public,'not'private'

ordering'–'but'that'technology,'including'otherwise'liberty-enhancing'

technology,'can'disrupt'these'institutions'in'ways'that'threaten'both'individual'

autonomy'and'the'private'ordering'built'upon'extant'institutions.'

I What Is Classical Liberalism? A Technology-

Relevant Account

It'may'seem'unnecessary'to'provide'a'background'understanding'of'classical'

liberalism'in'a'single'chapter'in'an'entire'book'on'the'subject.'But,'although'the'

general'contours'are'consistent,'there'is'no'universally'acknowledged'statement'

of'the'principles'that'define'classical'liberalism'and'they'vary'enough'from'

understanding'to'understanding'that'it'is'useful'to'define'how'the'term'is'used'

here.'Moreover,'the'discussion'that'follows'addresses'how'technology'affects'

what'we'think'of'as'certain'of'the'

defining

'characteristics'of'classical'liberalism.'

As'such,'it'is'particularly'useful'for'us'to'place'these'characteristics'on'the'table'

and'explain'their'importance'before'considering'how'technology'may'affect'

them.'

At'the'outset,'it'is'worth'clearly'stating,'as'a'matter'of'discursive'

convenience,'that'we'classify'classical'liberalism'and'libertarianism'as'closely'

related'but'distinct'philosophies,'where'libertarianism'encompasses'a'more'

restrictive'view'on'what'is'properly'the'purview ' of'the'state.'This'is'not'intended'

to'be'analytically'rigorous'nor'a'complete'characterization'of'either.'Rather,'it'is'

based'in'the'recognition'that'many'technologists,'both'in'academia'and'in'

industry,'style'themselves'as'libertarian'(or'“cyberlibertarian”),'and'that'there'is'

a'certain'complementarity'between'some'of'these'views'and'our'understanding'

of'classical'liberalism.'The'views'of'self-styled'libertarian'technologists'therefore'

present'a'useful'frame'through'which'to'consider'the'broader'features'of'the'

classical'liberal'understanding'of'technology.'

Other'contributions'to'this'volume'discuss'the'origins'and'principles'of'

classical'liberalism'in'more'detail'and'with'more'sophistication'than'is'required'

here.'For'our'purposes,'it'is'enough'to'explain'classical'liberalism'as'a'political'

philosophy'that'values'reliance'on'a'minimal'set'of'autonomy-respecting'rules'to'

facilitate'voluntary,'welfare-enhancing'transactions'between'individual s.

'By'and'

large,'these'“autonomy-respecting'rules”'are'property'rights.

Importantly,'this'sets'up'an'inherent'tension'in'classical'liberalism.'

Property'is'not'the'same'thing'as'liberty'and,'in'fact,'it'is'a'

constraint'

on'liberty.'

The'nineteenth'century'French'anarchist,'Pierre-Joseph'Proudhon,'famously'

declared'that'“[p]roperty'is'theft!”

'and,'in'a'sense,'it'is:'By'recognizing'or'by'

defining'and'assigning'property'rights'(and'by'enforcing'them),'the'government'

'Among'many'other'sources'for'this'general'conception'of'classical'

liberalism,'see,'

for'example

,'Richard'A.'Epstein,'

Let'“The'Fundamental'Things'

Apply”:'Necessary'and'Contingent'Truths'in'Legal'Scholarship

,'115'

Harvard

'LAW'

REVIEW'1300,'1302'(2002)'(“[A]'strong'(but'not'absolute)'

institutional

preference'for'consensual'over'forced'exchanges;'the'legal'system'should'find'

the'former'presumptively'acceptable'and'the'latter'presumptively'unacceptable.'

From'this'framework,'we'can'mount'a'defense'of'private'property'and'freedom'

of'contract,'subject'to'the'usual'provisos'regarding'the'role'of'government'in'

protecting'individuals'against'the'use'of'force'and'fraud,'regulating'monopoly,'

and'providing'public'infrastructure.”).'

'In'the'economic'sense,'as'much'as'the'legal'sense,'insofar'as'they'

establish'not'only'a'stable'legal'order'for'achieving'distributive'justice'in'

Nozick’s'sense,'

see,'for'example

,'ROBERT'NOZICK,'ANARCHY,'STATE'AND'UTOPIA'149–

52'(1974),'but'also'enable'an'efficient'economic'order'by'reducing'transaction'

costs,'see,'

for'example

,'Armen'A.'Alchian'and'Harold'Demsetz,'

The'Property'

Right'Paradigm

,'33'JOURNAL'OF'ECONOMIC'HISTORY'16'(1973).'

'PIERRE-JOSEPH'PROUDHON,'WHAT'IS'PROPERTY?'AN'INQUIRY'INTO'THE'PRINCIPLE'

OF'RIGHT'AND'OF'GOVERNMENT'(1840;'Benjamin'R.'Tucker,'trans.,'1890),'

available'

'http://bit.ly/2t0xPDC.'

removes'something'of'value'from'the'commons'that'was'formerly'accessible'by'

anyone'and'transfers'it'to'a'particular'person.'

But'just'as'importantly,'the'benefits'of'property'are'enjoyed'by'everyone.'

The'system'is'decentralized'such'that'

anyone

'may,'in'principle,'claim'a'property'

right'over'whatever'she'chooses'provided'she'is'the'first'to,' sa y,'possesses'a'

piece'of'land,'or'otherwise'assert'her'right'as'the'result'of'voluntary'exchange'or'

by'operation'of'law.'Moreover,'the'incentives'to'invest,'hire'workers,'produce'

things'of'value,'and'trade'enabled'by'a'system'of'property'rights'result'in'

widespread'social'benefit.'For'classical'liberals,'the'justification'for'the'

constraint'on'liberty'entailed'by'property'rights'arises'not'from'an'appeal'to'

natural'order,'but'from'the'perceived'social'advantage'it'confers.'As'Richard'

Epstein'has'written:'

[T]hese'rights'are'defensible'because'they'help'advance'

human'happiness'in'a'wide'range'of'circumstances,'so'that'their'

creation'under'a'set'of'general'prospective'rules'satisfies'the'most'

exacting'of'social'criterion.'They'tend'to'leave'no'one'worse'off'

than'in'a'state'of'nature,'and'indeed'tend'to'spread'their'net'

benefits'broadly'over'the'entire'population—including'both'those'

who'gain'property'rights'under'the'standard'rules'of'acquisition'

by'first'possession,'and'those'who'participate'in'the'system'only'

through'the'ownership'of'their'own'labor'and'their'ability'to'enter'

into'voluntary'transactions'with'all'individuals'for'the'exchange'of'

labor,'property'or'both.

'Richard'A.'Epstein,'

Why'Libertarians'Shouldn’t'Be'(Too)'Skeptical'About'

Intellectual'Property

,'Progress'&'Freedom'Foundation'Progress'on'Point'Paper'

Such'a'system'has'at'least'two'important'characteristics.'

First,'because'it'is'premised'on'respect'for'individual'autonomy,'including'

rules'that'provide'for'the'protection'and'disposition'of'all'individuals’'property,'

classical'liberalism'is'built'upon'what'is'commonly'accepted'to'be'a'sound'moral'

foundation.

'Second,'because'such'rules'channel'interactions'between'

individuals'into'

voluntary

'transactions,'these'transactions'tend'to'be'welfare'

enhancing.'At'the'same'time,'because'respect'for'autonomy'necessitates'that'an'

individual'cannot'use'or'dispose'of'her'property'in'a'way'that'interferes'with'the'

rights'of'others,'these'transactions'tend'to'enhance'(or,'at'minimum,'not'detract'

from)'

social

'welfare,'as'well.'

The'mechanism'by'which'these'principles'operate'–'and'also'their'

ultimate'goal'–'is'private'ordering:'“What'really'matters'is'that'we'develop'a'

system'of'secure'property'rights'that'allows'people'to'transact'at'low'cost'and'

high'reliability.”

'Rather'than'rely'on'an'external,'third-party,'decision'maker'to'

attempt'the'efficient'ordering'of'individuals’'affairs,'classical'liberalism'advances'

a'system'that'recognizes'the'limits'of'knowledge'and'the'risk'of'abuse'of'power'

inherent'in'that'model.'Instead,'classical'liberalism'advances'a'system'that'

depends'upon'individuals’'localized'knowledge'and't heir' own'self-interest'to'

No.'13.4,'at'2'(Feb.'2006),'

available'at

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=981779.'

'We'observe'that,'at'least'in'its'basic'design,'a'classical'liberal'order'can'

satisfy'the'morality'of'a'broad'array'of'thinkers.'For'instance,'on'Rawls’'account'

–'someone'not'typically'considered'a'classical'liberal'–'“justice'as'fairness”'

requires'something'like'Pareto-optimality'in'the'distributions'within'a'society.'

JOHN'RAWLS,'A'THEORY'OF'JUSTICE'58'(1999).'

'Richard'A.'Epstein,'

The'Property'Rights'Movement'and'Intellectual'

Property

,'REGULATION'58,'63'(Winter'2008).'

order'their'conduct.'The'key'virtue'of'such'a'system'is'that'it'does'not'

presuppose'the'existence'of'an'external'decision'maker'with'sufficient'

knowledge,'ability,'and'incentive'to'order'the'affairs'of'others.'And,'again,'such'a'

system'has'the'virtue'of'being'morally'sound:'Whereas'a'system'that'relies'upon'

an'external'decision'maker'must'empower'that'decision'maker'to'use'

(potentially'arbitrary)'force'to'implement'its'social'ordering'in'the'face'of'

intransigent'parties,'classical'liberalism'advances'a'system'in'which'transactions'

are'voluntarily'achieved'by'virtue'of'mutually'beneficial'exchange.'

In'part'because'of'its'preference'for'private'ordering,'classical'liberalism'

is'often'characterized'as'being'opposed'to'government'regulation'and'espousing'

extreme'views'of'regulatory'minimalism.'But'such'characterizations'are'overly'

simplistic'and'fundamentally'wrong.'Classical'liberalism'properly'understood'

both'requires'and'respects'strong'legal'institutions'–'particularly'well-defined'

property'rights'–'in'order'to'facilitate'and'enforce'the'private'ordering'that'is'its'

sine'qua'non

.'Moreover,'many'classical'liberals'recognize'that'the'system'of'

private'ordering'espoused'by'classical'liberalism'necessarily'advances'only'

allocatively'efficient'transactions;'it'does'not'necessarily'promote'distributive'

efficiency,'and'such'distributional'adjustments'of'wealth'by'government'may'be'

necessary'on'the'back'end'of'the'system.

'And'classical'liberalism'may'even'

admit'of'the'possibility'of'regulatory'intervention'through'public'law'institutions'

where'private'legal'institutions'are'insufficient'or'relatively'inefficient.

'See,'for'example,'Hayek’s'discussion'of'the'potential'need'for'some'form'

of'welfare'programs'in'sufficiently'wealthy'societies.'F.'A.'HAYEK,'THE'ROAD'TO'

SERFDOM'133–35'(1994).'

See,'for'example,

'RICHARD'EPSTEIN,'SIM PL E 'RULES'FOR'A'COMPLEX'WORLD'

280–81'(1995)'(describing'the'shift'from'a'civil'legal'regime'toward'a'public'

In'contemporary'discussions,'the'core'principles'of'classical'liberalism'

are'not'infrequently'framed'in'terms'of'Coasean'and'welfare'economics.'These'

perspectives'focus'attention'on'allocative'efficiency.

'The'predicates'for'

classical'liberalism,'however,'were'established'well'before'Marshall'an d' Coase,'

and'all'of'the'foundational'ideas'are'contained'in'contemporaries'of'the'Scottish'

Enlightenment,'most'notably'in'the'works'of'David'Hume'and'Adam'Smith.

