New Technology in Europe

Paul H. Rubin —  21 May 2012

Last week the New York Times ran an article, “Building the Next Facebook a Tough Task in Europe“, by Eric Pfanner, discussing the lack of major high tech innovation in Europe.  Eric Pfanner discusses the importance of such investment, and then speculates on the reason for the lack of such innovation.  The ultimate conclusion is that there is a lack of venture capital in Europe for various cultural and historical reasons.  This explanation of course makes no sense.  Capital is geographically mobile and if European tech start ups were a profitable investment that Europeans were afraid to bankroll, American investors would be on the next plane.

Here is a better explanation.  In the name of “privacy,” the EU greatly restricts the use of consumer online  information.  Josh Lerner has a recent paper, “The Impact of Privacy Policy Changes on Venture Capital Investment in Online Advertising Companies” (based in part on the work of Avi Goldfarb and Catherine E. Tucker, “Privacy Regulation and Online Advertising“) finding that this restriction on the use of information is a large part of the explanation for the lack of tech investment in Europe.  Tom Lenard and I have written extensively about the costs of privacy regulation (for example, here) and this is just another example of these costs, although the costs are much greater in Europe than they are here (so far.)

In Data Privacy & Security, European Union, Facebook, Google, Intellectual Property, International, Platforms, Regulation , , ,
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Paul H. Rubin

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PAUL H. RUBIN is Samuel Candler Dobbs Professor of Economics at Emory University in Atlanta and formerly editor in chief of Managerial and Decision Economics. He blogs at Truth on the Market. He was President of the Southern Economic Association in 2013. He is a Fellow of the Public Choice Society and is associated with the Technology Policy Institute, the American Enterprise Institute, and the Independent Institute. Dr. Rubin has been a Senior Economist at President Reagan's Council of Economic Advisers, Chief Economist at the U.S. Consumer Product Safety Commission, Director of Advertising Economics at the Federal Trade Commission, and vice-president of Glassman-Oliver Economic Consultants, Inc., a litigation consulting firm in Washington. He has taught economics at the University of Georgia, City University of New York, VPI, and George Washington University Law School. Dr. Rubin has written or edited eleven books, and published over two hundred and fifty articles and chapters on economics, law, regulation, and evolution in journals including the American Economic Review, Journal of Political Economy, Quarterly Journal of Economics, Journal of Legal Studies, and the Journal of Law and Economics, and he frequently contributes to the Wall Street Journal and other leading newspapers. His work has been cited in the professional literature over 8000 times. Books include Managing Business Transactions, Free Press, 1990, Tort Reform by Contract, AEI, 1993, Privacy and the Commercial Use of Personal Information, Kluwer, 2001, (with Thomas Lenard), Darwinian Politics: The Evolutionary Origin of Freedom, Rutgers University Press, 2002, and Economics, Law and Individual Rights, Routledge, 2008 (edited, with Hugo Mialon). He has consulted widely on litigation related matters and has been an adviser to the Congressional Budget Office on tort reform. He has addressed numerous business, professional, policy, government and academic audiences. Dr. Rubin received his B.A. from the University of Cincinnati in 1963 and his Ph.D. from Purdue University in 1970.