years that followed. >> just make one quick last point if i might on the question of whether government can do something positive on the technology and science area by investing and it strikes me that it depends a great deal on who is in the government to do that, and if you look at the 535 people in the u.s. house and senate, i think by generous count about 35 of them have any sort of back ground in science or engineering and the rest are living in the middle ages and don't understand that windmills don't work when the wind is not blowing or solar power does not work at night. >> when the sun doesn't shine. >> proud of that. >> and i think that if umt to have a techno cratic government you have to have a government with a lot fewer lawyers in it as a basic first cut. so i think we have sort of very interesting instances with the whole cling tech failure and the

c il in dra failure and says a pros thing and all of the these process violations and kickbacks and the obama defense said it was a process that was followed to allocate the money and the substantive question is does the science actually work? it seems like nobody has any confidence to actually evaluate whether that works and that's not a question that's sort of a question that's beneath or above or both people's dignity to think about. so as a libertarian i have no problem with lawyers being in government, but if you are a liberal person who believes that government should be driving science, then you should have some powerful affirmative action quota for it being a government heavily dominated by scientists and technoaccurates. >> i will go back and forth. >> people up top, too.

>> i am president of the santa clara university chapter. i am curious about seeing so many silicon valley firms supporting net neutrality because it strikes me as the camel's nose under the tent and i wonder about this because i can't understand the limits principle if we say that the telcos are monopoly and so therefore we should prevent them from stopping people from getting on and why shouldn't we say facebook has become a de facto or very important monopoly of access and how people communicate with each other so maybe we should force people to get on there. how can we have a limiting principle to say, well, if net neutrality at the protocol and not at the application later? >> you can't. it is a serious problem on this thing. what you have to do under these circumstances is go back to the literature written by harold dempsey 40 years ago call why

regulate public utility and he says if you look at these regulation from a static point of view you will always over regulate and the static regulation will make it difficult for new firms to get in there so you hurt the dynamic situation. the dominant theme of convergence is essentially when you reduce everything to zero and one's, the industry separations are gone and if these guys screw up within a matter of a week they will become life magazine and everybody will chip away at their side and take the bits and pieces and so forth. that's what happened. let me give you one kpmpl. when mci decided to enter into business against the bell monopoly it created a dead lighted line for the shipment of information from st. louis to chicago. these guys didn't need any of the network interconnectivity and wanted high levels of security. once those guys were able to break off, the subsidy system that was created under the old bell network started to crackdown and the last thing you want to do is say, oh, it is really important to make sure we have these cross subsidies and

so therefore what we have to do is rent prevent this from taking place and that's one of the problems you get with the medical mandate, the true damage and just one sentence, is if you actually understand how the government defines competition and health care, the level of constitute pend us on ignorance only on quality and price and not on the introduction of new products because otherwise we can't standardize it, that's the real long-term stuff. we're facing a genuine crisis. >> there is a little bit of history missing to richard's mci story here and it is important for the net neutrality debate. this he did do exactly what richard said. they created dedicated line basically you would make a local call in st. louis and they would to a special number which was an mci number and they pass it to chicago and make a local call in chicago and at&t found out about this and started shutting down all of mci's local numbers because they didn't like the competition. the way mci managed to survive was they ended up filing an antitrust lawsuit. >> because there was a monopoly.

>> a monopoly. >> statutory monopoly. >> it is right to say -- it is hard conceptually -- if our justification is just this is a monopoly, and therefore we should regulate it, it is hard to distinguish that from google or facebook or a number of other things. i think you need a conceptual justification that's a little bit more directed at difficulty of entry, right, so if you're going to distinguish the two, it has to be on the question of something structural about the telecommunications infrastructure and the network that people have created that makes it difficult for somebody to come in and enter if you're doing something inefficient, and, now, richard suggests and i think increasingly he may turn out to be right, that was absolutely 25 years ago and not true today, that is we're moving in -- as weerve moving towards a world with more possible means of alternative communication, we

have people with less control over the network and need to worry less about it. i am not persuaded we're there yet because the possible means of communication depend on government licensure at one stage or another and i have to get the spectrum from the government or the wire permission and so forth but in a world in which we had ten different ways, my information, my phone call could go from me to you, i wouldn't be worried about that. >> >> i think there is a lot to what you're saying and less union nim at this on silicon valley people on net neutrality know that you might think and i think they were a little down the road into supporting net neutrality before thinking through the issues that you raise here that are seemingly pretty apparent and i don't think you should take away the idea that silicon valley was alive behind net neutrality. there is plenty of diverging