That'said,'both'welfare'economics'and'Coasean,'transaction-cost'

economics'are'particularly'useful'for'understanding'the'classical'liberal'

perspective'on'technology.'

Welfare'economics'offers'a'useful'lens'for'understanding'classical'

liberalism’s'concern'with'individual'autonomy.'An'important'concept'in'welfare'

economics'is'the'distinction'between'Pareto-efficient'transactions'and'Kaldor-

Hicks–efficient'transactions.'A'Pareto-improving'transaction'is'one'that'makes'at'

least'one'party'better'off'without'making'any'parties'worse'off.'For'instance,'

Orlando'has'an'apple'but'prefers'oranges;'Alice'has'an'orange'but'prefers'apples.'

If'Orlando'and'Alice'exchange'fruits,'each'is'better'off'(and'neither'is'worse'off).'

In'a'transaction'that'is'Kaldor-Hicks–efficient,'however,'parties'may'be'made'

worse'off'provided'that,'on'net,'society'is'made'better'off.'Thus,'Orlando'has'no'

regulatory'regime'for'the'management'of'damages'from'small'amounts'of'

pollution'affecting'a'large'number'of'parties).'

See,'for'example

,'Armen'A.'Alchian'and'Harold'Demsetz,'

The'Property'

Right'Paradigm

,'33'JOURNAL'OF'ECONOMIC'HISTORY'16,'21–22'(1973).'

See,'for'example,

'ADAM'SMITH,'AN'INQUIRY'INTO'THE'NATURE'AND'CAUSES'OF'

THE'WEALTH'OF'NATIONS'(1776)'(Edwin'Cannan,'ed.,'1904),'

available'at

http://oll.libertyfund.org/titles/smith-an-inquiry-into-the-nature-and-causes-

of-the-wealth-of-nations-cannan-ed-in-2-vols;'David'Hume,'

On'Government,'

(1777)'(Liberty'Fund,'ed.,'2013),'

available'at

'http://lf-

oll.s3.amazonaws.com/titles/2472/Hume_OnGovernment1777.pdf.'

fruit'and'Alice'has'an'orange.'Orlando'likes'oranges'more'than'Alice'does.'If'he'

simply'steals'Alice’s'orange'he'has'gained'more'than'Alice'has'lost.'Under'a'

Kaldor-Hicks'standard'(assuming'no'expenditures'to'prevent'the'theft),'this'is'an'

efficient,'socially-beneficial'transaction.'

The'justification'for'Kaldor-Hicks–efficient'transactions'is'that,'in'

principle,'Alice'could'be'compensated'for'Orlando’s'theft.'For'instance,'the'

government'could'tax'Orlando'in'order'to'compensate'Alice;'or'Alice'could'sue'

Orlando'and'recover'compensatory'damages.'And,'the'theory'goes,'it'is'better'to'

allow'Orlando'to'put'Alice’s'orange'to'socially-valuable'uses'than'to'risk'losing'

out'on'the'benefit'of'those'uses'because'of'Alice’s'intransigence'or'difficulties'

that'Orlando'may'face'(i.e.,'transaction'costs)'in'bringing'such'a'transaction'to'

fruition.'

From'the'classical'liberal'perspective,'however,'only'Pareto-efficient'

transactions'are'presumptively'legitimate.'Such'transactions'are'inherently'

beneficial'to'all'parties'(or,'at'least,'beneficial'to'some'parties'and'not'harmful'to'

any),'and'these'benefits'create'incentives'for'parties'to'engage'in'these'welfare-

enhancing'transactions.'If'they'are'truly'welfare-enhancing,'no'coercion'should'

be'necessary'for'them'to'occur.'If'there'are'obstacles'to'these'transactions'

occurring,'classical'liberalism'holds'that'we'should'address'those'obstacles'

rather'than'adopt'(Kaldor-Hicks-efficient)'rules'that'would'allow'Orlando'to'

violate'Alice’s'autonomy.'Doing'so'facilitates'private'ordering'and'protects'

individuals'such'as'Alice'from'undue'encroachment'by'either'Orlando'or'the'

state.'(As'we'will'see,'however,'extreme'cyberlibertarianism'would'readily'

countenance'Kaldor-Hicks'improvements).'

The'background'concern'for'transaction'costs'implicitly'runs'through'

many,'if'not'all,'legal'constructs'that'developed'at'common'law.'As'Tom'Merrill'

and'Henry'Smith'have'observed,

'the'goal'of'creating'and'using'legal'constructs'

is'to'manage'the'transaction'costs'(“information'costs”'in'their'account)'inherent'

in'a'world'of'scarce'resources.'For'instance,'they'describe'the'difference'between'

applying'an'

in'rem

'regime'and'an'

in'personam

'regime'for'managing'property.'

The'wisdom'of'applying'one'or'the'other'in'any'given'context'comes'down'to'

their'relative'abilities'to'manage'the'information'costs'associated'with'settling'

disputes'relating'to'ownership'and'use.

Coase'similarly'offers'a'useful'lens'for'understanding'classical'liberalism’s'

focus'on'the'relationship'between'legal'institutions' and'private'ordering.'For'

Coase,'the'concept'of'transaction'costs'is'k ey'to'understanding'the'relationship'

See,'for'example,

'Thomas'Merrill'and'Henry'Smith,'

The'

Property/Contract'Interface

,'101'COLUMBIA'LAW'REVIEW'773,'792–797'(2001).'

'On'Merrill'and'Smith’s'account,'

in'rem

'rights'provide'a'way'of'

minimizing'the'overall'information'costs'associated'with'these'disputes'because'

the'locus'of'ownership'is'fixed'on'the'property'itself.'In'the'end,'what'matters'in'

a'particular'dispute'is'which'party'gets'the'right'to'use'a'piece'of'property;'but'

the'way'you'arrive'at'that'conclusion'matters'a'good'deal.'If'rights'to'use'were'

always'attached'to'individuals,'the'disputes'would'not'just'be'between'A'(the'

putative'owner'of'a'piece'of'property)'and'B,'but'between'A'and'all'possible'B’s,'

a'situation'that'would'exponentially'grow'the'social'costs'associated'with'

settling'property'disputes.'By'locating'the'a t tributes'of'ownership'within'the'

property'itself,'however,'the'costs'are'linear,'as'each'B'who'would'challenge'a'

use'examines'her'claims'against'a'single'record'of'entitlements'attached'to'the'

property'itself.'The'goal'of'establishing'this'order'is'to'create'an'efficient'system'

of'private'ordering'that'is'more'likely'than'not'to'promote'Pareto-optimal'

transfers'(in'theory,'if'not'in'practice).'

between'individual'actors’'actions,'legal'institutions,'and'efficient'outcomes.

Starting'with'a'counterfactual'world'in'which'there'are'no'transaction'costs,'he'

explains'that'legal'institutions'in'such'a'world'do'not'matter'because'individual'

actors'will'always'engage'in'a'series'of'transactions'that'result'in'all'resources'

being'put'to'their'highest-value'use.'But,'he'goes'on,'because'in'the'real'world'

there'are'always'transaction'costs,'well-designed'legal'institutions'play'a'crucial'

role'in'ensuring'optimal'outcomes'by'reducing'the'transaction-cost'impediments'

to'efficient'transfers.'This'perspective'is'very'much'in'line'with'that'of'Scottish'

Enlightenment'philosophers,'who'similarly'ascribed'great'importance'to'legal'

institutions.'

More'to'the'point,'Coase’s'focus'on'transaction'costs'precisely'captures'

why'the'relationship'between'classical'liberalism'and'technology'is'so'

fascinating'and'important.'As'we'discuss'in'Part'II,'new'technology'is'often'

developed'and'adopted'precisely'because'of'its'effects' on' transaction'costs.'But'

any'change'in'the'incidence'or'level'of'transaction'costs'can'significantly'alter'

the'optimal'initial'assignment'of'rights'to'maximize'the'likelihood'of'voluntary'

exchange.'This'means'that'technology'may'disrupt'the'structure'of'the'legal'

institutions'necessary'to'facilitate'efficient,'welfare-enhancing'outcomes.'At'the'

same'time,'the'distribution'of'these'effects'is'often'uneven,'across'both'the'

specific'transactions'that'will'be'entered'into,' a s'well'as'the'individuals'who'will'

benefit.'This'may'further'exacerbate'the'effects'of'technological'disruptions'upon'

existing'legal'institutions,'creating'the'possibility'that'a'technological'advance'

could'both'dramatically'benefit'some'parties'but'dramatically'disadvantage'

See'generally

,'Ronald'H.'Coase,'

The'Problem'of'Social'Cost

,'3'JOURNAL'OF'

LAW'AND'ECONOMICS'1'(1960).'

others'in'indirect'and'unpredictable'ways.'Where'this'is'the'case,'technology'has'

the'potential'to'undermine'both'the'moral'foundations'and'the'welfare'

justifications'for'classical'liberalism.'

II Why Technology Matters to Classical

Liberalism

Technology'in'its'broadest'sense'is'merely'the'means'by'which'we'do'things;'

technological'advance'is'a'change'in'the'way'we'do'things'that'increases'benefit'

and/or'lowers'cost.'The'waterwheel'allowed'us'to'use'a'constant'linear'force'

(the'flow'of'water)'to'drive'a'rotational'shaft'that,'in'turn,'could'be'used'to'drive'

a'range'of'tools.'It'was'a'vast'improvement'over'human-'or'animal-powered'

machines.'The'advent'of'the'steam'engine'offered'even'more'benefit'by'allowing'

us'to'drive'the'same'rotational'shaft'almost'anywhere,'without'the'need'for'a'

source'of'running'water.'The'advent'of'the'internal'combustion'engine,'in'turn,'

provided'yet'another'improvement,'allowing'us'to'drive'a'rotational'shaft'on'a'

more'reliable'and'efficient'scale.'In'the'same'way,'the'Internet'is'a'technological'

evolution'of'the'telephone,'which'is'an'evolution'of'the'telegraph,'which'is'an'

evolution'of'postal'carriers,'which'is'an'evolution'of'private'couriers'–'all'

technologies'that'allow'individuals'to'communicate'with'one'another'at'a'

distance.'

Technology,'and'especially'technological'advance,'is'important'to'the'

maintenance'and'advance'of'classical'liberalism.'Technology'is'a'key'input'into'

liberty,'effectively'defining'what'individuals'can'do:'that'is,'defining'the'practical'

boundaries'of'an'individual’s'liberty.'And,'as'technological'advance'can'expand'

the'scope'of'these'boundaries,'it'is'often'liberty-enhancing.'

Such'gains'are'realized'in'multiple'ways.'For'instance,'some'technology'

enables'new'types'of'conduct.'The'transition'from'the'waterwheel'to'the'steam'

engine'to'the'internal'combustion'engine'dramatically'expanded'where'

individuals'could'live'and'increased'their'quality'of'life.'Other'technology'affects'

how'people'are'able'to'engage'in'conduct'that'they'already'enjoy,'largely'by'

reducing'the'costs'associated'with'that'conduct.'Improvements'in'technology'for'

writing'and'communications,'for'instance,'reduce'the'costs'of'interacting'(and'

transacting)'with'others:'The'costs'of'transactions'in'a'world'where'

communications'are'recorded'on'papyrus'and'transmitted'by'courier'are'

dramatically'different'than'those'in'a'world'where'they'are'recorded'as'bits'on'a'

computer'that'are'transmitted'via'wires.'

