Competing Legal Futures - Commodification Bets all the Way from Personal Data to AI.

Abstract

In this article, we try to make sense of the institutional co-evolutionary dynamics shattering the legal foundations of the digital markets by digging into the anomalies emerging within the market for legal rules (Samuels, 1971, Calabresi and Melamed, 1978; Vatiero, 2020). To do so, we will sketch out a theoretical understanding of the working of the “market for legal rules” as a discovery process in the context of uncertain legal futures, to make a general argument concerning anomalous coordination between legal and economic dynamics as amplified by overreliance on co-regulatory strategies.
In a nutshell, we observe entrepreneurs willing to commodify “unseen” products which have to overcome uncertainty concerning the tradability of entitlements they claim over them.

Entrepreneurs willing to secure entitlements over novel resources and products must also persuade rule makers and judges that this is proper and legitimate vis-à-vis non-commodification claims by deploying instrumental and persuasive narratives (Kurtchar, 2016, Evans, 2023). In particular, for economic agents acting at the frontier of market expansion dealing with new "exemplary goods" which have come into existence only due to scientific, technological or social breakthroughs (Dekker and Kuchar, 219).

This is the case of behavioral commodification where human behavior per se is the object of commodification claims as well as for AI (Zuboff, 2019). Both of them depends on collective acceptance of commodification of human behavior as something compatible with the constitutional order and the rule of law. Economic agents have been prototyping their legal solutions over "exemplary goods" without prior approval nor guarantee of success even though the existence of markets they imagined for their innovative products was highly uncertain due to the legal qualities of their core resources. The survival of the surveillance economy as well as of AI powered products depend on collective acceptance of commodification of human behavior as something compatible with the constitutional order and the rule of law.

The process of discovery about the existence of such markets opens up a period during which multiple possible legal futures have been temporarily co-present and in competition with one another for years (See Beckert, 2018). Such pluralism of legal futures maps onto complementary economic futures, as it affects the existence of imagined markets as well as on the cost structure of legally exploiting them if that will eventually be allowed (Beckert, 2018).For some time, there is the co-presence of alternative economic categorization of the new resource which is contingent on the realization of the complementary legal future. During such a period, economic agents have nevertheless to “bet” on the legal future to ground their business models (Pistor, 2019), with no guarantees of legal success.

The co-regulation models exacerbate legal instability within newly emerging markets because of its exposure to dynamics of moral hazard at work both at the level of private agents and national data protection agencies. Stalling strategies and opportunistic litigation can thrive within such a model to the advantage of economic agents, thus lengthening what we call the "extended legal present" during which a plurality of possible legal futures competes with one another bearing on economic and political uncertainty. The economic downsides of such persistent uncertainty is the likelihood of fueling dangerous legal bubbles (Giraudo, 2022a), while politically this may lead to geopolitical tensions (see e.g. Broeders, Cristiano, Kaminska, 2023). In this context, anticipation of long term legal dynamics rather than daily legal assessments of legal decisions may prove decisive, as it becomes essential to anticipate what courts anticipate about future existence of these imagined markets, lest facing unexpected losses, if not bankruptcy.

This admittedly "audacious" approach to the digital economy is aimed at making a theory of the recent developments of surveillance capitalism also to promptly address and mitigate the concerning legal instability "on steroids" already foreseeable in the context of AI-based industry (Pasquale and Malgieri, 2022; Tafani, 2023). In this spirit, we elaborate on the growing literature on the legal fragility of the market for personal data and AI-based services (e.g. Custers and Maligieri, 2022; Yeung and Bygrave, 2022), and connect it with reflections on economic anomalies in the "market" for legal rules which is increasingly supported by judicial evidence and litigation (Cohen, 2019; Giraudo, 2022; Dughera and Giraudo, 2021). The article continues as follows. A first part briefly recounts how the foundational commodification bets upon which the digital economy have been deployed and partly rejected by the EU judiciary and DPA’s, pointing to the ill-adaptation of economic agents' legal practices despite emerging legal fault lines at the core of the European digital markets. The second part sketches out a theoretical framework of the functioning of the “market for legal rules” as enabled by the co-regulatory model also to emphasize the presence of anomalies and distortion typically associated with market exchanges at large. The third part emphasizes the sense of dejà vu in the context of the making of the legal foundations for the AI and calls for a course correction in the over-reliance on co-regulation. Then it concludes.

Keywords: Uncertainty, legal uncertainty, digital markets, AIA, surveillance capitalism