opinion debate on that. >> and i think there is not one version of what net neutrality means. there are some different ways to think about what it is and how you regulate it, so there is not necessarily agreement to that. we have a colleague who has written a really compelling book especially for those of who you believe all wisdom wasn't written 40 years ago called what is it internet architecture and innovation which i would really recommend to you as just a different way to think through sort of intermediate positions to keep the net hope for innovation that go a little beyond actually really a correction to antitrust law. >> we're in the best of all possible worlds in which we are just about to impose network

neutrality regulation and we never, ever do and because of that people are afraid to exercise that otherwise might. >> go up there. >> identify yourself. >> peter, university of michigan. mr. chills started to answer my question and i would like to hear the rest of the pam's opinion on this. given that most lawyers, politicians and judges don't have strong technical backgrounds, can they make good technological regulation and if not, should we be encouraging scientists and engineers to enter politics to become lawyers or serve on the bench? >> we don't want scientists in congress. they're lambs for slaughter. in fact, the single worst government administrator today without question is steven chute, nobel prize winner in physics and bafoon in regulat n

regulation. >> what i care about is do they know something and start with the president of the united states and a colleague of mine for many years and the basic skill set to dealing with these issues that managed to accumulate in 14 years is numd in a single-digit, zero. >> let me say something about the university of chicago. >> no, no. >> we have well trained stanford law grads in government. >> others want to say anything or otherwise let's go over here. >> my question is for mr. falzone. i prosecute esh your lness to say regulation and maybe toned

down and maybe investment stepped up. my problem is who is doing the investment in an economist said a a good economist is always looking what is unseen. you talk about this investment. the problem is when government i object vests it is not creating the wealth, it is having to steal the wealth from people that would otherwise raet create it in other place it is before allocating in a way that government wants to. my question is who should -- i guess it is broad. what would you say in response to that critique especially as it pertains to technology where i feel like the fast pace of it i would trust somebody like mr. teale to allocate resources in a would i i wouldn't trust the government at slow plodding pace to keep up with technological innovation. >> you have it trust both, absolutely. my point is that you shouldn't leave it all to private markets and sure as heck all to the government. that would absolutely be a disaster. my point is there are certain public components of it that i think the government may play an important role in some instances

and not as far as stealing anybody's money and we don't steal anybody's money to pry for national defense and there are things the government rightfully provides and that he is why we have a tax base. my only point is do we want -- is the answer to lots of bad regulation to throw up your hands and just deregulate everything? i think not. i think the point is that there may be some terrible, terrible instances or bad regulation that you need to fix and deregulation is part of the story. just because you're going to deregulation doesn't mean you shouldn't also invest in certain spots. >> the right way to think about it it seems to me is this. are research university useful. >> yes. >> i think the answer is yes. that's a statement basically, right. the research universitys are doing research in substantial part because they're taking government money and using it to do basic research that a private company is not going to do because it is a 20-year pay off if anything down the line. right? there may be ways to do that

without government funding if you can find some other cross subsidy of alumni generous enough to do it and if we charge tuition high enough and that has its own costs and should government be competing with private enterprise to fund research? no. are there areas of science that i don't think that the market is going to generate research in to the level that we might actually benefit from? yeah. >> can i make a comment? if you actually look at it, there is real evidence on this on how the national institutes of science work. the key to its success for the most part was that the small grants which are highly competitive or all peer reviewed by people inside the profession. it turned out for the most part those things actually worked quite well. when you get to big science you can't quite use that project so you have to figure out where you spend $3 billion on putting a reactor of one sort or another and the project works much worse under that circumstance because at this time it turns out it is the texas delegation against the illinois delegation as to who is

going to be able to grant it. what you need to do in effect is get government guys stressing the emphasis on small science and doing it that way. on the university side what you have to do since this technology is too expensive is to figure out how it is you could pool jfs and to give you one mpl kpa, the proton source which runs in chicago, essentially they they have parts and what they did is they financed the thing by having each of the universities pay for one of these parts or a fraction of the part so that you get private development inside the i think this. what you put in your part is the system becomes a highway and then the pods become the cars and you don't allow the government to decide when you put in the pod but you now have joint financing to create the public good. you can get this i think this done. you don't have to be a complete cynic about government support. you have to read the bush book. this is the guy that organized the science effort in world war ii and got the lastal most labs up and cambridge and there is no

way we can't learn from them today. >> good evening. my name is james bailey and i am in the evening division at western university in springfield, massachusetts. my question this evening is for mr. thiele and specifically, mr. teale,y nuns atd a very interesting dichotomy, on the one hand the world of high finance and high technology in which you have very like light government regulation and great results and the world of stuff in much you have heavy regulation and poor results. how do you fit the world that works? either stuff nor technology into that theory. do you consider it to be highly regulated or lightly regulated and how would you change the regulatory schema to make it better and more productive, et