As'a'result,'as'an'initial'matter,'the'classical'liberal'position'entails'a'

distinct'skepticism'of'the'development'of'new'rules,'or'even'the'application'of'

existing'rules,'to'impede'technological'advance:'

[T]here'is'a'robust'body'of'literature'establishing'the'

contributions'of'technological'innovation'to'economic'growth'and'

social'welfare'…'[E]ven'apparently'small'innovations'can'generate'

large'consumer'benefits.'It'is'because'of'these'dynamic'and'often'

largely'unanticipated'consequences'of'novel'technological'

innovation'that'both'the'likelihood'and'social'cost'of'erroneous'

interventions'against'innovation'are'increased.

'Geoffrey'A.'Manne'and'Joshua'D.'Wright,'

Innovation'and'the'Limits'of'

Antitrust

,'6'JOURNAL'OF'COMPETITION'LAWAND'ECONOMICS'153,'168'(2010).'

The'story'of'technology'is'not'necessarily'all'positive,'however.'Assessing'the'net'

effect'of'technological'advance'is'particularly'complicated'by'the'possibility'(or'

likelihood,'even)'that'its'effect'on'liberty,'autonomy,'and'the'institutional'

environment'may'simultaneously'push'in'opposing'directions.'

For'one'thing,'the'benefits'of'technological'advance'or'the'problems'that'

new'technology'can'(or'cannot)'improve'upon'will'inevitably'fall'unequally'

across'members'of'society,'thus'altering,'and'often'impeding,'social,'legal,'

commercial,'or'other'relationships'in'unexpected'ways.'The'advent'of'the'

waterwheel,'for'instance,'endowed'those'near'running'water'with'benefits'

unavailable'to'others,'and'diverted'economic'resources'away'from'activities'that'

could'not'benefit'from'the'operation'of'the'waterwheel,'all'without'respect'to'

those'activities’'relative'social'value.'

For'another'thing,'technologies'that'benefit'private'parties'and'expand'

their'liberties'can'also'benefit'government'and'expand'its'power'(and'constrict'

the'populace’s'liberties).'While'the'advent'of'the'telephone,'for'example,'

certainly'conferred'enormous'benefit'and'substantial'liberty'upon'the'pop u l ace,'

it'also'extended'the'reach'of'government'and'just'as'certainly'facilitated'to'the'

rise'of'a'more'centralized'and'invasive'state.

See'

Henry'G.'Manne,'

Reconciling'Different'Views'about'Constitutional'

Interpretation

'in'THE'CONSTITUTION,'THE'COURTS,'AND'THE'QUEST'FOR'JUSTICE'55,'60'

(Robert'A.'Goldwin'&'William'A.'Schambra,'eds.'1989)'(“As'a'practical'matter'…'

[e]ffective'application'of'federal'law'[at'the'time'of'the'Constitution’s'drafting]'

was'severely'constrained'by'the'primitive'technologies'of'transportation'and'

communications'…'But'the'rapid'development'of'communication'and'

transportation'technology'through'the'nineteenth'and'twentieth'centuries'made'

physically'possible'a'degree'of'federal'law'enforceability'inconceivable'in'

1787.”).'

Moreover,'new'technologies'that'increase'the'ease'of'or'benefits'from'

transactions'between'private'parties'(and'thus'expand'opportunities'for'private'

ordering)'may'impose'greater'external'costs'upon'third'parties,'either'because'

the'nature'of'the'transactions'may'entail'new'externalities'or'simply'because'of'

the'increase'in'the'number'of'transactions'that'impose'externalities.'

These'concerns'are'not'unique'to'“technology,”'although'they'may'appear'

particularly'acute'in'the'context'of'technological'advance.'And'this'critique'

should'not'be'read'as'anti-technology'Luddism.'To'the'contrary,'“problematic”'

technological'advance,'where'it'occurs,'often'accompanies'great'social'welfare'

gains'from'increased'productivity'and'widespread'dispersion'of'wealth.'

Moreover,'such'problematic'technological'advance'frequently'spurs'beneficial'

advances'in'response.'The'classic'example'is'Schumpeterian'competition,'in'

which'firms'leapfrog'one'another'in'a'series'of'short-lived'monopolies,'each'

achieved'through'technological'advance'and'maintained'only'so'long'as'the'then-

monopolist'can'maintain'its'advantage.'While'this'may'bear'the'superficial'

hallmarks'of'monopoly,'such'dynamic'competition'in'technology'markets'is'

actually'perfectly'consistent'with'strong'competition'and'procompetitive'

outcomes.

'Each'successive'“winning”'firm'must'be'committed'to'investing'its'

profits'in'developing'new'and'better'technologies'in'order'to'try'to'preempt'or'

co-opt'the'next'technological'wave'and'maintain'its'position.'The'benefits'of'this'

See,'for'example

,'Thomas'M.'Jorde'and'David'J.'Teece,'

Antitrust'Policy'

and'Innovation:'Taking'Account'of'Performance'Competition'and'Competitor'

Cooperation

,'147'JOURNAL'OF'INSTITUTIONAL'AND'THEORETICAL'ECONOMICS'118'

(1991).'Note'also'that'“competition'for'the'market”'can'be'as'constraining'as'

within-market'competition.'

See

'Harold'Demsetz,'

Industry'Structure,'Market'

Rivalry'and'Public'Policy

,'16'JOURNAL'OF'LAW'AND'ECONOMICS'1'(1973).'

“free-market'innovation'machine,”'as'William'Baumol'dubbed'it,

'redound'not'

only'to'the'firm,'of'course,'but'also'to'its'customers'and'to'society'writ'large.'

Thus,'further'confounding'any'evaluation'of'the'benefits'of'technological'

advance,'such'changes'must'be'considered'in'a'dynamic'context.'The'mere'fact'

that'a'new'technology'has'some'deleterious'effects'today'does'not'necessarily'

justify'corrective'intervention'through'legal'institutions;'rather,'today’s'apparent'

technological'costs'may'actually'drive'Schumpeterian'competition,'creating'

incentives'for'further'technological'advance'to'improve'upon'those'effects.'

The'important'insight'here'is'that,'as'noted,'classical'liberalism'is'

concerned'with'protecting'and'advancing'both'the'liberty'of'the'individual'

as'

well'as

'the'autonomy'of'other'individuals'and'the'ability'of'the'institutional'

environment'to'facilitate'private'ordering.'Technologies'that'are'liberty-

enhancing'may'nonetheless'be'concerning'from'the'classical'liberal'perspective'

if'they'risk'encroaching'upon'the'autonomy'of'others'or'impeding'welfare-

enhancing'transactions.'

The'effect'of'technological'change'on'the'institutional'environment'is'

particularly'important'and'underappreciated.'Changes'that'expand'liberty'for'

some'people'may'also'alter'the'relative'incidence'of'transaction'costs'between'

contracting'parties'and'thus'alter'or'impair'the'(previously)'efficient'allocation'

of'property'rights.'The'institutional'environment'is'not'–'nor'should'it'be'–'static.'

Just'as'libertarianism'is'concerned'with'ensuring'that'laws'and'regulations'not'

needlessly'impair'welfare-'and'liberty-enhancing'technological'progress,'it'

'WILLIAM'J.'BAUMOL,'THE'FREE-MARKET'INNOVATION'MACHINE:'ANALYZING'THE'

GROWTH'MIRACLE'OF'CAPITALISM'(2003).'

should'be'sensitive'to'the'ways'that'technological'advance'may'alter'the'

desirability'of'

status'quo

'institutions.'

Because'of'the'reallocation'of'relative'rights'and'powers'inherent'in'

technological'change,'even'an'effort'to'maintain'the'constancy'of'institutions'–'

not

'to'change'them'in'response,'in'other'words'–'results'in'a'reordering.'Perhaps'

most'troublingly'(and'in'a'fashion'seemingly'woefully'underappreciated'by'most'

classical'liberals),'this'exogenous'technological'change'even'inherently'alters'the'

fundamental'political'ordering'embodied'in'the'Constitution:'

In'1787,'[]'the'idea'that'the'federal'government'could'

effectively'regulate'matters'relating,'for'example,'to'coal'mine'

safety'standards'would'have'seemed'absurd,'not'merely'as'a'legal'

matter'but,'much'more'important,'as'a'practical'matter.'It'was'not'

physically'possible'for'the'federal'government'to'serve'its'writ'

widely'enough'to'allow'it'effective'authority'over'every'detail'of'all'

commercial'matters'…'

Then'…'enormous'systems'of'roads,'telephones,'radio,'

television,'airplanes,'and'computers'appeared'…'As'a'result'a'gross'

alteration'of'the'federal'government’s'physical'power'to'regulate'

commerce'had'occurred.'Yet'when'the'courts'looked'to'the'words'

of'the'document'and'to'the'“original'intent'…,”'[t]he'legal'concept'

of'interstate'commerce'grew'

pari'passu

'with'the'federal'

government’s'ability'to'administer'laws'locally.'While'the'words'

did'not'change,'the'Supreme'Court'allowed'the'constant'expansion'

of'federal'regulatory'powers'in'keeping'with'the'changes'in'

markets'and'market'structure'occasioned'by'the'new'technology'…'

What'had'actually'happened'to'change'our'constitutional'

reality'in'this'drastic'fashion?'Had'there'been'an'amendment'or'a'

revolution?'No,'there'had'been'only'the'invention'or'introduction'

of'new'technologies'by'nonelected'scientists'and'entrepreneurs'…'

In'other'words,'the'accidents'of'technological'development'

determine'the'real'limits'on'the'restraining'influence'of'the'

Constitution.

At'the'same'time,'classical'liberalism'must'deal'with'the'effect'of'technology'on'

the'perceived'distribution'of'rights'and'rents'through'political'institutions'and'

the'effort'to'change'them'accordingly.'At'minimum,'to'the'extent'that'

technological'change'alters'the'social'distribution'of'liberty'and'autonomy'under'

existing'institutions,'classical'liberals'must'grapple'with'the'reality'that'the'

backlash'against'such'changes'may'result'in'demand'for'–'and'political'

acquiescence'to'–'subsequent'institutional'changes'to'restore'the'previous'

distribution'of'rights'across'society'in'ways'that,'even'net'of'the'gains'from'

technology'itself,'are'socially'harmful.'

In'other'words,'although'technological'advance'can'(and'usually'does)'

increase'overall'social'welfare'in'broad'strokes,'the'political'response'to'the'

redistribution'of'rights,'power,'and'rents'it'may'entail'can'lead'to'a'net'reduction'

in'welfare'–'including'through'reductions'in'private'ordering.'

'Manne,'

Reconciling'Different'Views'about'Constitutional'Interpretation

supra

'note'17,'at'66–67'(emphasis'added).'

This'problem'is'particularly'acute'in'the'case'of'implementations'of'

technological'innovation'where'the'narrow'redistribution'of'rents'may'be'

immediately'apparent,'but'the'broad,'social'benefits'of'new'technology'or'new'

business'models'adapted'to'it'may'not'be'understood'for'some'time.'Importantly'

for'a'consequentialist'approach'like'that'of'classical'liberalism,'this'effect'may'be'

abetted'by'non-political'actors'including'economists'and'legal'scholars'who'tend'

to'underappreciate'the'limits'of'their'knowledge'about'novel'technology'and'

novel'business'arrangements.

Consider'an'important'and'contentious'contemporary'example:'privacy.'

