Welcome to Cato Audio for May 2024. I'm Caleb Brown. In this month's offering, a discussion of so-called government jawboning that has big implications for freedom of speech. Senator Eric Schmidt of Missouri joins Cato's Eric Smith for a discussion of the challenges posed by diversity, equity, and inclusion initiatives. Cato's Mark Calabria speaks with me about Joe Biden's proposed handout to homeowners. And a Cato Audio exclusive conversation about the new Cato book, Heroes of Progress. First up, this month's Cato Roundtable.
For a long time, tech regulation seemed normal. And now it has moved on to SNAFU, perhaps, or FUBAR. And you can Google those acronyms if you like. But here to talk about the current state of tech regulation and some of the efforts underway to regulate tech and what those implications might be, I'm joined by David and Sarah. He's a fellow for free expression and technology here at the Cato Institute. And Jennifer Huddleston, a newly minted senior fellow in technology policy at the Cato Institute. Welcome. Thanks for chatting with us today, Caleb. Yeah, thanks for having us.
We have a lot to talk about here, and that's part of why we're doing this in the form of the Cato Roundtable. Let's start with just a broad overview here. There are overlapping efforts, it seems, among states, the federal government, and governments overseas, perhaps even some global efforts to regulate tech. So if you wouldn't mind, Jennifer, give me a sense from your perspective of how different things are than they were in, say, the 1990s with regulating technology. I think that's really a good place to start to think about how were things in the 1990s, because it really is an American success story of how we got policy right when the Internet was really this new technology.
coming about. And as we start to see both continued debates over different issues when it comes to the internet, as well as new technologies like artificial intelligence, I think we really need to think about what the U.S. got right, which is while we saw Europe take a much more precautionary approach, a much more regulatory approach, an approach where innovators had to come and seek permission from government officials to prove that their products should be allowed on the market, the U.S. actually established a framework that widely presumed that innovators and consumers were the right ones to decide what applications were best for this new technology. And so we really took an approach that presumed the technology innocent until proven guilty as opposed to the other way around, and allowed the market, not government bureaucrats, to decide what the best applications of that technology were.
Now, unfortunately, we're starting to see people really question that approach and call for much more government restriction, both of existing technologies like the ways that the Internet's being used for speech, as well as for this kind of next wave of disruptive technologies, particularly around artificial intelligence. And that could have a lot of consequences, both for the economic development that can stem from leadership in new technologies, as well as for what we as everyday consumers may experience on what products are or are not available to us. Yeah, and I think it's worth noting here that. All the things that Jennifer just described allowed not just like the economic flourishing, but she mentioned like the massive implications on speech and expression that users of these technologies have benefited from. Not just in the U.S. It's literally been this massive benefit to the entire world that has come from the American approach to allow the development of these technologies largely free from or rejecting the precautionary approach, allowing them to proceed and only limiting them when there's very clear harms, very clear articulable harms that we need to deal with.
We're sort of flipping that on its head now. And the harms are being done once again to innovation, but also potentially to expression, to expression through AI, through expression, through social media. And every one of those issues is now a battleground as we consider turning it on its head. And so I worry also about what that means for expression in the future and how Americans, not just Americans, how everyone in the world is able to use these tools to express themselves. Let's start with AI, which is a technology that has, it seems to have advanced dramatically when Congress talks about it.
It seems to cover a lot more ground than just the latest and greatest generating images of generating responses to questions, searching the entirety of the Internet, it seems, for some answer to a particular question for solving problems that humans have had some difficulty trying to crack. First of all, what do you take to be the more legitimate criticisms of AI or the more legitimate concerns about AI's negative potential? I actually think we've had a very dystopian view of AI painted for us, one that often focuses on the potential for harms as opposed to looking at the benefits many of us are already experiencing in our everyday lives. While the term AI really got popular probably about 18 months or so ago now with the rise of ChatGPT and Dolly and kind of these large language models and generative AI, AI has been a part of our everyday lives for much longer than that. Whether it's using autocomplete in an email or talk to text in your phone or certain translation softwares or certain algorithms making our search results better, we've all been experiencing AI in our everyday life.
lives for a lot longer. With that being said, there have been some really exciting applications in the medical field with how AI is being able to help determine personalized treatments for things like cancer or identify certain potential risk or diseases faster. There's a lot of really exciting things going on with AI and disaster preparedness of being able to identify and model the way forest fires could spread. And then I think there are some really exciting potential applications of AI in any number of industries that we're just starting to scratch the surface of. If we allow innovators to really experiment and let the market and individuals be the ones to decide what products can help improve our existing workplace. We talked earlier about the internet and the rise of the internet and how that changed things. We've also seen automation in the past really disrupt existing workplaces. And that is a disruptive period where social norms have to arise, where new patterns have to arise, where we as workers or as students have to learn how to incorporate this technology into our lives. So when we're asking questions about AI, I think we really have to ask ourselves, is this an issue with the technology? Is this an issue where we are seeing...
societal norms evolve in real time. And that's a little bit discomforting for some of us that may not remember this kind of disruption before. Or is this a bad actor using that technology? Because just like any tool, bad actors can use a tool to do bad things. And we want to make sure that if it's the case of a bad actor, that we're responding to that bad actor and not to the underlying technology that is oftentimes benign or even beneficial. Yeah. And just to put a fine point on it, the harm of AI and new technologies that use AI are often very muddied when we talk about like...
AI harms, the dangers of AI. And so it's worth just thinking about what exactly is it that people have concerns about AI trying to solve for. So for example, one of the big harms is catastrophic, the matrix, the terminator. AI kills humans, takes over the world, kind of. That's the most dystopian sort of AI fear that some people have.
But then you have a separate one, which is, well, what if the AI is used to spread bad messages? It's going to be spreading hate speech or misinformation or other things like that. That's a different harm that we're talking about than killer robots taking over the world. And still another harm is the question of, yeah, what happens with jobs? What happens with the roles of this new technology and changing the ways in which we interface with the work that we need to do? There are other harms as well about how bad actors use this. But many of these questions are the same questions that we dealt with with every other prior technology. But all these harms are just getting thrown together as AI bad.
