Arnold Kling

FCC Chairman Cites Coase

Arnold Kling, Great Questions of Economics
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FCC Chairman Michael Powell made these remarks about spectrum regulation.

We don't seize all the land in the United States and say, 'The government will issue licenses to use land.' If my neighbor puts a fence one foot onto my property line, there's a whole body of law about what I can do about that, including whether I can tear it down. If a wireless company was interfering with another wireless company, it's a similar proposition. There are scholars who argue—indeed, the famous Ronald Coase treatise that won the Nobel Prize was about this—that spectrum policy is lunacy. The market could work this out, in the kinds of ways that we're accustomed to.

Of course, as Thomas W. Hazlett points out, Coase may well have worked out his ideas on how private firms could resolve "the problem of social cost" in the course of his analysis of the FCC and spectrum regulation.

Discussion Question. Can you see how the Coase theorem might apply to the regulation of radio spectrum?

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