Prior'to'the'modern'era'in'which'a'great'number'of'social'interactions'are'

carried'out'online,'it'was'relatively'easy'for'individuals'to'keep'information'

about'themselves'private'and'difficult'for'third'parties'(including'the'

government)'to'observe'and'record'that'information.'Today,'by'contrast,'it'is'

comparatively'difficult'for'individuals'to'keep'such'information'private'and'easy'

for'third'parties'to'observe'and'record'that'information.'Despite'changes'in'the'

value'people'attach'to'privacy'that'inevitably'accompanied'that'evolution,'

changed'technology'may'have'shifted'not'only'the'efficient'delineation'of'privacy'

rights'(from'a'regime'in'which'individuals'were'assumed'to'have'waived'control'

of'information'absent'efforts'to'retain'it'to'one'in'which'they'are'instead'

assumed'to'retain'control'absent'voluntary'waiver'of'that'control),'but'also'the'

See,'for'example

,'Ronald'Coase

,'Industrial'Organization:'A'Proposal'for'

Research

,'in'POLICY'ISSUES'AND'RESEARCH'OPPORTUNITIES'IN'INDUSTRIAL'ORGANIZATION'

59,'67'(Victor'R.'Fuchs'ed.,'1972)'(“[I]f'an'economist'finds'something'–'a'

business'practice'of'one'sort'or'another'–'that'he'does'not'understand,'he'looks'

for'a'monopoly'explanation.'And'as'in'this'field'we'are'very'ignorant,'the'number'

of'ununderstandable'practices'tends'to'be'very'large,' and'the'reliance'on'a'

monopoly'explanation,'frequent.”).'

perception

'of'the'appropriateness'of'the'resulting'allocation'of'rights'(such'that'

a'“correction”'was'required'to'shift'from'a'presumption'of'waiver'to'a'

presumption'of'prohibition'absent'affirmative'waiver).'

Indeed,'the'modern'American'political'discourse'on'privacy'and'its'legal'

and'regulatory'treatment'has'its'origins'in'Samuel'Warren'and'Louis'Brandeis’s'

seminal'1890'article,'

The'Right'to'Privacy

'which'was'written'in'significant'part'

in'response'to'the'advent'of'a'disruptive'new'technology:'the'portable'box'

camera'(the'Kodak'camera),'introduced'in'1888.'It'is'worth'quoting'Warren'and'

Brandeis'at'length,'not'only'because'the'article'addresses'so'directly'the'problem'

of'adapting'existing'institutions'to'technological'change,'but'also'because'it 'is'a n'

important'progenitor'of'one'branch'of'the'contemporary'cyberlibertarian'

approach'to'technology'and'institutions'that,'perhaps'excessively,'elevates'

liberty'over'private'ordering:'

That'the'individual'shall'have'full'protection'in'person'and'

in'property'is'a'principle'as'old'as'the'common'law;'but'it'has'been'

found'necessary'from'time'to'time'to'define'anew'the'exact'nature'

and'extent'of'such'protection.'Political,'social,'and'economic'

changes'entail'the'recognition'of'new'rights,'and'the'common'law,'

in'its'eternal'youth,'grows'to'meet'the'new'demands'of'society.'

*'*'*'

Recent'inventions'and'business'methods'call'attention'to'

the'next'step'which'must'be'taken'for'the'protection'of'the'

person…'Instantaneous'photographs'and'newspaper'enterprise'

'Samuel'D.'Warren'and'Louis'D.'Brandeis,'

The'Right'to'Privacy

,'4'

HARVARD'LAW'REVIEW'193'(1890).'

have'invaded'the'sacred'precincts'of'private'and'domestic'life;'and'

numerous'mechanical'devices'threaten'to'make'good'the'

prediction'that'“what'is'whispered'in'the'closet'shall'be'

proclaimed'from'the'house-tops'…”'[T]he'question'whether'our'

law'will'recognize'and'protect'the'right'to'privacy'in'this'and'in'

other'respects'must'soon'come'before'our'courts'for'

consideration.'

*'*'*'

It'should'be'stated'that,'in'some'instances'where'protection'

has'been'afforded'against'wrongful'publication,'the'jurisdiction'

has'been'asserted,'not'on'the'ground'of'property,'or'at'least'not'

wholly'on'that'ground,'but'upon'the'ground'of'an'alleged'breach'of'

an'implied'contract'or'of'a'trust'or'confidence.'

*'*'*'

But'the'court'can'hardly'stop'there.'The'narrower'doctrine'

may'have'satisfied'the'demands'of'society'at'a'time'when'the'

abuse'to'be'guarded'against'could'rarely'have'arisen'without'

violating'a'contract'or'a'special'confidence;'but'now'that'modern'

devices'afford'abundant'opportunities'for'the'perpet ra tion'of'such'

wrongs'without'any'participation'by'the'injured'party,'the'

protection'granted'by'the'law'must'be'placed'upon'a'broader'

foundation'…'[S]ince'the'latest'advances'in'photographic'art'have'

rendered'it'possible'to'take'pictures'surrept it iously,'the'doctrines'

of'contract'and'of'trust'are'inadequate'to'support'the'required'

protection,'and'the'law'of'tort'must'be'resorted'to.

Regularly'changing'delineations'of'legal'entitlements'that'may'occur'during'

periods'of'rapid'technological'change'are'potentially'problematic'for'the'very'

concept'of'property,'reducing'the'durability'of'property'rights,'injecting'

uncertainty'into'the'contours'of'ownership,'and'ultimately'limiting'the'viability'

of'private'ordering.'Indeed,'even'if'these'changed'delineations'improve'overall'

efficiency'in'the'allocation'of'entitlements,'the'mere'fact'of'the'change'imposes'

transaction'costs'that'can,'in'principle'at'least,'be'substantial.'This'is'particularly'

the'case'where'change'is'frequent,'such'that'systems'built'upon'long-term'

expectations'of'property'delineations'are'kept'constantly'out'of'equilibrium.'

Scholars'have'long'recognized'that'legal'institutions'are'shaped'by'

technology'and'that'changing'technology'may'change'those'institutions.'For'

instance,'Roman'citizens'enjoyed'a'very'different'concept'of'“freedom'of'

contract”'than'we'do'today;'they'were'free'to'enter'into'any'of'a'finite'number'of'

pre-defined'contracts,'but'they'were'not'free'to'draft'contracts'with'their'own'

bespoke'terms.'Today,'largely'any'terms'that'can'be'rendered'into'recorded'

prose'can'be'made'contractually'binding.'The'driving'differences'between'these'

paradigms'are'the'cost'and'availability'of'underlying'technology:'at'Roman'law,'

literacy'was'limited'and'it'was'costly'and'difficult'to'record'terms;'today'literacy'

is'assumed'and'recordation'is'widespread.'

Similarly,'at'early'English'common'law,'courts'recognized'a'finite'number'

of'forms'of'legal'claims'(

trover,'covenant,'assumpsit,'detinue,'trespass,'and'

.'at'193–211.'

replevin

).'These'forms'were'recognized'to'standardize'legal'process:'The'costs'

of'recording'and'transmitting'precedent'were'high,'so'courts'channeled'

precedent'into'standardized'forms'to'reduce'the'burden'upon'jurists'and'

counsellors'to'facilitate'the'development'and'uniformity'of'the'law.'

But'this'came'at'a'cost.'Courts'would'often'find'claims'that'could'not'be'fit'

into'one'of'the'standard'forms'nonjusticiable.'But'as'technology'improved'and'

the'costs'of'recording'and'transmitting'precedent'decreased,'common'law'courts'

developed'a'generalized'form'of'action,'

trespass'on'the'case

,'which'plaintiffs'

could'argue'in'cases'where'their'claims'did'not'fit'into'a'standard'form.'Over'

time,'this'generalized'form'largely'displaced'historic'practice,'to'the'point'that'

the'historic'writs'have'been'abolished'in'favor'of'generalized'rules'of'civil'

procedure.'

The'same'trend'has'also'been'seen'in'the'case'of'the'transition'from'

in'

rem

'to'

in'personam'

rights.'Over'time'the'law'has'increased'the'closed'number'

(

numerus'clausus

)'of'forms'of'

in'rem

'property'that'it'recognizes,'including'

allowing'for'an'increased'range'of'property-like'transactions'to'be'recorded'

through'

in'personam

'contractual'relationships.'As'with'the'expansions'in'the'

forms'of'contract'and'forms'of'action'recognized'by'the'law,'the'expansion'in'the'

forms'of'property'has'been'driven'by'advances'in'technology'that'reduce'the'

relevant'transaction'costs'and'consequent ia lly'alter'the'efficient'structure'of'

legal'institutions.'

These'examples'demonstrate'the'ever-evolving'relationship'between'

technology'and'legal'institutions.'But'they'are'also'examples'that'have'not'

proven'problematic'for'classical'liberalism'because'the'rate'of'technological'

advance'has'been'slow'enough'that'legal'institutions'have'been'able'to'evolve'

apace.'

But'this'alignment'between'the'rate'of'technological'and'institutional'

change'is'not'always'present'–'as'in'the'current'technological'setting'(and'

perhaps'that'of'most'future'technological'changes,'given'their'seemingly'

inexorable'rate'of'increase).'The'ICT'revolution'has'seen'the'transition'from'

mechanical'printing'presses'and'analog'telephones'to'palm-sized'

supercomputers'and'the'Internet'over'the'course'of'a'lifetime,'and'from'

individuals'who'grew'up'without'the'Internet'to'individuals'who'grew'up'with'

omnipresent'Internet'access'over'the'course'of'half'a'generation.'Even'more'

starkly,'the'advent'of'the'(inexpensive)'portable'camera,'along'with'

photographic'paper'and'film'rolls'that'enabled'easy'and'cheap'processing'of'

photographic'images,'led'to'the'extremely'rapid'and'widespread'diffusion'of'the'

ability'to'record'and'disseminate'visual'images'in'the'late'1800s.'As'evidenced'

by'the'tone'(and'influence)'of'

The'Right'to'Privacy'

(published'a'scant'two'years'

after'the'invention'of'the'Kodak)'this'led'to'the'rapid'and'distinct'disruption'of'

the'legal'institutions'surrounding'privacy'–'a'disruption'that'has'continued'

through'the'development'of'modern'technology'and'that'we'are'still'working'to'

resolve'today.'In'such'a'setting,'technological'change'and'legal'institutions'can'

easily'be'in'tension.'This'tension'is'explored'in'Part'III.'

III Dueling Views of Contemporary Technology

and the Law

Elements'of'classical'liberal'philosophy'have'featured'prominently,'if'

accidentally,'in'contemporary'discussions'of'the'regulation'of'technology.'

Roughly'mirroring'the'advent'and'growth'of'the'commercial'Internet,'many'

technologists'–'and,'in'many'ways,'the'tech'industry'writ'large'–'have'embraced'

various'forms'of'liberty-focused,'and'generally'liberty-maximal,'philosophies.'By'

and'large,'these'individuals'label'themselves'as'libertarians'of'one'form'or'

another'(whether'libertarian,'cyberlibertarian,'cryptolibertarian,'

technolibertarian,'cryptoanarchist,'or'some'other'variant).'Although'they'rarely'

identify'as'“classical'liberals”'(indeed,'it'is'likely'that'few'are'even'familiar'with'

that'term),'their'priors'are'nonetheless'closely'related'to'those'of'classical'

liberals.'These'views,'therefore,'provide'a'useful'survey'of'views'on'the'

contemporary'relationship'between'technology,'liberty,'and'the'law.'

The'discussion'that'follows'divides'these'views'into'two'broad'categories:'

“extreme”'and'“moderate”'libertarian'views.'In'both'cases'the'reference'is'to'

little-l'libertarian,'indicating'that'these'are'liberty-focused'philosophies.'The'

extreme'libertarian'view'generally'views'technology'as'liberty-maximizing,'so'

tends'in'turn'to'be'strongly'permissive'of'technological'change.'The'moderate'

view'also'views'technology'as'liberty-enhancing,'but'is'more'circumspect'about'

technology’s'ability'to'undermine'the'protection'of'important'autonomy'values.'