And I think it's worth us thinking about, first of all, all the benefits that Jennifer mentioned, but also think specifically about, you can't just say AI bad. Let's think specifically about what these problems are if you want to address them. And then you have to actually put forward policies that would address those problems. And in most cases, the answer is, well, we let the market figure this out and we take a light approach because that's how it's worked best in the past. Along that same vein, let me ask a question related to sort of the flip side risk, which is the risk associated with not allowing so-called maybe white hats.
to deploy responses to whatever these bad actors might do. And in some ways, it feels like that is a particular risk associated with AI, that only a few parties will have legal ability to make use of this and that other, you know, would-be tinkerers might not. When it comes to AI, there are a lot of benefits and a lot of opportunities. And as you mentioned, one of the concerns is if you have a regulatory burden where AI can't get off the ground in the U.S., where is this going to potentially develop? How might it be deployed?
there, as well as kind of this question of what are we losing out on in our economic development and our individual consumer uses, as well as in some of these really amazing scientific advances that could potentially come from AI. But I think when we look at this from a policy point of view, part of the problem here is how difficult it is to define AI in law. And that what we often see are these very broad definitions that could bring in not only many of the artificial intelligence elements that we're already used to, those autocompletes or things like that, but also have really profound implications for things like speech, even outside of the AI context. So I'll bring this up in part, we're on an audio show right now, but one of the questions is kind of voice replication. If we have something go wrong while we're recording this program and we have to splice in a retake or something like that, or perhaps...
one of our producers has to use an old recording of Caleb's voice because it didn't go through as well as it was meant to, if that's done using some sort of algorithm or some sort of AI technology, is that going to be allowed under some of these proposals that are designed to perhaps prevent something like deep fakes or something like that? These are often well-intentioned, but they can have much farther reaching consequences for existing normalized practices in a variety of industries that have been using this technology for a long time, let alone for speech more generally, where we've seen things that are attempting to target deep fakes, for example, that could have a much farther reaching impact on things like parody or impressions that are designed to be funny because the way that they are created is going to put such an onus that the impetus on a lot of platforms is if it's at all questionable that AI could have been involved in this, even if it's just using the background or even if it's not at all, that they're going to be more likely to take that speech down rather than to allow what would have normally been protected as a fair use. And if it's hard for consumers to avail themselves of these technologies.
To your point, Caleb, I think you're getting the idea that there's just lost benefit to society, whether it be medical, whether it be disaster, whether it be entertainment, media, communication. One example which stuck really clearly in my mind is we had a great showing of a film on jawboning, a question of government pressuring technology companies or companies in general to make certain decisions. And this film, which you can go see on the Kato website, called Jawboned, Misinformation vs. Free Speech, almost all of it was done, almost all of this film was animated via AI. The director and producer was telling me we've never been able to do this before. We never would have been able to produce this many films describing these complex issues in succinct, clear, vivid ways. We never would have been able to afford the illustrators. If you make it difficult for people to access AI, films like that, which are trying to educate people on just big policy issues of our day, those films don't get made, or they don't get made as well, or they take longer to produce. That's a lost benefit to our society. And in that case, it's a specific lost benefit to the discussions of core big policy issues of our day. And so it's important that we don't lose sight of those benefits that we are losing if we over-regulate AI at the get-go.
That dovetails nicely with our next topic here, which is sort of the attempts to regulate free speech online. States, the federal government, and foreign governments, which may have implications for the United States. Let's start with states. How have they attempted to regulate speech online? And what do those attempts look like?
Right now, there are two cases before the Supreme Court involving Texas and Florida social media laws. Both of these laws are a few years old now. They've been working their ways through the courts. And there's some distinctions in the two laws, but both of them relate to the decisions that different online platforms are able to make around the content that they leave up or that they take down. It would require that platforms at...
government command leave up certain types of content or not engage in content moderation decisions around certain types of content, really focusing on a kind of free speech issue there. Largely, these were brought up with regards to political speech and to political candidates, but they are oftentimes much broader. While we often think of these laws in the context of your typical large social media platforms, Facebook, Twitter, Instagram, YouTube, etc. In many cases, the definition is much broader than that, not only in its ability to reach smaller platforms that may have very specific types of audiences, very specific communities, whether it's a religious community or another type of identity that it's serving, but also in some cases, as we heard during oral arguments for these cases, they could reach sites like Etsy, that's an online marketplace, or sites like Uber that allow reviews and really raise some interesting questions there.
This legislative session, what we've really seen be a lot of discussion when it comes to online speech is how it relates to young people in social media, both in terms of young people's ability to have accounts, but also in a rise of a lot of age verification related proposals. While these proposals are often portrayed by their advocates as trying to prevent young people from experiencing certain types of harm online, the reality is that a law that requires some sort of age verification for everyone. under 16 or under 18, it's also going to require some degree of age verification for everyone over 16 or over 18. And so these can have very serious consequences for the speech rights, not only of those young users who are oftentimes using the internet in beneficial ways as well, but also for adult users. They can have very serious consequences for the longstanding norms around anonymous speech and the value that that's been to certain communities and to journalists and to all sorts of reasons that we can think of and discuss historically here. And so at a state level, we've seen many of these laws come up as well as at a federal level. But luckily, in many cases, they've been
challenged in the courts already. And either a preliminary injunction has been granted and they haven't continued on in that way, or we've even seen some further rulings in this regard. One of those laws is still moving through the court system in the Ninth Circuit Court of Appeals right now. That's an age-appropriate design code. And again, as it relates to kind of the impact this could have on the speech rights, particularly of adult users, that's something to be watching throughout the year and probably next year as that case progresses. David, when we think about age verification online, it strikes me that the kinds of speech you might engage in.
might hinge fairly critically on your ability to remain relatively anonymous in engaging in that speech. Yeah, that's right. I think that one of the big challenges of, as Jen has mentioned, the challenges of many of these age verification systems is that while in theory you say, okay, protect the children, but what it does mean is that you're talking about applying this to everyone. And anonymity is one of those really important things to many speakers online for various reasons, whether it be people who are whistleblowers, whether people who are talking about abuse or criminality that was engaged against them. There are important reasons why people may want to remain anonymous and requiring those people to give information over to either a third party or the government and sort of hope that it remains secure and that that never gets out. That is something which I think many people would be afraid of.