cetera? >> i would be in favor of going back to say 1950, 60s level of regulation and the world of stuff and even if you were in favor of government doing things, many cases where the government regulations are stopping, the government from being able to do things it would like to do and i had a conversation a few years ago with some of the people in the obama administration on why the stimulus bill, why couldn't they build any infrastructure and it was there were no shovel ready projects you could actually build because all been regulated. they wanted to build clean tech windmills north of chicago and you weren't allowed to build the power lines connecting the windmills to chicago so no windmills could be built. the high speed rail in california call could not be built because have you all sorts of local zoning rules that prevent it and i think it is

really important for us to understand that there is sort of no regulation and light regulation and there is moderate and heavy and insane and self destructive and we're somewhere between insane and self destructive in many of these things on the spectrum and we don't need to ask all the pure libertarian questions about what about should we have privatize the nuclear weapons program and should we privatize what about private roads and you can sort of -- we don't need to deal with those problems. go back to the 50s. >> no. >> i would say -- i don't know that i have much to add but i would say that the world bids certainly he is less rig late than some more regulated and it is not unregulated.

there is plenty of regulation and i think an increasing problem. >> there is something about the world of bits where we have to realize that it is a cautionary tale. we had these geese laying all of these golden eggs in technology and the geese have all been killed and the only one left is the computer goose. we killed the -- the finance goose was killed the last few years with dodd-frank, so the only one left at this point is the computer one. i think unnecessary excess of regulation of computers is extraordinarily dangerous because it is the only thing left. everything else has been killed off. >> can i make a comment? i think peter is wrong about one thing and i will try to explain why it doesn't challenge but strengthens the thesis. environmental regulation is to some extent different from all the others because you're concerned with things that when done were private law nus an actionable in 1200. i could say whatever you want to think about the house levels of innovation in 1950, smog in san

marino was not one of the things you praised. the big problem with the environmental protection act and the clean air act was not that it chose to regulate, but you have to go down a level and figure out what the proper scheme of regulation is and you can't answer that question by saying i am pro or against. let me tell you one of the huge blunders they all made which was they thought that they would grandfather all technology and they would regulate new technology. this is the fundamentally most expensive word in the environmental protection act on air pollution is the word new. that this did although nobody thought about it is completely disrupted the transmission cycles from old to new transitions. the regulations on the new stuff were intolerable so the biggest area of litigation under the statute was what counts as a modification and allows you to keep over? this has gone on for 40 reerz and you but a rattle trap on old players because you don't allow the new stuff to come in under the same thing. you needed a system of regulation that replicated

common law rules in which darnl damages caused by ex ternlts, i don't mean carbon dioxide was basically punished because it didn't matter whether you did it through new or old plant and if you had just done that system, i would have been able to stop 95% of the problems with tiny fraction of the current cost. so that what happens and peter is right, ramp it down in organize of manage any tud when do you regulations there is no substitute knowing what's going on inside an industry, particularly in those cases where some regulation is indeed needed and that's where the other piece of information has gone wrong. the system designed for environmental protection regulation on every area you care to talk about is fatally flawed in the way in which they put this together and the political sufficient on transition turned out not to be a two year issue but a 40 year issue. >> i am chris gyer from the university of pennsylvania. this a little bit on the last

one going to the two things, the two industries which mr. thiele discussed, the computers and the finance, a lack of regulation in the financial industry in the face of inadequate regulation exposed us to systematic risk and required strong governmental intervention. what are the major risks and/or costs from a lack of regulation regarding technology? is it limited simply to restrictions on innovation or are there broader risks? and then following up on that, going to professor lemley's point about rule-based regulatory system and given the slight mismatch in speed between which legislation is passed and technology develops, how can legislation be developed that is flexible enough to address some of the issues we've talked about? and others that will arise in the future? >> look. and i think this is a very hard problem and as richard suggested in his answer to the last question, it's a hard problem any time you have to intervene and you can't avoid intervening

at some level. to me, by and large, and i think this is in line with what richard is saying -- we're just agreeing all the time. >> i disagree with you on vaccines, but that's a different issue. >> it seems to me for the reasons you suggest we are generally speaking better served with common law and flexible rules than detailed legislative set parameters in part because congress can get them wrong because they don't understand or congress can get them wrong because they have a vested interest in doing particular things that might not be efficient. in part because they just don't change, right? so i think -- so, for example in the patent system, i have argued along with dan burke the way we need to account for the very different characteristics of the

pharmaceutical and the biotechnology industries and the information technology industries is not by passing legislation that specifically is tailored to each of them but by having general rules that the courts can actually apply with some sensitivity to the needs of different circumstances. >> the key illustration on that is on injunctive relief. it was to delay innovation -- imposition and so if you have this mosaic in the business you're in and there's a thing that's patented, we give you six months where you pay a royalty and by that time you design around it and all is well instead of having an insaintaneous shutting the thing down. that's a classic illustration where you do that for him but don't do it for a guy who wants to infringe on liberty. you are exactly right. >> on your first question -- so it seems to me, we're starting to see, i think, that there are two mechanisms by which we start