A The Extreme Libertarian Embrace of Technology

Libertarianism'is'related'to,'but'(we'contend)'more'restrictive'than,'classical'

liberal'philosophy.'In'its'more'extreme'form,'it'takes'the'preference'for'private'

ordering'that'classical'liberalism'rests'upon'and'extends'it'to'its'maximum'

extent.'Under'this'form'–'often'referred'to'as'a'variant'of'anarchism'or'anarcho-

capitalism'–'the'only'morally'acceptable'order'is'the'purely'private'order.'The'

state,'based'as'it'is'on'a'more-or-less'involuntary'premise'(i.e.,'that'it'has'a'

monopoly'on'the'use'of'force,'and'an'individual'cannot'opt'out'of'it)'is'to'be'

avoided'as'a'source'for'rule'making'and'enforcement.'

In'the'contemporary'technological'setting,'this'branch'of'thought'often'

falls'into'one'of'three'categories:'cyberutopianism,'cyberexceptionalism,'or'

cyberanarchism.'These'are'not'meant'to'be'precisely'defined'categories'–'indeed,'

there'is'substantial'overlap'between'each.'But'this'categorization'typifies'key'

features'of'contemporary,'extreme'libertarian'views'on'technology.'

Cyberutopianism,'as'exemplified'by'John'Perry'Barlow’s'

Declaration'of'

the'Independence'of'Cyberspace

,'is'the'notion'that'the'traditional'legal'rules'

developed'to'handle'disputes'in'the'“real”'w orl d'are'wholly'inapposite'in'online'

environments'because'the'innate,'exalted'characteristics'of'the'online'world'

render'them'superfluous'(and'even'deleterious):'

Governments'of'the'Industrial'World,'you'weary'giants'of'

flesh'and'steel,'I'come'from'Cyberspace,'the'new'home'of'Mind.'On'

behalf'of'the'future,'I'ask'you'of'the'past'to'leave'us'alone.'You'are'

not'welcome'among'us.'You'have'no'sovereignty'where'we'gather.'

We'have'no'elected'government,'nor'are'we'likely'to'have'

one,'so'I'address'you'with'no'greater'authority'than'that'with'

which'liberty'itself'always'speaks.'I'declare'the'global'social'space'

we'are'building'to'be'naturally'independent'of'the'tyrannies'you'

seek'to'impose'on'us.'You'have'no'moral'right'to'rule'us'nor'do'

you'possess'any'methods'of'enforcement'we'have'true'reason'to'

fear.'

*'*'*'

You'claim'there'are'problems'among'us'that'you'need'to'

solve.'You'use'this'claim'as'an'excuse'to'invade'our'precincts.'

Many'of'these'problems'don’t'exist.'Where'there'are'real'conflicts,'

where'there'are'wrongs,'we'will'identify'them'and'address'them'

by'our'means.'We'are'forming'our'own'Social'Contract.'This'

governance'will'arise'according'to'the'conditions'of'our'world,'not'

yours.'Our'world'is'different.'

*'*'*'

We'are'creating'a'world'where'anyone,'anywhere'may'

express'his'or'her'beliefs,'no'matter'how'singular,'without'fear'of'

being'coerced'into'silence'or'conformity.'

Your'legal'concepts'of'property,'expression,'identity,'

movement,'and'context'do'not'apply'to'us.'They'are'all'based'on'

matter,'and'there'is'no'matter'here.'

*'*'*'

We'must'declare'our'virtual'selves'immune'to'your'

sovereignty,'even'as'we'continue'to'consent'to'your'rule' over' our'

bodies.'We'will'spread'ourselves'across'the'Planet'so'that'no'one'

can'arrest'our'thoughts.

Barlow’s'views'captured'the'zeitgeist'of'the'moment'–'a'sincere'belief'that'

“cyberspace”'was'a'new'and'better'place'than'the'physical'world.'It'was'a'place'

in'which'individuals'could'explore'and'express'their'liberty'in'the'purest'and'

most'extreme'forms'possible,'and'could'do'so'free'of'the'constraints'of'the'

physical'world'or'territorial'governments'–'and'possibly'even'without'concern'

for'encroaching'upon'the'autonomy'interests'of'others.

Today,'the'utopianism'of'Barlow’s'vision'of'the'cyber'has'fallen'from'its'

once'dominant'intellectual'position,'though'strands'of'it'remain'in'the'

cyberanarchist'perspective'(discussed'below).'Rather,'as'the'Internet'grew'in'

social,'economic,'and'political'importance'–'and,'importantly,'as'the'Internet'

came'to'distinguish'itself'more'for'its'transformative'ability'to'facilitate'(and'

extend)'the'same'sorts'of'social'interactions'that'occurred'offline,'rather'than'as'

the'birthplace'of'an'entirely'new'kind'of'social'order'–'the'same'social,'economic,'

and'political'institutions'important'in'the'offline'world'naturally'came'to'exert'

influence'in'the'online'world.'These'efforts'occurred'largely'through'the'

'John'Perry'Barlow,'

A'Declaration'of'the'Independence'of'Cyberspace

(1996),'

available'at

'www.eff.org/cyberspace-independence.'

'Barlow'was'not'alone'in'his'views,'although'his'powerful'prose'

captured'the'imagination'of'many.'

See'also,'for'example

,'Esther'Dyson,'George'

Gilder,'George'Keyworth,'and'Alvin'Toffler,'

Cyberspace'and'the'American'Dream:'

A'Magna'Carta'for'the'Knowledge'Age

,'Progress'&'Freedom'Foundation'Future'

Insight'No.'1.2'(Aug.'1994),'

available'at

'www.pff.org/issues-

pubs/futureinsights/fi1.2magnacarta.html.'

operation'of'existing'legal'principles'and,'where'necessary,'the'establishment'of'

new'legal'rules'designed'to'extend'those'principles'into'the'online'world.'This'

intrusion'of'offline'institutions'into'the'new'online'space'gave'rise'to'the'next'–'

and'arguably'still'dominant'–'wave'of'extreme'cyberlibertarianism:'cyber-

exceptionalism.'The'cyberexceptionalist'perspective'is'to'accede'that'cyberspace'

can

'be'brought'to'heel'by'traditional'institutions,'but'that'it'

should

'be'exempted'

from'such'treatment.'

One'of'the'more'influential'strains'of'cyberexceptionalism'is'so-called'

permissionless'innovation.'Permissionless'innovation'holds'that'individuals'

should'be'able'to'operate'and'innovate'online'(and,'in'fact,'in'the'realm'of'

information'technology'more'generally)'without'impediment'from'any'

authority.'In'its'most'extreme'view'this'includes'not'only'government'actors'

directly,'but'also'private'parties'whose'assertion'of'property'or'contractual'

rights'might'“impede”'others’'ability'to'freely'innovate.

'In'its'most'fully'

developed'form,'permissionless'innovation'holds'that'the'state'should,'short'of'

compelling'circumstances,'refrain'from'interfering'with'private'ordering'in'the'

digital'context'entirely.'Adam'Thierer'has'characterized'this'position'as:'

the'notion'that'experimentation'with'new'technologies'and'

business'models'should'generally'be'permitted'by'default.'Unless'a'

compelling'case'can'be'made'that'a'new'invention'will'bring'

See'

Geoffrey'Manne,'

Permissionless'Innovation'Does'Not'Mean'“No'

Contracts'Required,”

'TRUTH'ON'THE'MARKET'(Jun.'26,'2014),'http://bit.ly/2t0k6fV.'

This'version'of'permissionless'innovation'thus'implicitly'hearkens'back'to'

cyberutopianism,'shunning'even'private'ordering'if'it'is'facilitated'by'traditional'

institutions,'denying,'in'effect,'that'the'“harm”'of'contract'or'property'law'

violations'exist'in'cyberspace.'

serious'harm'to'society,'innovation'should'be'allowed'to'continue'

unabated'and'problems,'if'any'develop,'can'be'addressed'later.

This'view'is'focused'almost'entirely'on'the'positive'value'of'innovation,'holding'

that'the'gains'from'innovation'will'tend'to'overwhelm'any'potentially'

complicating'realities,'or'that'potential'complications'will'themselves'be'

addressed'by'subsequent'innovation.'Thus,'Internet'platforms'should'be'

permitted'to'experiment'with'new'services'without'

ex'ante

'constraint,'even'

though'we'understand,'for'example,'that'third-parties'often'use'these'platforms'

for'illicit'purposes.'The'exceptionalist'perspective' is' that'concern'about'those'

illicit'uses'does'not'justify'placing'any'limits'on'the'development'of'new'

technological'platforms.'

The'advent'of'the'automobile,'for'instance,'was'overwhelmingly'positive'

for'society,'even'though'it'upended'much'of'tort'law.'Likewise,'the'advent'of'

driverless'cars'will'certainly'lead'to'new'wa ys' for'people'to'be'injured'and'hard'

questions'for'the'law'in'assessing'and'apportioning'liability'for'those'injuries'–'

but'it'will'likely'make'automobiles'substantially'safer'than'they'are'today'and'

increase'the'efficiency'(and'decrease'the'costs)'of'driving'so'substantially'that'

we'should'push'ahead'in'the'development'of'the'new'technology'and'address'

such'concerns'once'the'technology'has'arrived.'

Similarly,'the'Internet'has'unquestionably'been'one'of'the'most'beneficial'

and'important'developments'in'the'history'of'humankind'–'but'it'has'also'

facilitated'child'pornography'and'other'forms'of'exploitation'on'a'scale'never'

before'known.'The'exceptionalist'perspective'is'that'the'new'technology'should'

'ADAM'THIERER,'PERMISSIONLESS'INNOVATION:'THE'CONTINUING'CASE'FOR'

COMPREHENSIVE'TECHNOLOGICAL'FREEDOM'1'(revised'and'expanded,'2016).'

be'forgiven'these'ills'in'favor'of'its'overwhelming'benefits.

'Particular'

implementers'or'users'of'new'technology'who'use'it'to'harm'others'should'be'

penalized'accordingly,'but'the'technology'itself'should'not'be'constrained'in'

order'to'deter'such'harm'–'even'if'the'most'(or'only)'practical'way'to'do'so'is'by'

limiting'the'technology'(and'even'if'users’'ability'to'evade'the'law'is,'in'fact,'a'

function'of'the'new'technology).'The'exceptionalist'perspective'holds'this'view'

even'despite'the'fact'that,'in'numerous'offline'situations,'just'such'“intermediary'

liability”'is'common.

The'rationale'for'this'exceptionalism'is'that'new'technologies'are'less'

likely'to'develop'if'their'developers'are'held'accountable'for'the'harms'that'some'

will'inevitably'use'them'to'cause.'Such'liability'would'increase'the'costs'of'new'

'According'to'many'proponents'of'cyberexceptionalism,'in'fact,'this'immunity'

has'been'written'into'US'law.'

See'

47'USC'§'230(c)(1)'(“No'provider'or'user'of'an'

interactive'computer'service'shall'be'treated'as'the'publisher'or'speaker'of'any'

information'provided'by'another'[provider'or'user].”).'Courts'have'largely'been'

willing'to'go'along'with'the'exceptionalist'interpretation'of'this'language.'

See,'for'

example,'

David'S.'Ardia,'

Free'Speech'Savior'or'Shield'for'Scoundrels:'An'

Empirical'Study'of'Intermediary'Immunity'Under'Section'230'of'the'

Communications'Decency'Act

,'43'LOYOLA'LAW'REVIEW'373,'435'(2010)'(finding'

that'Section'230'provided'immunity'to'defendants'in'over'sixty'percent'of'

relevant'cases).'