Exactly. We want to protect the ability of those users to remain anonymous. And I think that is certainly another harm. One other thing I will mention, in addition to the other laws that Jen mentioned, is there's another set of laws we've seen. A normal one is in New York at the state level, which passed a couple years back, which basically said, here's what hate speech is. We want you to make sure you tell your users what your hate speech policy is. That is actually currently working its way also through, I think, the circuit courts. I think it's up to the Second Circuit. It was a law passed in New York, and Eugene Volokh is suing because his website doesn't want to have to post that version of a hate speech code because he disagrees that that is...
Maybe it might be hate speech. He doesn't want to have to do that. And so that's another state level court case, which is working its way through the courts. And that could have significant implications on what social media or just any blog has to say how they can regulate their content, how they can host third party content. That's yet another case for the courts. Allow me to put my entrepreneurial federal lawmaker hat on briefly. Well, obviously, these states can't have a patchwork of different laws governing speech. That doesn't make for an efficient system of respecting speech. We need a federal law to handle.
Things like age verification so that young people aren't suckered into illegal activity. The federal government needs to be the one coming up with something comprehensive to deal with the scourge of speech we don't like online. There are a couple of federal proposals that we've seen, some around youth online safety that much like the state proposals raise questions of what these would mean, both for young people's privacy of would this actually require in some cases more data be collected, as well as what this would mean for the speech of all Internet users, whether they are young people who are using these platforms in beneficial ways or adult users that in many cases, similar to the concerns at a state level. Another recent federal proposal that we've seen, though, as well, that raises serious free speech concerns are the debates over potentially banning TikTok or to be more accurate, a bill that would.
require a divestment from parent company ByteDance to force sale by the government or otherwise face a ban from being distributed in the U.S. And I bring this up because it raises serious questions of what this proposal would mean for the speech rights of American users of this platform, that we would have a government intervention into speech. Not only is there a debate over what this might mean for TikTok itself, but I think it's very important that we consider there are American users who have chosen this platform. for their expression that would lose their right to that platform in the event that a divest or ban proposal resulted in a ban and what that might mean from a free speech and First Amendment analysis point of view. So those are probably the two most recent notable examples. There are also several examples in the AI debate. A lot of questions around how, as I mentioned, some of these proposals could impact parody or other types of speech. There's been a lot of questions around AI and election speech or AI and misinformation and disinformation, all of which, again, start to bring in some of those speech questions as well, not even from a kind of...
AI at speech necessarily, but what does this mean for users who are using AI in their process? And thankfully, your example of your entrepreneurial federal lawmaker, one of the big hangups to your hypothetical person there is that they know that they can't explicitly regulate conduct that is, we don't like this kind of conduct. This conduct leads to bad things, it's hate speech, misinformation, et cetera. And so that's why at the federal level, instead, the other big Supreme Court case this term is over the issue of jawboning. So the question is, when can the government apply pressure or coerce a private actor into doing the government's bidding, even though the government...
You're not allowed to require them to do something, but you can pressure them to do it instead. And that's the question before the court in Murthy v. Missouri. And the question is, when does the government go too far? When does government communications with tech companies in that case? And there's also a related case called Vulo versus the NRA that deals with a similar issue, but not online, but instead deals with a financial regulator in New York pressuring people to not provide insurance or bank with the NRA. Similar questions. When does the government's actions go too far? And how as a society do we deal with allowing the government to have some important conversations with companies, but not allow them to?
pressure those companies to take actions that they otherwise would not be able to take. Those cases are also before the court, and I think we'll have to see what happens, and we're going to have to see what the potential actions for lawmakers are there. One of the big suggestions that different scholars at Cato have suggested is that we need a sort of transparency-based approach where, well, we don't know exactly what the government is saying to these various private actors, but we need transparency into those communications. Then we can better figure out where to draw that line, because right now so much of it is in the dark. In the dark, as was expressed to me by one of our colleagues, Brent Skorup, at least in one case of a state-level regulator attempting to cajole certain behavior out of a private firm.
those messages were being sent on a platform where the messages evaporate after a certain amount of time. The fact that these communications are, in some cases, literally on, you know, we can't even see them. In some cases, they're, yeah, they're varying levels of formality. Sometimes it is, yeah, a Snapchat or esque thread. Sometimes it is a formal email. So like the different ways in which job winning can occur presents this challenge, I think, to the court to figure out how do we set the standard about what is appropriate and what is not. But regardless, we need to know those communications because that is, I think, the starting point to determine, okay.
Let's call this out into the open. And then immediately some of this goes away because when people know that they're being when they're on camera, they can't get away with it. This seems like an issue as we move on here to issues of antitrust. It seems like there aren't rights implicated here. Like we're talking about the First Amendment, our right to express ourselves, our right to receive information. But of course, when it comes to companies wanting to merge or associate with one another or engage in a certain business model with respect to commerce with average people, of course, rights are implicated. So if you don't mind, could you detail how the government views antitrust at the federal level?
differently than the standards that have prevailed in the past. It seems like we've seen a resurgence of this idea that big is automatically bad, that a company that is large and successful should be presumed to be doing something wrong rather than more carefully examining why is this company large and successful? Because we should be applauding large, successful companies that get that way because they provide an innovative product. because they're responding well to their consumers' needs. This is what we want companies to do, is to provide products that respond to what their consumers want. And if that's why a company is popular, because it's offering a superior product, because consumers like that product, those should be the type of things that we feel are real American success stories and we should be incredibly proud of.
