Michael Powell Resigns
Michael Powell, the Chairman of the Federal Communications Commission, is stepping down. In my book, I included an essay on Powell’s Hayekian approach at the FCC.
The FCC oversees industries in which competition is messy. Broadcasting and telecommunications do not resemble the economist’s model of “perfect competition,” in which there are no economies of scale or network effects or information asymmetries or dominant firms. In spite of all of these deviations from the ideal of perfect competition, Powell favors reducing the weight of the hand of government.
By defending markets even when competition is messy, Powell is being Hayekian. Friedrich A. Hayek, awarded the Nobel Prize in economics in 1974, viewed Competition as a Discovery Procedure. He wrote, “market theory often prevents access to a true understanding of competition by proceeding from the assumption of a ‘given’ quantity of scarce goods. Which goods are scarce, however, or which things are goods, or how scarce or valuable they are, is precisely one of the conditions that competition should discover.”
The inside-the-Beltway approach to telecommunications regulation is micromanagement. They have a “natural monopoly” theory of telecom that is somewhat self-fulfilling. Even when the theory obviously breaks down and competition enters from new sources, the old regulatory structure is retained. Powell fought against this regulatory culture as hard as anyone could.
With the rise of the Internet, the FCC is arguably the most important (and anachronistic) Federal agency. I hope that the person who is named to replace Powell comes from far outside the K Street axis and shares Powell’s willingness to question the regulatory conventional wisdom.
For Discussion. In what ways has the importance of the FCC increased in the Internet era?
Lawrance George Lux
Jan 22 2005 at 3:34pm
The Internet requires an International Cop to prosecute Crime–specifically Fraudulent practice. The FCC will retain power only so long as it integrates into a World Police net. lgl
Jan 22 2005 at 9:17pm
Too bad he didn’t believe in free speech as well as free markets.
Jan 23 2005 at 1:45pm
With the Internet as umbrella, more telecom has fallen out of the purview of state regulators and presumably under the FCC. As we move from telecom where most Internet use was over locally regulated phone systems to telecom where most phone use is over the Internet, state regulators are pretty much irrelevant. The relevant historical lesson is that when a company (AT&T and its local RBOCs) and the government (federal and state) conspire to fully regulate and monopolize economic system as envisioned by AT&T President Thomas Vail back in 1907, it takes a sea change in technology to undo all the damage. Even divestature in the early 80s failed to bring a fraction of market benfits to telecom that the Internet finally did in the 90s. The FCC has centralized more regulatory authority over telecom, taking it from the states. Future FCCs must resist temptations to exercise it so that the net long term effect is less regulation. Perhaps Powell’s name could be attached to this kind of path to deregulation.
Feb 4 2005 at 5:05am
Michael Powell also fought for deregulation of media. That would allow one media outlet to eventually control all newspapers, TV and radio information.
Free-market proponents don’t think (or never say) that absolute monopoly is bad.
Why is that?
In a marvelous paper An Austrian Theory of Business Cycles, Ben Best says:
Apparently, Ben Best does not see the huge Microsoft monopoly (probably the largest monopoly in the world, in terms of dollars) as anything bad.
Like thousands of other software developers, I think that Microsoft’s monopoly stifles new technologies through attempts to destroy them (Netscape, RealPlayer, Linux, Burst), forces developers to waste time and be inefficient by using botched up Microsoft interfaces (Windows Media Player, COM, OCX), and by keeping high prices in the absence of competition. And these are all factors that unfavorably affect economy.
I am not convinced that this world would be a better place without Microsoft. Still, it is important to be against bullying, in principle.
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