'Courts'have'long'dealt'with'out-of-reach'offenders'by'enjoining'the'

conduct'of'intermediaries:'

for'example

,'by'prohibiting'local'stores'from'selling'

foreign-manufactured'counterfeit'goods,'or'requiring'that'taverns'prevent'

patrons'from'driving'drunk.'

technologies'–'especially'“generative”'technologies'(i.e.,'technologies'(like'

platforms'open'to'user-generated'content'and'peer-to-peer'interactions)'that'

can'give'rise'to'new,'unpredictable,'uses).'At'the'same'time,'once'the'technology'

is'established,'suitable'institutions'can'be'put'in'place'to'protect'aga inst 'specific,'

harmful'uses'of'the'technology.'

This'view'of'permissionless'innovation'is'liberty-maximalist,'both'in'the'

short'run'and'the'long'run.'It'frees'innovators'to'develop'new'technologies'as'

they'see'fit,'furthering'their'liberty'interests.'And'successful'technologies'will'

tend'to'be'those'that'benefit'others,'enhancing'their'liberty'interests'as'new'

technologies'are'developed'and'permeate'the'market.'

But'this'view'is'also'autonomy-agnostic.'It'pays'no'heed'to'concerns'that'a'

given'technology'may'tend'to'be'used'to'cause'harm'to'its'users'or'to'third'

parties,'and'expressly'argues'that'harmed'parties'be'denied'recourse'against'the'

implementers'of'the'technology'for'such'harms.'Importantly,'this'is'the'case'even'

where'future'harms'are'predictable,'and'even'where'the'technology'is'developed'

in'such'a'way'that'it'makes'it'particularly'easy'for'parties'to'be'harmed'or'

difficult'for'them'to'seek'redress.'In'other'words,'under'dominant'

cyberexceptionalist'views,'platforms'and'intermediaries'are'under'no'obligation'

to'design'their'technologies'in'ways'that'prevent'harm,'allow'for'recovery'when'

harm'occurs,'or'even'facilitate'action'being'taken'against'the'party'causing'

harm.

'Again,'this'approach'largely'harkens'back'to'the'cyberutopian'view'that'

in'a'very'real'sense'traditional'conceptions'of'“harm”'do'not'apply'online,'

because'cyberspace'is'not'bound'by'the'physical'or'social'constraints'of'the'real'

world'that'prevent'a'harmed'party'from'removing'themselves'from'a'harmful'

situation'or'engaging'in'self-help.'

The'third'category'of'extreme'libertarian'views'on'technology'is'different'

in'kind,'although'it'draws'on'ideas'from'both'cyberutopianism'and'

cyberexceptionalism.'Cyberanarchism'views'technology'as'a'remedy'against'the'

sins'of'the'state.'This'view'is'particularly'prevalent'in'contemporary'discussions'

about'privacy,'surveillance,'encryption,'and'cryptocurrencies.'Cyberanarchism'

views'government'surveillance'in'particular'–'whether'through'wiretaps'and'

warrants,'the'intelligence'community,'collection'of'public'information,'or'

issuance'of'subpoenas'to'collect'information'from'private'platforms'–'as'an'

undue'encroachment'on'individual'autonomy'and'an'impermissible'limit'on'

liberty.'Technology'can'and'should'be'used'to'frustrate'these'governmental'

functions,'thereby'enhancing'liberty.'

There'is,'of'course,'an'obvious'trade-off'with'such'an'approach.'

Cryptocurrencies,'for'instance,'were'developed'at' least'in'part'to'provide'an'

anonymous'and'largely'untraceable'alternative'to'fiat'currency'and'traditional'

online'payment'systems.'In'many'contexts'anonymity'in'financial'transactions'is'

valuable,'of'course,'but'cryptocurrencies'can'be'and'are'used'to'facilitate'harmful'

or'criminal'conduct.'Likewise,'TOR'and'other'encryption'technologies'have'

enabled'individuals'to'trade'illicit'goods'and'services'as'well'as'nonillicit'goods'

and'services'under'anonymous'conditions.'Privacy-enhancing'encryption'

technologies'are'also'broadly'seen'as'tools'to'circumvent'state'restrictions'on'

speech'(particularly'in'hostile'regimes),'and'to'avoid'state'surveillance.'

Although'it'is'true'to'some'extent'for'all'of'the'different'strains'of'the'

extreme'libertarian'view,'for'privacy'and'cryptocurrency'advocates,'in'

particular,'technology'is'viewed'as'a'means'for'resisting'any'government'

regulation'–'and'even'private'ordering'abetted'by'government'institutions'–'

completely.'

Cyberanarchism'hearkens'back'to'the'central'cyberutopian'view'of'the'

fundamental'illegitimacy'of'government,'especially'in'the'technological'age'–'

that'those'“Governments'of'the'Industrial'World,'[]'weary'giants'of'flesh'and'

steel'…,'are'not'welcome'among'us'[and]'have'no'sovereignty'where'we'

gather.”

'Of'course,'this'assumption'of'illegitimacy'is'rejected'by'the'classical'

libertarian'perspective.'It'is'surely'the'case'that'some'of'the'government'

functions'that'animate'these'causes'are'illegitimate'excesses.'But'others'are'not,'

and'these'technologies'do'not'discriminate'between'interfering'with'illegitimate'

and'legitimate'government'functions.

B The Moderate Libertarian Embrace of Technology

It'is'almost'a'misnomer'to'characterize'the'moderate'techno-libertarian'position'

as'an'“embrace.”'The'moderate'libertarian'or'classical'liberal'perspective'on'

'Barlow,'

A'Declaration'of'the'Independence'of'Cyberspace

supra'

note'

24.'

'A'prime'example'of'this'tension'was'the'court'order'requiring'Apple'to'

render'assistance'to'law'enforcement'by'defeating'encryption'on'one'of'its'

iPhones.'

See'In'the'Matter'of'Search'of'an'Apple'iPhone'Seized'During'Execution'

of'a'Search'Warrant'on'a'Black'Lexus'IS300,'California'License'Plate'35KGD203

No.'ED'15–0451M,'2016'WL'618401'(C.D.'Cal.'2016).'Although'arguably'resting'

on'fairly'well-established'legal'footing,'the'court’s'order,'based'on'the'All'Writs'

Act,'28'U.S.C.'§'1651,'was'met'with'cries'of'outrage'from'certain'techno-

libertarian'quarters.'This'outrage,'again,'was'premised'on'the'idea'that'there'is'

something'unusual'about'data'and'digital'devices'that'warrants'a'completely'

different'legal'treatment.'But,'as'with'other'instances'of'such'extreme'

cyberexceptionalism,'the'explanation'about'just'

why

'it'is'that'technology'should'

be'in'a'legal'class'of'its'own'was'never'adequately'explained.'

technology'is,'at'root,'nothing'special,'insofar'as'classical'liberals'do'not'presume'

that'any'social'construct'should'receive'a'

per'se

'different'treatment'under'the'

law.'

The'moderate'libertarian'view'admits'room'for'the'state'to'establish'a'

framework'of'neutrally'administered'and'enforced'rules'against'which'

individuals'arrange'their'private'ordering.'Technology'is'evaluated'by'its'effects'

upon'the'rule-based'expectations'of'individuals,'and'is'not'regarded'as'

inherently'outside'of'(but'acting'upon)'the'legal'order.'Fundamental'to'this'

approach'is'the'view'that'technology'is'not'regarded'as'exceptional'in'any'

priori

'sense;'it'matters'only'how'it'is'used'or'how'it'affects'the'optimal'

institutional'ordering.'Technological'innovations'do'often'offer'significant'

benefits'(not'only'in'terms'of'liberty'and'autonomy,'but'general'consumer'

welfare),'of'course,'and'any'benefits'arising'from'the'adaptation'and'application'

of'existing'legal'rules'should'be'weighed'against'the'possible'costs'of'deterring'

the'creation'or'welfare-enhancing'deployment'technology.'But'in'principle'any'

technology,'no'matter'how'revolutionary,'can'be'brought'within'the'ambit'of'

predictable,'neutrally'administered'legal'rules.'

One'key'component'of'the'moderate'libertarian'view'is'that'immunity'

from'established'legal'principles'should'not'be'assumed'even'if'extension'of'

those'principles'to'new'technology'requires'novel'applications'of'common'law'

precedents,'or'even'the'adoption'of'new'regulations'or'legislation.'Internet'

platforms,'for'example,'may'entail'a'

different

'liability'structure,'but'there'is'no'

reason'to'believe'that'they'should'engender'

no'

liability'as'a'result.'

Unlike'the'more'extreme'approaches,'the'moderate'libertarian'approach'

to'technology'would'not'inherently'object'to'extraterritorial'application'of'a'

country’s'laws,'for'example,'as'is'often'necessitated'on'the'Internet.'While'cloud-

based'activity'and'cross-border'data'flows'can'be'particularly'complicated'to'

untangle,'this'does'not'mean'that'territorial'courts'should'be'presumed'unable'

to'adjudicate'disputes'arising'out'of'multi-nation'digital'trade.'Courts'are'skilled'

at'parsing'conflicts'of'laws,'as'well'as'parsing'facts'in'complex'or'difficult'cases.'

Determining'jurisdictional'competencies'for'Internet-based'disputes'is'only'a'

difference'of'degree,'not'of'kind.'

Similarly,'under'the'moderate'libertarian'view,'technologies'that'are'used'

to'secure'privacy'online'or'in'the'cloud'will'have'to'yield'in'some'cases'to'the'

needs'of'the'state,'just'as'in'the'offline'context.'For'instance,'although'the'answer'

may'not'be'to'build'in'purposeful'security'holes'such'as'back'doors,'in'cases'

where'a'firm'

could

'theoretically'help'override'encryption,'as'in'the'Apple-San'

Bernardino'dispute,

'they'can'lawfully'be'required'to'do'so.'

Intellectual'property'(“IP”)'draws'into'stark'relief'the'distinction'between'

the'hard-core'and'more-moderate'libertarian'approaches.'IP'presents'a'rather'

unique'circumstance.'By'defining'a'property'right'around'a'novel'technological'

idea'(patent)'or'original'expression,'including'of'technologically'sophisticated'

software'code'(copyright),'IP'comes'close'to'treating'technological'advance'itself'

(as'opposed'to'the'use'or'implementation'of'technology)'as'exceptional.

'In'this'

See'generally

'Justin'(Gus)'Hurwitz,'

Encryption

Congress

'mod'(Apple'+'

CALEA)

,'30'HARVARD'JOURNAL'OF'LAW'AND'TECHNOLOGY'355'(2017).'

'It'is'important'to'note,'however,'that'(under'US'law,'at'least)'both'

patent'and'copyright'law'encompass'core'elements'that'mitigate'this'

exceptionalism'to'some'extent.'For'an'idea'(invention)'to'be'granted'a'patent,'for'

sense,'it'could'be'argued,'the'mere'definition'of'IP'rights'represents'a'

problematic'extension'of'the'legal'order'beyond'a'system'necessary'for'

mitigating'transaction'costs'to'one'that'inherently'curtails'liberty'

regardless

'of'

countervailing'social'gain:'Because'IP'rights'are'granted'before'any'welfare-

improving'transaction'is'undertaken,'even'essentially'valueless'technology'can'

receive'IP'protection,'subject'only'to'the'(largely'arbitrary)'cost'to'an'applicant'

of'obtaining'it.

'For'moderate'libertarians,'however,'a'system'of'IP'rights'readily'

overcomes'this'apparent'defect.'

Not'surprisingly,'however,'the'hard-core'libertarian'argument'against'IP'

extends'from'precisely'this'apparent'quirk.'Hard-core'libertarians'generally'

advance'two'arguments'against'IP.'First,'IP'is'a'creation'of'government:'As'

suggested'above,'not'only'the'

ex'post

'regulation'of'technology,'but'its'very'

example,'it'needs'to'be'

useful

:'It'cannot'exist'merely'as'an'abstract'idea,'but'

must'be'a'functional'“process,'machine,'manufacture,'or'composition'of'matter.”'

