Tuesday, December 17, 2013

Rent Seeking Across Party Lines

            Over many years, telecommunications and Internet policymaking have become politicized often with clear cut Democratic and Republican viewpoints.  Votes by the FCC Commissioners increasingly split 3-2 along party lines.   How can this be?

             Perhaps the politicization stems from higher stakes in FCC votes which in turn have stimulated greater interest in the outcome.  But politicization stands as a cause if and only if a specific political party clearly holds one perspective largely opposite that of the other party.  Don’t both parties support competition? They do, but a dichotomy might arise if the Democrats readily welcome government initiatives to promote competition and the Republicans consider competition most potent when government opts out.
           
            At first blush the role of government can support a Democratic/Republican dichotomy, but it does not always play out.  Teddy Roosevelt made it his mission to bust up monopolies and this Republican “tradition” extended into the early 1970s when the Nixon Administration filed suit against the AT&T monopoly.  Democratic FCC Commissioners regularly vote in favor of market concentrating, competition reducing horizontal mergers
 
             So maybe the blame lies with unprincipled and apolitical rent-seeking.  Stakeholders keen on working less hard and earning greater returns will resort to any political, legal and economic ideology and philosophy to support the desired outcome.  It is quite fine when the FCC granted incumbent wireline telephone free spectrum for mobile services, but now denying these carriers the opportunity to bid for any and all spectrum is an abomination.
 
             Let’s not underestimate the power of sponsored research where esteemed scholars grab lots of dollars for embracing a specific ideology and explaining how it serves the public interest.  In a matter of days the very same economist might rail against the Herfindahl Hirschman Index (“HHI”) of market concentration as flawed and not predictive of anything.  But when presented with an assignment and a generous retainer to show how robustly competitive a market is, that economist might quickly invoke the HHI to “prove” how competition can exist in a concentrated marketplace.
 
            Rents seeking crosses all party lines.

1 comment:

geonomist said...

It’s encouraging that this sort of corruption gets covered by professors and in the biggest paper in the Pacific Coast Northwest. However, as usual, it’s almost all problem and no solution. The solution is not just to say “no” to rent-seeking but something far more fundamental. It’s as Abraham Lincoln said: “Nothing’s fixed until it’s fixed right.”

This sort of rent-seeking above won’t end until the classic sort of rent-winning — that is, absentee owners and lenders getting paid to permit others to use land — gets corrected. The correction to that basic injustice is to not pay them for a site or a resource but to pay your community. Nobody made land, everybody needs land, and all of us — the presence of community — is what gives locations their value.

We need to pay Land Dues into the public treasury and get Rent Shares back. But we don’t need to pay taxes on earnings, purchases, and buildings while getting bureaucratized “services”. Letting politicians decide how to spend public money only opens the Pandora’s Box of rent-seeking. Better to follow the basic principle of sharing Earth’s worth while de-legitimizing capricious taxation and subsidization — the geonomic reform at progress.org.