Flawed Economics Behind Online Harms Regulation

The Flawed Economics of Online Harms Regulation

I am not an economist,  but even I can see the huge flaws in a recently published “cost/benefit analysis of the UK’s online safety bill”.[1] My immediate reactions:

The author, Sam Wood, of ‘The Economics of Online Harms Regulation’ in InterMEDIA, begins with an argument that the pandemic ‘[feuled] concerns about harmful content and behaviour encountered online’. Quite the contrary, I think it is arguable that the Internet and related online media became a lifeline for households in the UK and across the world during this period of lockdowns and working from home. The impetus for the online harms [now called ‘safety’] bill was fueled by the demonization of social media in the years before the pandemic. So, from the very introduction to this piece, I worried about the credibility of the economic analysis it promises. 

I was not disappointed. It is jaw-dropping. Even enumerating some of the many online harms to be addressed and outlining some of the ‘challenges’ in quantifying them, the piece proceeds to do exactly that. Using Department of Digital, Culture, Media & Sports (DCMS) estimates, the author argues that the estimated costs of seven types of harm, the greatest being cyberstalking – at £2,176m over ten years beginning in 2023, is much greater than the costs of implementing the bill, the greatest cost being ‘content moderation’ estimated to be £1,700m over the same ten years in the future. 

Pulling the costs of regulation out of a hat?

Of course, the costs of implementing this bill are not simply captured by the activities enumerated: awareness campaigns, creating reporting mechanisms, updating terms of service, producing risk assessments, content moderation, and transparency reports. What has the analysis left out?

Well, what about reductions in freedom of expression and commensurate reductions in the value and use of the Internet and related social media for the public good? This will be the major impact of the disproportionate incentivisation of censorship by tech platforms in order for platforms to avoid huge the potentially huge costs to be imposed by government regulators.

The duty of care solution is the problem that will have major negative impacts on what has been the lifeline for households, educators, healthcare professionals and all government departments at all times, but made so visible by the pandemic. The duty of care mechanism will incentivise censorship and surveillance of users and push the tech platforms to act like newspapers in performing ever stronger editorial roles, such as determining what is ‘disinformation’.

One could ask: Would not an economist need to list all the benefits of social media and related activities, and not just the costs?

This is not a neutral, critical analysis, but seems to be a political stitch up to support the proposed regulation. That said, such a flawed analysis might well make a better case for opposing than supporting this bill. Read it, consider its flaws, and oppose this misguided effort to address particular grievances by introducing a terrible policy. The proposed bill will do unmeasured damage to one of the most critical infrastructures available here and now for enabling enhanced means for communication and information for every age group in the UK and worldwide. 

With apologies to the journal editors, but if the BBC or public service broadcasting were subject to such a flawed analysis, I am sure that InterMEDIA would not have even considered publishing such a piece. Then again, this bill seems to enjoy widespread support and specifically advertises its intent to protect freedom of expression. Yet how often do the intentions of regulation end up in failure and the unintended collateral damage overwhelm any positive outcomes. I’m afraid we are about to see this happen when this bill undermines an open and global Internet and free expression, and privacy is further eroded in order to enforce tech’s duty of care.

Progress on the pandemic is allowing the UK to talk about moving back to a new normal. In that spirit, may the UK apply a level of common sense and closer parliamentary and public scrutiny to the online safety bill – a level of care that such an important piece of media regulation would normally receive.


[1] Sam Wood, ‘The Economics of Online Harms Regulation’, InterMEDIA, 49(2): 31-34. 

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