35'U.S.C.'§'101.'And'for'original'works'to'receive'a'copyright'they'must'be'“fixed'

in'any'tangible'medium'of'expression'…'from'which'they'can'be'perceived,'

reproduced,'or'otherwise'communicated.”'17'U.S.C.'§'102(a).'Again,'it'is'clear'

from'this'statutory'limitation'that'abstractions'

per'se'

will'not'receive'protection'

unless'they'are'actually'implemented'in'a'useful'form.'Nevertheless,'these'

eligibility'requirements'do'not'

entirely

'undermine'the'idea'that'“technology,”'

rather'than'“the'use'of'technology”'is'p rot ected'by'IP'rights'because,'once'the'

conditions'of'eligibility'are'met,'IP'protections'extend'beyond'those'limitations'

to'restrict'others’'implementation'of'the'new'technology.'

'Because'copyright'attaches'automatically'to'any'original'expression'

once'it'is'fixed'in'a'tangible'medium,'even'this'limitation'doesn’t'exist.'Of'course,'

the'investment'required'(including'opportunity'costs)'to'create'a'patentable'

invention'or'copyrightable'work'acts'as'a'limitation,'as'well,'and'one'that'is'

decidedly'more'closely'related'to'expected'social'value.'But'even'ideas'

discovered'accidentally'and'(nearly)'trivial'works'of'authorship'are'still'eligible'

for'protection,'so'there'remains'a'significant'scope'for'legal'constraints'to'attach'

even'without'any'indication'of'their'social'value.'

definition'through'patent'or'copyright'is'an'“artificial”'function'of'statute.'

Moreover,'because'this'government-created'property'right'entails'a'right'to'

prevent'unauthorized'use'of'protected'technology'and'the'concomitant'right'to'

extract'monopoly'rents'in'exchange'for'authorization'(license),'it'amounts'to'an'

unjustifiable'(and'possibly'inefficient)'government'transfer'of'rents.'Second,'

unlike'real'and'personal'property,'another’s'use'of'an'idea'(or'copying'of'an'

expression)'is'not'inherently'rivalrous:'it'can'be'accomplished'without'depleting'

the'idea'or'expression'and'without'limiting'anyone'else’s'ability'to'implement'or'

copy'it.'Similarly,'absent'enforcement'of'the'artificial,'government-granted'

monopoly'(or'concealment),'it'is'

very'

difficult'(if'not'impossible)'to'exclude'

others'from'the'use'an'idea'or'of'copyright-protected'content,'particularly'digital'

content.'On'top'of'all'of'which,'the'system'for'granting'and'enforcing'IP'rights'is'

costly'and,'inevitably,'complex.'As'a'result,'so'the'argument'goes,'IP'rights'erect'

artificial'and'costly'impediments'to'the'liberty'of'people'to'do'(and'say)'what'

they'will'and'should'not'be'enforced.

But'this'is,'yet'again,'a'case'of'cyberexceptionalism.'Property'rights,'if'

they'have'any'meaning'or'utility,'are'always'creatures'of'the'government.'In'fact,'

as'we'have'noted,'a'central'feature'of'libertarianism'is'the'recognition'that'the'

definition'and'enforcement'of'property'rights'is'inarguably'a'valuable'function'of'

government.'Without'the'implicit'imprimatur'of'the'state'on'one’s'claim'to'a'

particular'“thing”'(whether'tangible'or'intangible),'the'value'of'that'claim'(and'

thus'the'thing'itself)'is'approximately'zero.'

See,'for'example

,'Tom'W.'Bell,'

Indelicate'Imbalancing'in'Copyright'and'

Patent'Law

,'in'COPY'FIGHTS:'THE'FUTURE'OF'INTELLECTUAL'PROPERTY'IN'THE'

INFORMATION'AGE'4'(Adam'Thierer'&'Clyde'Wayne'Crews'Jr.'eds.,'2002).'

No'one'can'defend'any'system'of'property'rights,'whether'

for'tangible'or'intangible'objects,'on'the'naïve'view'that'it'

produces'all'gain'and'no'pain.'Every'system'of'property'rights'

necessarily'creates'some'winners'and'some'losers.'Recognize'

property'rights'in'land,'and'the'law'makes'trespassers'out'of'

people'who'were'once'free'to'roam.'We'choose'to'bear'these'costs'

…'because'we'make'the'strong'empirical'judgment'that'any'loss'of'

liberty'is'more'than'offset'by'the'gains'from'manufacturing,'

agriculture'and'commerce'that'exclusive'property'rights'foster.'

These'gains,'moreover,'are'not'confined'to'some'lucky'few'who'

first'get'to'occupy'land.'No,'the'private'holdings' in' various'assets'

create'the'markets'that'use'voluntary'exchange'to'spread'these'

gains'across'the'entire'population'…'[T]he'inconveniences'[IP]'

generates'are'fully'justified'by'the'greater'prosperity'and'well-

being'for'the'population'at'large.

It'is'also'important'to'note'that'the'presumed'“monopoly”'granted'by'IP'rights'is'

not'actually'a'monopoly'in'any'meaningful'sense.'Because'patent'rights'and'

copyrights'are'limited'in'both'time'and'scope,'they'do'not'foreclose'the'

development'and'implementation'of'competing'ideas'or'competing'expressions'

any'more'than'the'owner'of'a'single'house'can'avoid'competition'from'her'

neighbors.'

'RICHARD'A.'EPSTEIN,'INTELLECTUAL'PROPERTY'FOR'THE'TECHNOLOGICAL'AGE'8'

(Manufacturing'Institute,'2006).'

IV'A Classical Liberal View of Technology and

the Law?

On'first'blush,'it'seems'that'the'moderate'position'on'technology'(more'

accurately,'technological'advance)'enjoys'the'better'claim'to'the'mantle'of'

classical'liberalism'–'and'in'many'ways'it'does.'While'the'extreme'position'

appears'to'be'more'acutely'protective'of'liberty'from'government'interference,'

its'myopic'focus'on'freedom'from'all'constraints'leads'it'to'reject'even'

transaction-cost-reducing'rules'that'further'autonomy'and'voluntary'exchange'

and'thus'overall'social'welfare.'

Consider'the'concept'of'permissionless'innovation'again'which,'as'noted,'

is'important'to'both'the'moderate'and'extreme'liberal'positions'regarding'

technology.'On'the'one'hand,'the'extreme'version'of'permissionless'innovation'

does'not'stand'for'neutral'application'of'genera l ly'applicable'legal'rules'and'

principles'to'new'technology,'but'for'the'avoidance'of'all'legal'rules'that'might'

constrain'the'ability'to'develop'any'particular,'new'technological'advance.'This'

view'of'permissionless'innovation'–'the'extreme'libertarian'view'–'treats'even'

private

'constraints'arising'out'of'enforceable'property'rights'as'inherently'

outdated.'It'is,'under'this'approach,'a'problem'not'only'that'innovators'might'

have'to'seek'“permission”'from'the'government'to'deploy'new'technology,'but'

that'they'might'have'to'seek'it'from'private'property'holders'through'contract'or'

license'–'by'transacting'with'them,'in'other'words.'On'this'view,'the'transaction'

itself'becomes'an'unjustified'cost,'and'rules'that'enable'rightsholders'to'limit'an'

innovator’s'liberty'–'even'if'efficiently'–'are'problematic.'This'seems'too'

solicitous'of'liberty'and'too'dismissive'of'autonomy'and'the'broader,'systemic'

benefits'of'well-defined'property'rights.'

On'the'other'hand,'the'moderate'view'runs'the'risk'of'naïve'deontology,'

embracing'and'preserving'rules'for'their'own'sake.'The'moderate'position'is'that'

permissionless'innovation'denotes'the'ability'to'experiment,'enter'into'

transactions,'and'develop'and'deploy'new'technology'without'requiring'the'

adoption'of'new'rules'that'apply'with'special'force'to'new'technology,'that'

overly'constrain'it'out'of'excessive'fear'of'its'potentially'harmful'effects,'or'that'

protect'incumbents'from'new'competition.'It'would,'at'the'extreme,'seem'willing'

to'sacrifice'even'welfare-enhancing'innovation'for'the'sake'of'legal'constancy:'

the'continued,'neutral'application'of'existing'rules'and'the'avoidance'of'new'

rules,'regardless'of'whether'either'would'clearl y' further'technological'advance.'

The'problem'with'this'view,'of'course,'is'that'there'is'no'inherent'reason'

to'think'that'the'specific,'

status'quo

'structure'of'rights'is'optimal'in'the'face'of'

any'given'technological'change,'particularly,'as'we'have'noted,'when'it'is'

relatively'rapid,'disruptive'change.'The'classical'liberal'embrace'of'rules'and'

legal'institutions'is'consequentialist'and'utilitarian,'not'deontological:'public'

rules'are'needed'solely'because'we'gain'more'from'their'ability'to'facilitate'

private'ordering'and'preserve'autonomy'interests'than'we'lose'from'the'

constraints'on'liberty'they'entail.'But'that'(emphatically)'does'not'mean'that'any'

specific'rules'

per'se

'are'worth'the'cost.'The'challenge'is'understanding'how'rules'

should'evolve'alongside'changing'technologies.'

We'frequently'see'this'on'vivid'display'in'regulated'industries'that'

undergo'technological'disruption:'as'the'cost'and'reliability'of'air'travel'

improved'leading'to'commoditization;'as'electricity'generation'was'separated'

from'transmission'and'became'increasingly'competitive;'as'new'network'

technologies'enabled'the'transition'from'a'monopoly'telephone'network'to'one'

of'widespread'intermodal'competition;'as'ride-sharing'platforms'like'Uber'and'

Lyft'have'disrupted'heavily'regulated'taxi'monopolies.'Most'classical'liberals'

would'cheer'the'disruption'of'these'legal'regimes'and'celebrate'the'technological'

innovation'that'hastened'the'transition'away'from'industry-specific'regulatory'

regimes.'

In'fact,'this'is'the'case'even'as'we'can'recognize'the'losses'faced'by'the'

energy'company'with'stranded'investments,'the'telecommunications'carrier'

whose'rate'of'return'was'dependent'on'regulated'prices,'and'the'driver'who'paid'

$1'million'for'a'taxi'medallion'that'is'now'worth'a'quarter'of'that.'Recall'Richard'

Epstein’s'important'point'that'“[e]very'system'of'property'rights'necessarily'

creates'some'winners'and'some'losers'…,'[but]'the'inconveniences'…'are'fully'

justified'by'the'greater'prosperity'and'well-being'for'the'population'at'large.”

The'“losses”'here'are'largely'only'distributional;'they'arise'because'the'

rejiggering'of'property'rights'enables'techn ol ogy'to'expand'the'size'of'the'pie,'

even'as'it'also'redistributes'the'pieces.'But'it'is'the'

transition

'from'one'state'of'

affairs'to'another,'frequently'brought'on'by'technological'advance,'that'creates'

the'appearance'of'loss.'Behind'the'metaphorical'veil'of'ignorance,'everyone'

would'prefer'technological'dynamism'to'stasis,'even'with'the'disruption'it'

entails.'For'the'same'reason,'classical'liberalism'should'countenance'some'

reordering'of'rights'in'order'to'facilitate'or'respon d' to'new'technology.'

'Id.'

Thus,'an'important'and'underappreciated'role'of'technological'change'is'

to'highlight'these'fault'lines'between'appropriate,'transaction-cost-reducing'

background'rules'and'those'laws'and'regulations'(or'specific'enforcement'

decisions'of'otherwise-desirable'background'rules)'that'may'

appear

'to'facilitate'

trade,'but'really'impede'the'creation'of'wealth'and'the'exercise'of'liberty.'