Unfortunately, what we've seen from both the Federal Trade Commission and the Department of Justice recently are things that are really scrutinizing particularly the tech sector with this presumption that large companies engaged in mergers and acquisitions or large companies because of their size or because of their popularity should be up for further scrutiny at different times. Recently, we saw, for example, an antitrust case against Apple that focuses a lot on the green bubble in iMessage, you know, something that despite there being many, many more messaging apps available for consumers out there, really tries to claim that this is where the monopoly is. and a monopoly for luxury smartphones and some very strange market definitions in some of these cases. And while some people have really seen this as a kind of big tech issue, I think it's important to recognize this mindset goes much farther. We've seen grocery store mergers be challenged recently under these grounds. And we've even seen, you know, Senator Elizabeth Warren calling to break up big sandwich this year as kind of the prime example of how far this logic can go.
At the same time, while we think about this as about big companies, we have to also consider how this could impact small companies, small companies that lose an exit strategy, that no longer, now if you're a startup who's trying to decide whether you're making a product better, whether you want to compete in some cases and become the next innovative giant, or whether you're a serial entrepreneur where you want to design a product, but you don't really necessarily want to spend all your time running a company, you're potentially seeing the government really interfere in this market and in these transactions in ways that could harm small businesses and consumers as well, who then miss out on the potential that could come from those mergers and acquisitions. And I'll just also note that the logic of sort of big being bad, this is certainly not something that's unique to the new wave of antitrust actions in the United States. You see this a lot right now, that general mindset coming a lot from Europe as well, where you look at things like the Digital Services Act, which is not an antitrust measure, but it just says only for the biggest companies, which happen to be defined as only American companies, because A, we have the biggest tech companies, but also because Europe doesn't want to regulate the few medium-sized tech companies that it has to harshly. It wants to go after big companies for being successful. And since Europe has not been able to innovate the big companies, it just wants to penalize because they're big and...
making a lot of money, just penalize the big tech companies by requiring them to meet all sorts of extra additional standards under their Digital Services Act and their Digital Markets Act and all sorts of other regulatory barriers that they're putting in their way as well. So this logic is certainly not something that is limited to just the U.S., but we're seeing it. increasingly commonly throughout the world in various spheres of policymaking. And we can actually look to Europe to see what some of the concerning consequences of this should be. We could spend a whole nother podcast episode talking about many of the concerns of what we could learn from Europe and their mistakes in tech policy. But the Digital Markets Act provides another example of what these consequences could be. Again, really looking at laws that are largely targeting American tech companies of while Europe hasn't been able to build their own tech successes, they have quite significantly exported their tech regulation in some ways. And we're starting to see the way this impacts, you know, your average consumer's experience when they purchase a smartphone and it's no longer just ready to go out of the...
box in the way they expect, but they have to go through all these additional steps to set it up or in the availability of certain products in certain markets as well. The decision to potentially not launch threads in Europe was in part tied to some concerns around competition issues there, it's believed. And then there's the way this impacts us as Americans. One of the examples that I've pointed to in past work is if you've bought a new iPhone recently, you may have noticed that your charger has changed. That's in part due to the fact not that Apple found a better way to conduct charging or thought that this would be something that consumers wanted where they could more easily share their chargers across.
other types of platforms, but because a European law decided to dictate what type of charger tablets and smartphones must have. We're going to leave it there, but let's just say that both of you have job security, at least as far as your issue area goes, because these issues aren't going anywhere. David and Sarah is a fellow for free expression and technology at the Cato Institute. Jennifer Huddleston is a newly minted senior fellow in technology policy at the Cato Institute. You can, of course, follow their work on our other podcast, Until I Am Replaced by AI, the Cato Daily Podcast, and of course, Cato.org.
When does lawful government engagement cross the line into jawboning or compelling behavior among private parties that would be illegal or unconstitutional to impose legislatively? At a Cato online event, Attorney Robert Corm Revere of the Foundation for Individual Rights and Expression and Attorney Kristen Shapiro, the Independent Women's Forum detailed some of the difficulties in drawing the line between government speech and unlawful coercion and the costs for those whose speech is effectively censored. So let's start there and then we'll go to the NetChoice and CCIA cases. So section 230 is a law that essentially says websites and users are not liable for third-party content. The way this usually comes up, you know, if I say something defamatory, God forbid, about Bob on Twitter, Bob can come after me. That would be terrifying. Bob could come after me for the defamatory tweet, but notably he cannot go after Twitter because Twitter didn't author that tweet. So it's been sort of known as the law that...
created the internet, essentially. It's an immunity for these social media companies and us users to be able to actually host user-created content. And in the context of the Murthy case, it came up a lot because lawmakers at the time, policymakers at the time, government officials, they would literally tweet, they would say in passing, maybe even put in the emails, you know, maybe we'll have to repeal or revoke Section 230 if you don't make the content decisions that, you know, we're asking you to make. And we heard it a lot kind of directly, but also indirectly, where the, you know, the Biden administration, the Trump administration would both talk openly about repealing Section 230. And I guess the administrations kind of see it as this sort of...
as a, quote, gift to the social media companies. I think what's important to keep in mind is that Section 230 doesn't really grant any new rights. All it is is a procedural fast lane for the First Amendment. Remember, the First Amendment is what grants these private companies, their ability to do content moderation and to act as online publishers and have editorial discretion. That dovetails nicely with the net choice and CCIA cases that we've sort of brought up before. And this is in regards to laws in Texas and Florida that would essentially, and kind of ironically, given the Murphy case, essentially tell these services what they can and can't carry when it comes to content. Now, those cases have nothing to do with Section 230. Those are peer free.
