🔒 Big Tech, Big Finance – big censors – With insights from The Wall Street Journal

China’s stalling and lying about Covid’s origins weren’t surprising. On the other hand, the behavior of U.S. officials and scientists was startling. They dissembled over their intimate knowledge of gain-of-function research at the Wuhan Institute of Virology and their early suspicions the virus was “engineered.” But who expects politicians and bureaucrats to be honest and competent? That’s what an open society is for. Truth and accountability are the responsibility of a free press—and a free internet.

What happens when the press and the internet aren’t so free? Over the past year, YouTube, Twitter and Facebook joined with a partisan press to block and throttle discussion across a range of Covid-19 topics. They discouraged and erased talk of the Wuhan lab-leak hypothesis, cheap and safe generic treatments such as ivermectin, Sweden’s heterodox decision to stay mostly open, and the inefficacy (and cruelty) of school closures.

Social media even blocked access to three eminent epidemiologists—professors at Stanford, Harvard and Oxford Universities—who advocated “focused protection” of the vulnerable, which could have avoided the devastating economic and social costs of the overly broad lockdowns. A new National Bureau of Economic Research paper suggests lockdowns were a net negative for public health. In too many cases, independent-minded scientists and data analysts were right, while Big Public Health and Big Tech were wrong.

In his 1974 Nobel Prize lecture, Friedrich Hayek explained why this top-down “pretense of knowledge” is so dangerous. At the time Hayek was fighting socialists and Keynesians. The socialists thought governments should own and operate most industries and could allocate resources more efficiently and fairly than private firms. The Keynesians allowed more private control of business but thought they could fine-tune the economy with aggressive fiscal, monetary and regulatory policy.

Hayek thought they were all deluded. He argued that information is too voluminous, diffuse and dynamic for central authorities to plan the economy successfully. Even the world’s smartest people and most competent governments don’t possess enough knowledge to micromanage sprawling complex systems. Instead, a diversity of opinion—in science, business and policy—helps us correct errors and climb the ladder of progress and truth.

In the past, large firms might have exerted market power. But today, hyperscale digital and financial platforms have access to, and can manipulate, information at governmental scale. They can also impose rules in a broader way than ever before.

Consider the world’s largest financial firm, BlackRock. It has some $9 trillion under management, mostly in passive index funds. Along with its two closest rivals, BlackRock exerts around 25% voting control over most publicly traded companies. The company is leveraging this control by imposing the climate beliefs of its chief executive across much of the economy. In his most recent annual letter, Larry Fink called climate change an “existential threat” and demanded all companies and even his clients submit to the “net zero transition” away from carbon dioxide emissions.

BlackRock now assigns stock and bond funds “temperature alignment metrics,” presuming to know how much each company will warm the planet decades from now. But these temperature scores and capital market assumptions are based on implausibly extreme emissions scenarios (such as RCP 8.5) and computer models that have proved wrong by a massive factor of 2 to 3 over the past several decades.

BlackRock couches its climate advocacy in the faux fiduciary language of risk management. But what if BlackRock’s climate views, and its corresponding long-term economic and financial forecasts, are wrong?

Think about the February blackouts in Texas. BlackRock asserts that global warming is the great danger and renewable energy—windmills and solar—is the obvious solution. Yet Texas was crippled by a devastating cold spell, which froze its windmills and paralyzed the state for more than a week. Initial estimates of direct damage reached $200 billion. The ripple effects were even larger, including a worldwide shortage of plastics. Texas’ overreliance on an unreliable source of electricity and its implicit forecast of excessive heat, not dangerous cold, contributed to the disaster. Are these not “risks” that contradict BlackRock’s climate forecast and its favored energy policy?

Index funds exist because security prices are nearly impossible to predict. So if expert computer modelers can’t yet predict temperatures in a single complex realm—climate—how can we take seriously BlackRock’s triple extrapolations of the climate, the economy and finance?

Big Tech and BlackRock’s presumptuous monopolies on truth create new fragilities. When information is debated and decision-making is dispersed, we get little mistakes and quick error-correction. But when today’s hyper-giants impose single answers that turn out to be wrong the mistakes can be catastrophic. They both suffer what Hayek called “scientism”—the hubristic assertion of perfect knowledge in messy, complex arenas as if they were controlled physics experiments.

In fact, both are grounded in politics. Who wants to bet BlackRock, which just won a first-of-its-kind approval to operate in China, won’t force every Chinese firm to submit to Mr. Fink’s climate vanities in the name of fiduciary risk management, or even saving the planet?

Mr. Swanson is president of the technology research firm Entropy Economics LLC and a visiting fellow at the American Enterprise Institute.

Appeared in the July 6, 2021, print edition.