Articles, Commentary

Unexpected economics of free speech – India

In a previous post I argued that there are several reasons that we should care about and advocate for the freedom of speech. They centered around the ideal of a healthy democracy fueled by informed citizens that know the forces that affect their lives. Citizens can then root out corruption, prevent violence, and find consensus through discussion forums and communication. Rather idealistic, striving for a utopian society.

If you’re like me, though, it helps to find motivation and support in something much more concrete. And the above story portrays all other effects of free speech as only side-effects, instead of something specific to work towards. Discussions around free speech should not only rely on the political and social benefits. There are however far more measurable and practical dimensions to free speech, but they are seldom mentioned.


The big one is the economics of free speech – the prosperity that can come with free, unmolested, unthreatened information sharing. Rarely are economic dimensions considered, but they can have enormous benefits in an economy and society. When they are mentioned, discussions revolve around a free market’s need for innovation. But there is something deeper that is quantifiable.

You can of course still speak economics while remaining idealistic: “Free speech ensures that the old ideas of society can be identified and rooted out through discussion of new ideas – a kind of free market competition of ideas.”

But this can stretch into partisanship and opinions on open competition and a game theoretical approach to immoral capitalism of ideas that shut out the unknown ideas and create monopolies of the popular ones. So let’s stay away from that. Instead, we’ll talk about online intermediary liability, a legal restriction that has proven to stifle economic growth.

Intermediary liability is an annoying esotericism. An intermediary is a website – platform that acts as the middleman between a customer and the reason he or she uses it. Facebook is one, Amazon is another. I go through the third-party of Amazon to reach what I really want, the Puma shoes sold buy Puma. Puma puts up their shoes on this website so I can find it easily. I go through Facebook to reach friends.

Liability is a little more confusing. Because so much content flows through these sites, it’s almost inevitable that some will offend someone. For example, sexual objects on Amazon or political satire on Facebook. Liability means that the intermediary can be responsible and prosecuted for what appears on their platform. Facebook could be sued for allowing offensive content on their website, and Amazon for allowing the sale of illegal things, or items for illegal organizations, or bad-mouthing reviews on their website.

What does this have to do with free speech? It should be clear with the example of intermediaries like Facebook. If Facebook is vulnerable to be prosecuted for things it can’t control, like our status updates, it will try to control them. Censorship by Facebook is a result. The connection to free speech with Amazon is more than just the comments allowed in reviews on products. It’s is a little less clear, but it comes through economics.

Consider India. Recently, the Indian Supreme Court repealed section 66 of the IT act that permitted officials to arrest individuals for “offensive” things said online. The section used words like “offensive,” “menacing,” and “annoyance.” It’s clear now how easily that could be manipulated to target unwanted  opinions. The removal of that section was praised internationally – and indeed it should be.

But it should also be recognized that there are provisions in the same IT act that continue to suffocate free speech.

The fact is, the internet is changing so rapidly that it looks very different than how it did in 2008, when the act was most recently amended. The IT Act was also intended as a way to hold online intermediaries liable for what passes through them. The government didn’t want to have to employ people to check everything that was posted, so it shifted the responsibility.

Consider this example from a report Copenhagen Economics and The Global Network Intiative published on the topic: “Online marketplaces and other intermediaries are in some respects comparable to a traditional city square marketplace. The city mayor makes a square available to merchants, but the city is not held liable for the items traded on that marketplace. However, if the city mayor is made aware of illegal traders on the city square, he/she is obliged to ensure that they are removed and their trading is discontinued.”

But there is an unmistakable debate. Another analogy could be used: Telephone companies cannot listen in on every phone call to make sure no illegal activity is occurring. We know how the world is reacting to this news that governments are even peering into our metadata.

Is there a right to privacy and thus free speech when using an intermediary? An answer may come quickly when thinking about sites like Amazon – the products are meant to be public, so companies are not entitled to that right. But the right is not given to companies – it’s for individuals, the consumers. Just as you can keep privacy when buying from any shop physically, so should you be able to online.

Free selling and buying online – and removing any intermediary liability – has three direct economic benefits: [link to the report again]

1. Limited or no liability allows intermediaries to feel more comfortable about allowing more products and ideas on their site. This promotes healthy competition and gives equal chance of success to everything that wants to be online.

2. Information asymmetry will decrease transactions. Here’s how. The intermediary will be held liable for whatever products may pass through its site and will want to thus remove any possibly provocative content. The seller knows this, but still wants to sell its product. So it may withhold information about its product, or the full product itself. Whether the seller does that or not, the intermediary will be wary of the possibly and extremely hesitant to accept unknown products onto its site. The result would be, and is, that less products are accepted onto the site and transactions decrease.

3. More tangibly, the intermediary who is cautious about accepting products onto its site is the one who will spend time, effort, and money on the labor required to extensively check each product’s background. For example, a classifieds site called Quikr employs a full quarter of its employees to sift through user-generated content to find illegal content.

Even some content that would be legal offline is banned online. The same report that I’ve been citing also proposes that India’s GDP could increase by $41 billion within just a year.

India has a fledgling but quickly growing and impressive internet presence. It has already been fueling powerful growth in the country, but that is being dragged down by intrusive legal regimes, legal regimes that are kept secret and out of public scrutiny.

It was set up with the right idea in mind. Just like the solution I spoke about here that recommended users could report and flag content for inappropriateness, the law thought it could pass on the responsibility on a much larger scale. The result has been a restraining leash on India’s economy, intimidation over consumers, threats to companies from the government.



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