amendment cases but as you can imagine section 230 kind of gets implicated and just given again the way that it procedurally operates um but those cases the heart of the question really is do online services have first amendment rights and for those of you who are listening this and are feeling some deja vu yes the supreme court already did address this back in the late 90s in um reno v aclu and had said undoubtedly that yes the first amendment is crucial it's it for online companies for online expression to flourish and thrive what i found connecting this back to the murphy case um what i found to be i would say maybe encouraging. A few of the justices, I think Justice Kagan specifically, actually referred back to social media companies like Facebook as, quote, speech compilers, sort of recognizing that these social media platforms, they operate in this duty as online publishers. And as online publishers, they too make editorial decisions. They are compilers of all of the speech that all of us put up online. And Kagan also talked about how Facebook's content moderation policies and the enforcement decisions that they make are Facebook's own viewpoints, which is a core part of the NetChoice and CCIA cases as well. It's all about whether
when these services do content moderation, are they expressing a viewpoint of their own or are they just taking content down? And depending on who you ask, I think the correct answer there is that indeed, it's just like with the New York Times when they decide what to put on the front page or articles they decide to run or not run. It does express viewpoints that these services that when they make decisions about what content they want to carry and what content they don't want to carry, it expresses a viewpoint of what the service sort of endorses. You can compare what's allowed on Facebook today versus what's allowed on Elon Musk's apps, for example. That's sort of how all of these connect. But just kind of getting back to the point here, I thought that the oral arguments, again, were encouraging with regards to the net choice cases. And I think there's sort of this deep understanding for many of the justices that essentially these services operate like online publishers and very akin to their traditional offline counterparts, they have First Amendment rights to do editorial discussions, to make editorial decisions.
I think that background is very helpful. And if I could just add, people can be forgiven if they're a little bit confused about what's going on in these cases, because the Supreme Court is facing five social media cases this term alone. And you have people sort of all over the board. Two were decided last Friday, and we could do a whole other panel on those. But there are also the net choice cases that involve direct regulation of states attempting to regulate the moderation decisions of social media companies. And the irony here is that the states that are in the Murthy case arguing that this...
nudging by the Biden administration is the worst First Amendment violation in history, are also supporting the states that want to regulate moderation decisions directly. These are absolutely irreconcilable. As we pointed out in our Amicus brief, that the attorneys general who are advocating a First Amendment position in the Murthy case not only themselves violate the principles that they are trying to espouse here, but then are advocating in the same term, in the same court, a directly opposite theory of the First Amendment when it comes to direct regulation of speech. So I can... Forgive your listeners if some are confused about these positions. And it's because of the politics. And my personal view is that pretty much politics either diminishes or destroys most things that it touches. And that's one of the things that has made this issue so divisive in that this has been billed as a case against the Biden administration to stop the evil Biden administration from meddling with social media. In fact, this cuts across all administrations. The Trump administration was famous for bullying the media. It was famous for going after social media platforms and threatening to repeal Section 230. The record in this case established that...
This is something that started during the Trump administration and was carried on in the Biden administration as well. And the question is, when does the First Amendment impose a limit on that kind of interaction and sometimes very threatening interaction between government actors and private media companies? If I can tack on just one more quick point to that note, there's also sort of, we talked about the hypocrisy of these states, but you also are seeing in these red states, at the same time, they are clamoring for government engagement in kids' online safety. They talk all the time about how social media is terrible for kids, it's horrible for their mental health, and we need the government to step in. And then we're seeing in this case, again, they're arguing for, okay, no government interaction. And I thought Justice Jackson really, you know, she really nailed it when she said, well, it seems like the breadth of this injunction, and those of us on Spanel may agree or disagree, but it seems like the breadth of this injunction would actually reach governments just...
warning the general public, saying in one of their more general statements, hey, kids are eating Tide Pods because of a Tide Pod challenge. Maybe that's not so great. And so, again, there's sort of this dissonance between what's being argued by these same states here in these cases, in the Murphy case, and then what they're actually going off and saying and sort of begging the government to get involved. To me, it goes directly to Bob's point that this isn't really about content moderation or about protecting kids. It's politics. It's all politics. Robert Corn Revere is Chief Counsel at the Foundation for Individual Rights and Expression. Kristen Shapiro is a Senior Fellow at the Independent Women's Forum.
Diversity, equity and inclusion have become the topics of policy discussions across several aspects of society. The advance of DEI at public universities raises its own set of issues for academic freedom, free expression and other ideas. Republican U.S. Senator Eric Schmidt sat down with Cato's Eric Smith for a discussion of how to think about the impacts of DEI in schools, corporations and broader society. There is an overarching ideology called critical social justice. CRT, critical race theory, is a subcategory of critical social justice. And what critical social justice is, is what was already mentioned, splitting society into oppressor and oppressed. The idea that the American way is systemically racist. In fact, the American way was put together for the express purpose of protecting whiteness. What's more, whiteness, and now we're getting into the subcategory of critical race theory and critical white studies, that's a thing.
Whiteness, the definition has been broadened basically to mean classical liberal or even bourgeois attitudes that many proponents of critical social justice think are actually perpetuating racism. They help to hide the insidious racism in society. So critical social justice, critical race theory, it comes out of critical theory in general. Most popular from the Frankfurt School of Sociology, things like that. There's a concept called repressive tolerance, which really means the repression of tolerance. And we just talked about it. You do not entertain the other side whatsoever. You do not agree at all with the other side whatsoever. If the other side agrees with you 99% of the time, but 1% they don't, they are altogether bad. You can see how that kind of ideology is manifesting these days on college campuses, and now even corporate America, and now even congregations, churches, things like that.
To add to that, a critical social justice theorist, the prominent theorist, the de facto leader of critical social justice, Derrick Bell, wrote an essay called Racial Realism. And the conclusion, the ultimate conclusion in that essay is that racism will never go away. We can't get rid of it. The best we can do is constantly push back, constantly agitate, constantly make white people uncomfortable. This is what he says. So you put those things together, Derrick Bell's conclusion and the concept of repressive tolerance, and you get, well,
What you see on college campuses these days, the intolerance of anything that smacks of classical liberal values, the pushing back on white comfort. There is a primary tenet to critical social justice. And that tenet is, the question isn't did something racist happen, it's how did it manifest in this situation, right? So racism is always already around. And it's manifested in every interracial interaction. Somehow this is racist, right? I wish I could say I was kidding. I'm not. Somehow this is racist. What's more, another primary tenet is that anything that makes white people comfortable is suspect. Yeah, that can't go wrong, huh?
