Public policy must regulate algorithms
and AI to avoid adverse impact on society (Indian Express)
Mains Paper 2: Governance
Prelims level: CPC
Mains level: Regulate algorithms and AI to avoid adverse impact on society
- Businesses are increasingly utilising algorithms to improve their
pricing models, enhance customer experience and optimise business processes.
Governments are employing algorithms to detect crime and determine fines.
- Consumers are benefitting from personalised services and lower prices.
- However, algorithms have also raised concerns such as collusions and
malfunctioning, privacy, competition issues, and information asymmetry.
- Automated systems have now made it easier for firms to achieve collusive
outcomes without formal agreement or human interaction, thereby signalling
- This results in “tacit algorithmic collusion”, an outcome which is still
not covered by existing competition law. This can occur in non-oligopolistic
- In 2015, US Federal Trade Commission fined David Topkins (former
e-commerce executive of a company selling online posters and frames), for
fixing the price of certain posters sold through Amazon Marketplace using
complex algorithms, impacting consumer welfare and competition adversely.
- In 2011, two third-party Amazon merchants, Bordeebook and Profnath,
attempted to use algorithmic pricing to sell an out-of-print version of
Peter Lawrence’s The Making of a Fly.
- The first seller algorithmically priced the book at 1.27059 times the
price of the second seller.
- The second seller’s price was thus automatically set at 0.9983 times the
price of the first seller.
- Over time, the price shot up to an unimaginable high of over $23 million
before dropping to $106.23 and $106.05 respectively! But, the relative
pricing between the booksellers remained unchanged, indicating endless
possibilities for both “collusion” and “chaos”.
Security concerns too remain paramount
- In order to enjoy services at low or zero price, consumers neglect the
value of their data.
- Access to easily procurable data such as Facebook “likes” can be used to
target only advantageous customers circumventing anti-discrimination
- Application of advanced algorithms have also resulted in an increase in
- Ransomware is a form of malicious software that blocks access to a
victim’s data and threatens to make it public unless the ransom demanded by
the hacker is paid.
- A devastating cyber attack the WannaCry ransomware attack hit the world
in May 2017, affecting around 2,30,000 computers across 150 countries.
- Through the use of EternalBlue, an exploit leaked by the Shadow Brokers
hacking group, the malware spread on Microsoft Window’s Operating System
across the globe without any human interaction. Such attacks require prompt
action by regulatory authorities.
Concerns pertain to “competition”
- Processing of large datasets through dynamic algorithms generate
real-time data “feedback loops”, impacting competition adversely.
- As more users visit select platforms, not only more data, but data with
greater reliability is collected, allowing firms to more effectively target
customers. Consequently, more users feedback into this loop.
- Such feedback loops have the potential of creating entry barriers which
are a cause of concern for competition authorities.
- Also, better monetisation of platforms reinforces such loops as the
additional revenues generated are reinvested to improve services, thereby,
further attracting more users — leading to dominance.
- That Google has been estimated to charge a higher cost-per-click (CPC)
than Bing, a competitor, suggests that advertisers attribute a higher
probability of converting a viewer of Google’s ads into a customer.
- We have evolving machine-learning algorithms ranging from voice
recognition systems to self-driving cars.
- Even high-profile programmers/developers may not be able to trace the
working of such algorithms making nearly impossible the identification of
any anti-competitive practice. Such algorithms may have the capacity to
identify a dominant strategy on their own to maximise profits.
Q.1) Recently the “time of day tariff structure” was in news, which of the
following statements are correct regarding this particular tariff structure?
1. It refers to the practice where differential charges are applied at
different time of day.
2. It would be applied on smart meters for water consumption.
3. Maharashtra is the first state to start time of day tariff policy for
Select the correct answer using the code given below:
a) 2 and 3 only
b) 1 and 2 only
c) 1 only
d) 1, 2 and 3
Q.1) A rethink of public policy is absolutely essential if non-desirable impacts
of artificial intelligence on human race are to be arrested. Critically examine