Maybe We All Should Be Economists

I recently had the opportunity to attend the 17th biannual conference of the International Telecommunications Society; see http://www.itsworld.org/Montreal2008/. The conference attracts academics, practitioners and consultants, with economists predominating.
Attending a conference of this sort showcases the strengths and weaknesses of economists. I marvel at their confidence. Perhaps that comes from their mastery of math, statistics and the Greek alphabet. Or maybe it stems from the fact that many of the ITS attendees get paid handsome hourly rates to offer expert opinions.

I admit I am envious. These folks get to assume anything. You might know the lame joke about how economists can make their way out of a deep hole: they assume a ladder! So stakeholders in telecommunications policy contests employ economists to issue opinions based on most favorable assumptions. On the other hand lawyers have to work around case precedent and therefore cannot work with a blank slate.

My economist friends show extreme impatience when I challenge their assumptions. At the conference most of the economists dismissed the network neutrality debate as simple and misguided opposition to carrier efforts to secure some of the rents, i.e., profits, accruing to content providers. The economists at ITS seemed primarily to work with carriers, so there was little concern about the impact of such extraction on startup content providers, civil society and democracy. The economists at ITS assumed that a two-sided market should exist in the Internet with two payments: 1) downstream from content providers and 2) upstream from end users. No one seemed to recognize or acknowledge that peering substitutes for monetary transfers upstream.

In another conversation I had with a top flight economist, I was the one who became impatient when I explained that the concept of common carriage confers both rights and responsibilities and that carriers seemed to emphasize the responsibilities as “confiscatory” and an unlawful “taking.” This economists could not equate unbundling with such monetary benefits accruing from common carriage as below market or free access to property (for rights of way, ducts and tower sites) through eminent domain and by law (the Telecommunications Act of 1996).

Lastly I marvel how economists can create new Rules that some would consider as powerful case precedent. Now that’s something worth $600 an hour.