Put all those things together and you have critical social justice. You have what's going on on college campuses. And you have what is undergirding diversity, equity, and inclusion. It's not things like equality, individuality, right? Diversity is a good thing. Inclusion is a good thing. I love this image up here because it's not just fingerprints of a bunch of colors. Fingerprints are individual, right? They're one of a kind. So we have individuals of different colors there, not group members to be pitted against other groups, right? Another primary tenet of critical social justice. So I will stop there.
Well, I actually think you're hit on something, too, that's really important. And again, just taking sort of an American point of view here, the founding was bold. It said to the world a bunch of things, but it also said that as individuals, as individual souls, we're endowed with certain rights. That aspect of individual rights is under assault, too, by an assertion of sort of this collectivist mentality. And again, very dangerous. And I'll just hearken to – so Tocqueville comes to America in the 1830s, and he writes essentially this travel dispatch back to Europe about what's going on in America. There's this economic dynamism. The War of 1812 is over and all this. What's going on? And so he travels to – at the time, I think it was 19 states or something. He's writing back.
And what he discovers, he thinks he's going to find some great bureaucratic ingenuity in Washington, but that is not what he discovered. Same is true now. But what he found was that what made America unique was we're a nation of joiners, that this real sense of cultural pluralism, these different layers that define us. I am German descent, Italian descent, Irish descent. I like beer. I like the barbecue. I'm a St. Louis Cardinals fan. I'm Catholic. All these different things that define who I am as an individual.
What DEI ultimately does is sort of wipes all of that away. And you are whatever. You're white or you're black. And that's the only thing that matters. And that is, I think, if we get an opportunity to talk to people about what this really is and educate, we can have disagreements. That's OK. But when you sort of destroy or wipe away any sense of individuality or perspective or background or experience, it's a very dangerous thing. And it also makes it easier to sort of this othering that I mentioned before. Eric Schmidt is a Republican U.S. senator from Missouri. Eric Smith is a research fellow at the Cato Institute.
In his recent State of the Union address, President Biden, among several other big spending proposals, proposed a handout to both buyers and sellers of homes. And in a tight housing market, that handout will accrue mostly to sellers. For the Cato Daily podcast, Cato's Mark Calabria detailed why the real solution to America's housing woes is build more housing. You know, from about February to May of 2020, home sales decreased 30 percent. Most of us at the beginning of COVID thought that prices would come down and that we risked a repeat of 2008. And of course, you know, some of the stuff I talk about in my book, Shelter from the Storm. But, you know, it all turned out to be very different, obviously, because of some policy choices that were made. And instead, we got one of the biggest housing booms we've probably had in my lifetime. You know, sales and prices and refinancing were all off the chart.
2020, 2021. So rather than a sort of housing deflation or housing bust, we got a crazy housing boom. Some of this was in direct response to both state, you know, not just federal, but state and local policy. So for instance, many families, you know, their reaction to the lockdowns and the school closures was to say, I'm going to move my kids to somewhere where the schools are open. And we saw a lot of that. So tremendous amount of mobility changes in direction, often from what were higher cost housing markets to lower cost housing markets. So you can imagine, say, a family.
moving from the Bay Area, San Francisco to Boise. Think about how far your money is going to go there. And also, if you think about it, much smaller housing markets. So you saw these really just big booms, really drove affordability problems where outside money was coming in on what had been much lower price points in the housing market. Obviously, we had record low interest rates, in part because of actions from the Federal Reserve, where it wasn't unusual during the pandemic to get a mortgage at 3%. And now we're in a world where many of these stimuluses have drove up prices, have drove up interest rates. Mortgage rates are at minimum twice what they were during the pandemic. And again, we've seen all this fiscal stimulus really drive up demand. On that point, I'm among these people, so I can speak to the personal experience of it, of buying a house in the middle of 2020.
I would be lying if I said my wife and I knew what was happening at the time or where we would be. None of us did, really. But we find ourselves very fortunate. You mentioned a wave of refinances of people getting sub three, sometimes two and a half percent or lower mortgages. And President Biden in his State of the Union address wants to address part of this for what he terms people who are locked in.
to low mortgages and feel like they can't move, he would like to apparently, and tell me if I'm wrong here, he would like to see more churn in the housing market, that is houses turning over, and wants to provide financial incentives to get people to sell their homes. And in fact, this is from the White House, before his State of the Union address, they write, President Biden will call on congressional Republicans to end years of inaction and pass legislation to lower costs by providing a $10,000 tax credit for first-time homebuyers and people who sell their starter homes. So if the cash benefit... is on both sides, that is first-time homebuyers and sellers, you might expect sellers to absorb more than that $10,000 benefit. If not pretty much all of it, yeah. So let's start with the observation. And even though I myself have used the term lock-in, I don't love the phrase because you're not locked in, you're just disincentivized from selling. Because the problem is like for you and your family, Caleb, were you to sell and give up your 3% mortgage, you might buy a better house you like more, but you're gonna be giving that up 3% mortgage for a 7% mortgage.
So it's a big disincentive effect for existing homeowners to put their homes on the market, which, of course, decreases housing availability for people who start up. Because the way the housing market, of course, works is you buy up and you sell down the housing ladder, if you will. So, yeah, it has, again, I hate to use the word, it froze in that housing ladder to some degree. And it's harder for first-time homebuyers to get on that ladder because people aren't selling who would normally be selling because they're disincentivized. And because as we go back, I mean, I hate to say Econ 101, maybe this is more Econ 102, the question of tax incidents.
