"Innovation or regulation?" and other fishy false dilemmas
Anu Bradford has two or three things to say about this one
Every time—let me repeat, every single time—that someone (usually a politician, or some other kind of salesperson) reduces a complex issue to a choice between “A” or “B,” they’re trying to pick your pocket.
No exceptions made.
Innovation or regulation?
In her paper “The False Choice Between Digital Regulation and Innovation”, Anu Bradford challenges the prevailing narrative—has someone said fallacy?—that attributes the success of U.S. tech companies to a permissive regulatory environment, and the EU’s lag to excessive regulation.
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The author identifies two regulatory models:
United States: A “market-driven regulatory model” that prioritizes the free market, freedom of expression, and the internet, with weakly enforced antitrust laws, no federal data privacy legislation, and very permissive content moderation rules.
European Union: A “rights-centered regulatory model” that emphasizes fundamental rights and market fairness, with an interventionist regulatory approach through the GDPR, actively enforced antitrust laws, and regulations such as the DSA and DMA (the well-known Digital Services Act and Digital Markets Act).
The viewpoint or “COnsensus assumed COmmonly without INsufficient SUbstance” (hereafter, “COCO-INSU”) or opinion of the “average armchair expert” is that regulation increases operational costs, diverts resources from innovation, and creates barriers to growth.
This COCO-INSU has gained traction in public discourse and political positions in the U.S., reinforced by Big Tech’s intense and relentless lobbying.
Note: it’s possible that if you read Ms. Bradford’s paper, you won’t find references to the COCO-INSU or the average armchair expert—believe it or not, those are my own inventions.
The truth dichotomy is "simple but wrong vs. complex but right."
Bradford argues that this relationship is significantly more complex:
Data privacy: Although the GDPR costs money, it also promotes privacy-focused innovations. The regulation can stimulate products that are also marketable: "social innovations" (greater privacy and self-determination) and "market innovations" (products that cater to more privacy-conscious consumers). Not pointing fingers, Apple.
Antitrust regulation: Contrary to the COCO-INSU perception, it can foster innovation by reducing market concentration and stimulating competition. A less concentrated market incentivizes (even more: enables) startups to innovate and challenge tech giants, rather than merely aspire to be acquired by one of them as is often the case today. Reagan knew this.
AI regulation: Well-designed regulation can steer AI development toward more ethical, accurate, and safe applications, building consumer trust and encouraging adoption. Something that, despite Big Tech's verbose claims, is still not happening. To be clear, we're talking about more critical issues than Ghibli-style doodles.
Five factors – conveniently omitted – regarding the USA-EU tech gap
Bradford identifies five key contributing factors:
Absence of a single digital market: European companies must navigate a fragmented market with different languages, cultures, and national regulations, making it harder to scale products and services. The biggest losers are European tech SMEs, as everyone in the industry knows.
A highly fragmented capital market: Europe lacks integrated capital markets and venture capital funds on the scale of those in the U.S. European capital markets are more risk-averse and less inclined to invest in new tech companies. The lack of venture capital funding has prevented European firms from growing and competing globally. Venture capital investors tend to show a local bias, preferring companies from their own countries.
Punitive bankruptcy laws. Cultural aversion to risk: European insolvency regimes are harsher, discouraging entrepreneurship. Culturally, Europe stigmatizes business failure, whereas in Silicon Valley it is even seen as a valuable experience. Just look at Donald Trump, who managed to bankrupt his casinos—no small feat.
Labor market rigidity: This is widely recognized: labor regulations result in rigidity in labor costs and less flexibility compared to their U.S. counterparts. Consequently, EU start-ups are more cautious when offering employees generous salaries and stock options.
Limited success (so far) in attracting global talent: The U.S. attracts international talent through elite universities and high salaries. Europe faces greater political resistance to immigration and lacks unified policies to attract talent. This is starting to change.
Conclusion
Anu Bradford maintains that there is, in fact, no inevitable trade-off between digital regulation and economic progress.
Well-designed regulation (let us repeat: “well-designed”) can strongly promote both responsible innovation and collective benefits.
To reduce the technology gap with the U.S., the EU does not necessarily need to abandon its regulatory agenda. It should tackle other structural reforms, such as greater integration, reforming capital markets, harmonizing insolvency regimes, and adopting more appealing immigration policies for tech talent.
P.S. The first time I heard the concept of a false dilemma used poorly was from Dr. Ann Cavoukian.
Jorge García Herrero
Data Protection Officer
Thanks for the post! It's always nice to read a contrarian opinion to the mainstream.