Not'that'it'requires'an'Uber'to'see'that'taxi'medallions'are'almost'

certainly'examples'of'the'latter,'and'not'the'former.'They'constrain'non-

medallion'holders’'liberty'without'even'facilitating'value-maximizing'

transactions'for'those'who'hold'them.'But'it'does'often'take'an'Uber'to'bring'into'

relief'the'but-for'world'that'such'laws'deter.'Absent'this'information,'the'

classical'liberal'approach'is'far'less'likely'to'succeed'in'influencing'law'and'

policy'–'in'overcoming'the'politics'and'rent-seeking'that'prop'up'welfare-

limiting'or'-reducing'laws'or'allow'them'to'come'into'existence'in'the'first'place.'

There'is'thus'a'second-order'–'and'ironic'–'benefit'to'the'more'extreme'

libertarian'position,'which'would,'at'the'margin,'enable'deployment'of'more'

disruptive'technologies,'some'number'of'which'will'confer'this'political'economy'

benefit'–'improving'the'reliability'of'the'law'–'independent'of'the'direct'benefits'

they'may'also'entail.'

If'the'extreme'position'can'be'too'…'extreme,'the'moderate'position'can'

be'too'cautious,'overweighting'present'autonomy'interests'(the'protection'of'

existing'property'rights'and'the'ability'for'their'holders'to'demand'license)'and'

underweighting'future'liberty'interests'(the'ability'to'undermine'existing'

property'rights'for'the'sake'of'dynamic'efficiency'gains).'But'unless'we'are'able'

to'reduce'transaction'costs'far'beyond'what'is'likely,'the'optimal'classical'liberal'

position'will'still'require'background'rules:'So'long'as'transaction'costs'exist,'

rules'will'be'required'and'the'challenge'will'be'to'implement'the'rules'that'yield'

the'most'efficient'of'outcomes.'

While'there'can'be'little'doubt'about'the'inefficacy'of'maintaining'status'

quo'regulatory'regimes'in'the'face'of'technological'change,'the'classical'liberal'

position'is'not'so'obstinate.'When'it'comes'to'the'intrusive,'industry-specific,'

regulatory'oversight'of'the'administrative'state'that'has'come'to'dominate'in'the'

contemporary'era,'the'classical'liberal'position'is'invariably'skeptical,'and'

technological'change'is'one'of'the'most'important'reasons'for'classical'liberal'

efforts'to'unwind'(or'prevent)'such'regimes'in'the'first'place:'For'the'classical'

liberal,'most'such'regimes'are'ill-advised'from'the'start.'

But'things'are'more'complicated'when'it'comes'to'rules'of'general'

applicability.'It'is'more'difficult'to'countenance'abrupt'shifts'in'overarching'

regimes'governing'things'like'competition,'intellectual'property,'privacy,'and'

consumer'protection'(among'others).'Not'that'even'these'regimes'are'likely'

optimal'

ex'ante

,'of'course.'But'the'inherent'tension'between'liberty'and'

autonomy'interests'is'somewhat'more'complicated'to'resolve'when'

technological'advance'disrupts'them.'

This'is'particularly'true'where'such'regulatory'regimes'were'adopted'to'

address'perceived'lacunas'in'the'basic'realms'of'operation'of'the'common'law,'

often'brought'about'by'previous'technological'change.'In'the'main,'it'is'

important'to'note,'classical'liberals'favor'customary'and'common'law.

'These'

See'generally'

FRIEDRICH'A.'HAYEK,'THE'CONSTITUTION'OF'LIBERTY'(1960);'

FRIEDRICH'A.'HAYEK,'LAW,'LEGISLATION'AND'LIBERTY:'A'NEW'STATEMENT'OF'THE'LIBERAL'

PRINCIPLES'OF'JUSTICE'AND'POLITICAL'ECONOMY'(1973).'

evolutionary'systems'adapt'to'technological'(and'other)'changes'over'time,'

maintaining'relative'constancy,'minimizing'the'frustration'of'expectations,'and'

eschewing'preemptive'constraints'that'may'turn'out'to'be'inefficient'or'

otherwise'undesirable.'But'statutory'rules'of'general'applicability'al so'evol ve'

through'iterated'judicial'enforcement'(in'part'in'response'to'technological'

changes),'and'also'effect'an'allocation'of'property'rights'and'set'expectations.

While'the'slow,'deliberate'evolution'of'the'common'law'is'certainly'preferable,'

where'they'exist,'the'relative'constancy'of'these'longstanding'statutory'schemes'

is'similarly'important'in'maintaining'the'background'rules'against'which'

transactions'take'place.'

The'central'tension'here'is'that'classical'liberalism'posits'the'need'for'

legal'institutions'to'promote'private'ordering,'but'these'institutions'themselves'

are'often'established,'maintained,'enforced,'and'updated'through'a'process'of'

public'ordering.'Indeed,'even'institutions'that'evolve'through'private'ordering'

quickly'take'on'a'public'character'in'any'society'beyond'a'trivial'level'of'

complexity.

'And'such'rules'can'easily'fall'victim'to'the'perils'of'public'choice,'

erring'on'the'side'of'excessive'constraint'due'to'limited'knowledge,'an'excess'of'

caution'(the'so-called'precautionary'principle),'and'the'lure'of'rent'extraction.'

'The'operative'language'of'Section'1'of'the'Sherman'Act,'for'example,'

comprises'the'following:'“Every'contract,'combination'in'the'form'of'trust'or'

otherwise,'or'conspiracy,'in'restraint'of'trade'or'commerce'among'the'several'

States,'or'with'foreign'nations,'is'declared'to'be'illegal.”'15'U.S.C.'§'1.'The'courts'

have,'for'the'125'or'so'years'of'the'law’s'existence,'been'responsible'for'

interpreting'the'law'and'giving'it'its'real'content'(subject,'of'course,'to'the'strong'

influence'of'enforcement'agencies’'exercise'of'their'prosecutorial'discretion).'

See'generally

'ELINOR'OSTROM,'GOVERNING'THE'COMMONS:'THE'EVOLUTION'OF'

INSTITUTIONS'FOR'COLLECTIVE'ACTION'(1990);'ROBERT'ELLICKSON,'ORDER'WITHOUT'LAW:'

HOW'NEIGHBORS'SETTLE'DISPUTES'(1991).'

The'very'rules'that'classical'liberalism'depends'upon'in'order'to'ensure'private'

ordering'and'autonomy'can'be'captured'through'public'means'to'

limit

'private'

ordering'and'undermine'autonomy.'The'extreme'libertarian'position'has'the'

undeniable'virtue'that'it'is'a'purely'private'mechanism,'one'that'can'disrupt'

legal'institutions'that'have'lost'their'way'–'even'if'that'disruption'has'great'costs.'

So'too'does'the'classical'liberal’s'common'affinity'for'the'common'law'–'an'

institution'in'which'changes'to'the'law'are'predicated'on'private'disputes,'which'

serves'to'check'the'problematic'characteristics'of'public'ordering.

Conclusion

Classical'liberalism'is'often'conflated'with'libertarianism,'and,'on'issues'relating'

to'technology,'libertarianism'writ'large'is'often'conflated'with'particular'strains'

of'anarcho-capitalism'and'techno-'and'crypto-libertarianism.'These'strains'

embrace'extreme'views'of'the'liberty-enhancing'potential'of'technology.'But'

they'are'also'in'tension'with'the'classical'liberal'acceptance'of'a'minimal'set'of'

legal'institutions'as'necessary'to'protect'individual'autonomy'and'promote'

stable'private'ordering.'Indeed,'the'hallmark'of'much'of'the'techno-libertarian'

ideal'is'disruption'–'including'disruption'of'the'very'institutions'tha t 'classical'

liberalism'identifies'as'necessary'in'order'to'promote'individual'liberty'and'

social'welfare.'

'See,'for'example,'Justin'(Gus)'Hurwitz,'

Data'Security'and'the'FTC’s'

UnCommon'Law

,'101'IOWA'LAW'REVIEW'955,'981'(2016)'(discussing'that,'while'

common'law'judges'do'make'law,'“they'do'not'embrace'this'function'warmly,”'

and'the'various'obstacles'that'exist'to'limit'the'scope'of'judicial'rule'making).'

This'suggests'tensions'between'the'classical'liberal'and'the'ascendant'

libertarian'impulses'that'drive'many'in'the'modern'technology'sphere.'These'

tensions'are'real.'But'the'greater'tensions'are'within'classical'liberalism'itself.'

Classical'liberalism'accepts'–'even'posits'–'the'need'for'legal'institutions,'but'

does'not'provide'an'endogenous'explanation'for'the'origins,'extent,'or'nature'of'

those'institutions.'Contemporary'thinkers'in'the'classical'liberal'tradition'are'

likely'to'ground'these'institutions'in'welfare'and'transaction'cost'economics.'But'

technological'changes'can'lead'to'meaningful'changes'in'transaction'costs'and'

shifts'in'the'allocation'of'social'welfare'(that'is,'the'efficient'ordering'of'private'

resources).'In'other'words,'technology'is'exogenous'to'the'principles'of'classical'

liberalism,'such'that'the'fundamental'institutions'of'classical'liberalism'are'

themselves'defined'(at'least'in'part)'exogenously.'This'leads'to'the'peculiar'

result'that,'lacking'internal' p rinciples'to'guide'the'private'ordering'of'its'

institutions,'classical'liberalism'must'rely'in'part'on'a'public'ordering'of'the'

institutions'that'govern'the'private'ordering'that'it'seeks'to'facilitate.'

The'modern'era'of'disruptive'technology'has'magnified'this'tension.'

There'is'little'question'that'much'of'modern'technological'advance'ends'up'

enhancing'liberty'and'promoting'private'ordering.'But'disruption'almost'by'

definition'implies'winners'and'losers,'and'the'spoils'of'disruption'do'not'

necessarily'fall'efficiently,'either'to'the'winners'or'the'losers.'The'classical'liberal'

prefers'Pareto'efficient'transactions,'and'is'relatively'averse'to'transactions'that'

are'merely'Kaldor-Hicks'efficient.'But'technological'advance'–'and'especially'

disruptive'advance'–'places'us'squarely'in'the'uncomfortable'realm'of'Kaldor-

Hicks'efficiency:'Either'we'allow'disruption,'allowing'harm'to'those'disrupted;'or'

we'deny'disruption,'denying'benefits'to'would-be'disruptors.'Without'both'a'

sense'of'the'magnitude'of'harm'and'an'efficient'means'by'which'to'compensate'

for'it,'we'are'no'longer'operating'in'the'realm'of'voluntary'private'ordering'–'

that'is,'in'the'realm'of'classical'liberalism.'

The'safest'response'to'this'conundrum'for'the'committed'classical'liberal'

is'likely'to'recommit'to'the'basic'principle'of'simple'rules'developed'through'the'

common-law'mechanism.'These'are'least'likely'to'be'disrupted'and'most'likely'

to'transfer'relatively'unscathed'between'technological'regimes.'Too'often'legal'

institutions'have'embraced'complexity,'either'on'their'own'or'in'response'to'

specific'technologies.'Such'complexity'runs'counter'to'classical'liberalism'and'

compounds'the'confounding'conundrum'that'technology'poses'to'principle.'

Instead,'when'confronted'with'technological'change,'classical'liberalism’s'future'

more'likely'lies'in'its'past.'As'usual,'Richard'Epstein'got'things'right:'“The'proper'

response'to'more'complex'societies'should'be'ever'greater'reliance'on'simple'

legal'rules,'including'older'rules'too'often'and'too'easily'dismissed'as'curious'

relics'of'some'bygone'horse-and-buggy'age.”

'RICHARD'A.'EPSTEIN,'SIM P LE 'RULES'FOR'A'COMPLEX'WORLD'21'(1995).'