So the president has proposed a benefit for both sellers and buyers, but it's a seller constrained market. So all that subsidy ultimately would be captured. I mean, I'm actually comfortable saying pretty much all of that subsidy would be captured by the seller. And related to that, not to be forgotten, is when you're goosing demand for housing in a severely constrained market where housing is produced in far lower unit numbers than you and I might prefer. You're just talking about raising the price. Yeah, absolutely. I somewhat describe it that the administration looks at the housing market and says, here are two people bidding against each other for this one house. Why don't we add a third bidder? Or why don't we give more money to the people bidding against each other? Rather than the real solution is how do you increase supply? Now, yes, the administration has said, oh, we're worried about supply, but their reaction to supply is predominantly to increase demand.
which of course make it worse. So there certainly is a big misdiagnosis of how you address the fundamental problem. And even things where they seem to kind of recognize, okay, well, let's get more people to sell their homes. Well, those people are also going to buy homes. It's not like, for instance, like you and your wife, if you sold your home, you'd buy another home. You're not going to suddenly be out of the housing market. So there's a net net. And of course, let's set aside, you know, the awfully regressive nature of what they're proposing in a way is to give a subsidy to existing homeowners who are by and large wealthier than first-time homebuyers or renters.
So it's really a regressive subsidy to get people who have had the windfall, good luck as you touched upon, to buy and see a lot of house price appreciation. So it's not only, you know, Caleb, not only have you done great by having, you know, several years of strong price appreciation, President Biden wants to give you an additional windfall of a subsidy. If only you would sell and put your house back on the market. Thank you, President Biden. Yeah, I mean, looking out for those truly in need. In any normal market, when we see a price appreciation, and as we just mentioned, the president would like to goose demand in some way, you would see an increase in production.
to meet that demand, to bring those prices back down. But in housing, it doesn't seem to work that way. It also takes a really long time. So we are building a lot of housing in this country. And one of the unintended consequences of the so-called lock-in effect is that new homes are at record percent of sales overall.
So normally, you know, new homes are, you know, 10, 12, maybe 15% of home sales overall and the rest, the rest are existing homes. But, you know, we're much closer to say 25%. I mean, there's some arguments, you know, in the data, what actually is the percent, but there's general agreement that new home sales are at record percents of overall sales. And you're also seeing builders try to price lower in the price point. So the builders are trying to figure out.
Well, there's a shortage of entry-level housing, so let's build entry-level housing. But there are limits to that. We also have to remember with all the additional stimulus like the CHIPS Act and the so-called Inflation Reduction Act, when we're building all of these plants for semiconductors, we're competing for construction labor. We're competing for construction materials prices. So part of the problem is builders would actually even produce cheaper houses if they could.
But all the fiscal stimulus for construction is competing with home construction prices. And that's putting a little bit of a floor on under how low prices could go for builders. Part of the problem is with the construction, not just the prices of materials and labor, but land use as well. And the problem with land use is not only that it restricts supply, but it takes it so much longer to get the supply online. So what could take six months becomes nine months, 12 months. And so you see a bigger disconnect. So yes, I mean, the fundamental problem with the housing market is dysfunctional, but it's dysfunctional because of state, local, federal policies. So much of what restricts housing supply.
are policies that are set by state and local governments. It's not exactly clear to me, and you can correct me if I'm wrong, what the federal role would be except to get out of the way. The president seems to want to go a different direction in terms of goosing supply, which is to say subsidies for the construction of new homes. It strikes me that to the extent that this is a state and local problem, there have to be state and local solutions. So let's pull that apart a little bit. Let's start with the easy part of even the things that the administration have claimed would increase supply don't really. So one of the more popular is a tax credit for developers.
But the developer still has to bid for the land. So ultimately, if the binding constraint here is developable land, because you look at a developer and say, oh, the developers increase supply. So if we subsidize developers, that increases supply. Not really, because what ultimately it means is I'm giving the developer more money to simply bid up land prices because you aren't actually fundamentally increasing land. Now, the federal government has played a role. So, for instance, before Herbert Hoover was president, he was secretary of commerce, and he really went around the country trying to convince localities, you know what you need? You need zoning.
And so the federal government did play a really big role in encouraging localities around America to adopt restrictive zoning practices. Mark Calabria is a former director of the Federal Housing Finance Agency. We spoke for the Cato Daily Podcast. Over the last 200 years, humanity has become more prosperous, educated, healthy, and peaceful. Alexander Hammond, author of the new Cato book, Heroes of Progress, sat down with me for this Cato audio exclusive to discuss some of the heroes of progress who saved or improved billions of lives and the social and economic conditions that made their contributions possible.
What really inspires me with a lot of these heroes is a common trait that binds a lot of them together is just how motivated they were towards their work. Relentless, almost tenacious. They wouldn't accept no for an answer. They were willing to pursue their tasks no matter what their boss, their family, their friends, even their bank accounts said. An example could be Grace Eldering and Pearl Kendrick. These were two American scientists who in the 1930s in a lab in Grand Rapids, Michigan, due to funding limitations and perhaps some discrimination due to their gender, they weren't allowed to work on a vaccine for whooping cough during their working hours.
And instead, for years and years, they dedicated their evenings, their weekends, their holidays to developing this vaccine. And eventually, they were successful. And so far, that vaccine alone saved more than 15 million people across the world. There are others like Wilhelm Rottingen, who's a German scientist. And when he told the world that he could take photos of the insides of people's bodies, he was denounced. People thought he was crazy. And yet today, x-rays are a pillar of the medical system and probably something most of our listeners have benefited from so far. So it's really the stories about those who were told no were...
denounced as crazy, but just remained committed to their work, I find really, really inspiring. One of the stories you tell is William Wilberforce. If anybody's seen the movie Amazing Grace, it tells his story in great detail. And you talk about somebody who was committed to an idea, which was the abolition of slavery. And that's somebody who it took decades for him to achieve his goal. He devoted his life to it. And Wilberforce's commitment to it is extremely deep and very spiritual, actually, because he was devout.
