Rule by Data: The End of Markets?

Abstract

This Article explores data as a source and, in their processed variant, as a means of governance that will likely replace both markets and the law.Discussing data not as an object of transactions or an object of governance, but as a tool for governing others on a scale that rivals that of nation states with their law, seems a fitting topic for a special issue that is devoted to the legal construction of markets.Here, I argue that while it may well be the case that law constitutes markets, markets are not the only way in which economic relations may be organized, and law is not the only feasible mode of governing these relations.Central planning under socialism posed an alternative, which proved ultimately non-viable. 1 The rise of big tech companies (Big Tech) and their accumulation of vast amounts of data offers yet another possibility: the rule by data.In his path-breaking article on the nature of the firm, published in 1937, Ronald Coase famously posed the following question: if markets are the optimal form of economic organization, why do firms exist? 2 His answer to this question was that some transactions are better governed inside hierarchically organized firms than in open markets.3 The explanation he gave focused on the inevitable transaction costs that beset markets, where markets are defined by "price movements [that] direct production, which is co-ordinated through a series of exchange transactions on the market."4 Implied in this definition (which I will embrace for this Article) is that goods or services are traded for a unit of account, or money, and that a series of transactions reveals the prevailing market price.And as Coase added in another seminal paper on the "problem of social costs," the allocation of property rights is key for market exchange.5 Yet, as I will discuss

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