to regulate the computer internet industry. one is hollywood, right, which has a very powerful lobbying machine that is pushing very hard to try to restrict the freedom of the internet precisely because they view that as a real danger point to them because a lot of the stuff that crosses the internet is piracy. that did not go away with the defeat of sopa and pipa. it will be back. and that's one flash point. the other one which people pay less attention to and it's a harder problem because you have to worry about it is cybersecurity. the real nightmare story for computer regulation is some seriously destructive infrastructural attack on the internet that takes out some critical -- whether it's the airline network or the electric grid or something of that nature. and that would not only be catastroph niic in its own righ. the idea that computers are largely an unregulated area goes

away. >> down here. >> my name is henry nichol from california southern law school. i had just a quick question. a number of you have touched upon this issue of the global marketplace, and i was wondering if you could comment on the creeping danger of harmonizing with foreign law and expanding federal regulation. i speak specifically of recent controversies that relate to european demands that the u.s. adopt a data privacy regime similar to what exists in europe. what is -- is this a danger? what is the magnitude? and how can we reconcile these types of demands from foreign governments that we expand our regulatory regime? >> i got a couple of thoughts about that one because i think -- i think when you talk about harmonharmonization, what see is not so much harmonization but ratcheting up. it's a one-way ratchet again and

again and again. so especially in the copyright sphere when you see the move from the united states and its domestic copyright policy that existed for a couple hundred years and you move into the bern convention, what you see again and again on the international level are minimum standards of protection. so every country has to provide at least this much but is free to regulate more and more and more. the imbalance that occurs there is you protect more and more but what you leave out are the safety valves that are designed to make sure that the regulations don't go so far as to kill the golden goose. and copyright, that's creativity and expression. the idea is, yes you create copyrights and give certain limited rights but you have a whole bunch of safety valves like fair use that let other people use the material to do new things. so if you ratchet up the protection constantly and leave behind those protections that are supposed to protect critically important public speech rights, then

harmonization is really just -- it's a recipe for eroding the basic balance that we worked for a couple hundred years to construct. >> what they did is by having harmonization they allowed the department of agriculture to nationalize production and create chartel. that's what the labor cases were about. and what happens in the european union, which peter did not mention is that the wrecking of the labor markets by harmonization which presents competition has created 30% and 40% unemployment rates in various places because once you get the -- when you have the common market, it's open. subject to brussels, which is a big plus. then you get the protective barriers so as to keep everybody else out. and that's essentially what's happened in the american agricultural market. we have a common market inside the united states subject to cartel regulation. the reason it's more disastrous in labor than it is elsewhere is because in labor, the productivity goes down whereas the technological improvements

in agriculture until we got on this war against gmos and other things was large enough so it more than offset the monopoly losses. but american labor, you go right back to those 37 decisions, national cartels are very efficient and harmonization becomes a synonym for cart cartelizati cartelization. >> on the internet in particular, the problem is it doesn't obey national boundaries, right? so, you know, i mean, general harmonization on good ideas is usually a good thing. harmonization on bad ideas is usually a bad thing. but it doesn't work on the internet because your bits aren't obeying those boundaries. and so the worry -- my worry is that the alternative to some level of more or less rational harmonization is the equivalent on the opposite side of what tony is talking about which is the most restrictive regulatory

regime ends up controlling. >> yes, so i pretty much agree with -- i have to say, i agree with that in the sense that -- and i don't -- although i don't like international governments, international bodies, on the other hand, you know if you are an internet business, you are confronted with just a nightmarish set of complex local rules and, you know, sort of state by state rules and certain areas of the u.s. when we ran paypal we had to find ways to comply with money regulator rules in all 50 states and that was probably harder than if you had a single one. it's a complicated question about what's more efficient in different cases. >> this also comes up with standard setting organizations. and what happens is there's now another report, i think, by the ftc announcing private market failure so they want to basically get more government included in setting these things.

i wrote with scott keefe a report for qualcomm on the other side of it. i'll mention to you one fact which is that these organizations, all of them, in hundreds of different standard setting organizations and that the number of breakdowns when you do it is very small and what we heard about all the -- about the antitrust laws, one very good set of antitrust rules are essentially who can join a particular group and essentially what you do is you allow compliments but not substitutes to come together because that allows you to overcome the double marginalization problem without creating the cartelization problem. that's a classic illustration where they did it well in the 1990s and are about to do it wrong in the next decade if the new fdc report takes over. >> i was going to say one practical observation on some of the one-way ratchet issue and ever-inkre ever-increasing scope, the danger of harmonization. one, i think, technology can help push back against that. for example,