Christian. And the song we all know now, Amazing Grace, was written by the father of a pastor in the local church, who was a slave owner for many decades. And then he realized the wrongs of his ways and devoted his life against slavery and wrote Amazing Grace, which really influenced Wilberforce. But Wilberforce, once he found out that slavery was abolished in the British Empire, he died, I believe, only a couple of days later. So it really was his quite spiritual life purpose to get that over the line. Immense commitment. It is appropriate, I think, for an inquisitive teenager or maybe even younger than that, because the language is fairly simple.
but it also tells the story of some particularly inspiring and accomplished people in history that we ought to take some inspiration from. So yes, we deliberately designed the book so that you could pick it up and read the biographies of the people that you find most interesting. You don't have to sit down and read it chronologically. You can skip if you find science particularly interesting or the history of science. You can only read those biographies and still, I hope, take away a lot from it. And same is true if you're interested in policy or businessmen or technological innovation. Extremely easy to read, very simple language. And that was really the goal.
hope to inspire young people. And I know that through Cato's Sphere Initiative that a lot of teachers are receiving the book and there's even some classroom materials that have been made by teachers that are being used, which is pretty cool. Are there some patterns that we can detect about how these innovations came about? It's the kind of thing where, you know, if you devote your life to something, it means that for the most part, nobody's telling you what to devote your life to. you know, we're happy to live in the United States where innovation is relatively unfettered compared to even Europe and the rest of the world. But what do you note about the societies in which these people grew up and did their work? Unsurprisingly for the audience of the Cato Daily Podcast, freedom did play a huge role. And it's not like I intentionally went out only looking to write biographies of people from free societies. All I did is go out into the world for many years and research individuals who met that definition of a hero of progress. And as we look at the sample size of 65 individuals,
One was born in the 14th century. One was born in the 15th and 16th and 17th. However, nine were then born in the 18th century. 24 were born in the 19th century and 28 were born in the 20th century. So what that shows us is as freedom has spread across the world and to more societies, a number of world-changing innovators does too. When people have the freedom and agency to turn their ideas and innovations into marketable goods, they do so. They have to be able to take the risk and most importantly, disrupt the existing status quo.
What's also actually quite interesting is individuals who did not come from a free society did one of two things. First, they migrated. This is especially common for the ones that are from a few hundred years ago. Erasmus, as an example, the first modern champion over peace and tolerance, he migrated about seven times in two decades, all across Europe in order to find freedoms, networks, mentorship, and education that just wasn't available to him in his home country. It started with Netherlands and then the UK, some states in Western Europe, spread to America, and is also now spread more globally. When the free societies do this, what happened...
which is also really cool in the book, is the diversity of the heroes significantly increase. Really early on, the first few heroes were rich and from Europe, mostly the UK. However, when time has gone on, the background of the heroes became, it could be various different countries, various different socioeconomic status to start with. And that's quite cool. And I hope that continues as the world begins to get more free going forward. And then the second thing that heroes from unfree societies did, and there's only a couple of them in the book, but they actually managed to get special government permission to continue their innovations.
One example of this is Sir John Harrington, who's been mentor of the first flushable modern toilet. And he was really a disruptor. A lot of people had it out for him, but he was the godson of a queen. So he could get away with doing a lot of things. And similarly, a more recent example is Yang Longping, who's a Chinese agronomist. And he developed a hybrid rice, which saved hundreds of millions of people, and about 100 million people still rely on it every year. Yet during the Cultural Revolution in the 60s in China, he was denounced, likely for disrupting the status quo in the scientific field. He was proposing new ways of doing things.
The local government reserved a spot in jail for him. And yet it was only because a more senior official from another town had read one of his papers and liked him. He managed to get special permission, which, of course, is great for Longping. But then imagine the millions, others or billions across the world who don't have those freedoms and don't receive that special permission to innovate. And at least one of your heroes of progress who should be better known, but isn't, did not live in a free society and did not have special permission to do what he did. Vasily Arkhipov, the Soviet naval officer who...
according to the U.S. National Security Archives, saved the world by refusing to launch nuclear weapons. Yes, that's right. He was in a submarine during the Cuban Missile Crisis. And essentially, when he left Russia with his flotilla of submarines, he was on his way to Cuba. And at that point in time, the U.S. had not enacted a blockade around Cuba.
However, by the time we got there about a month later, the blockade was in place. But due to lack of radio communications, they were unaware. So when they got to Cuba and the American warships started dropping destination charges on them, just warning shots to try and get them to rise to the surface, every other captain and person in position of power on board the ship believed they were at war and wanted to fire the nuclear torpedo that was on the submarine. And despite the depth charges disrupting the heating system, so it was extremely hot, well over 100 Fahrenheit, and indeed affecting the air regulation system, so there was a huge amount of carbon dioxide coming in. Vasily Arkhipov said, no, we're not firing. And what's really unique about this is even though he was in charge of the entire flotilla, he was only the, I believe, subcommander on board the ship. And it just so happens he was on this ship with a nuclear torpedo. And it just so happens these other captains wanted to fire. Usually it would only take the captain and the political officer to give permission. And both of those people wanted to fire the nuclear torpedo. But because he was on board, they required the permission of all three and he refused. And eventually the submarine rose to the surface, got the communication from Moscow, headed back. And he did continue his career in the military, but he was...
quite harshly denounced on his return, and some people saw him as a count. Alexander Hammond is author of the new Cato book, Heroes of Progress. Why are housing prices in America so high? Supply and demand is a reasonable explanation, but it's also misleading because draconian regulation drastically constricts housing supply. In an exciting new nonfiction graphic novel, Build, Baby, Build, The Science and Ethics of Housing Regulation, economist Brian Kaplan makes the economic and philosophical case for radical deregulation of the housing industry. Combining visually stunning graphics and careful interdisciplinary research, Build, Baby, Build shows readers why deregulation turns out to be a bona fide panacea. Order your copy of Build, Baby, Build today at cato.org.
That will do it for this edition of Cato Audio. I'm Caleb Brown. Talk to you again next month.