Guest Blogger: Ed Lopez

by on December 16, 2012 at 1:08 am in Economics, Web/Tech | Permalink

Ed Lopez, co-author with Wayne Leighton of Madmen, Intellectuals and Academic Scribblers and president of the Public Choice Society, will be guest blogging at Marginal Revolution this week. Madmen is about the process of political change, where we are, where we should go and how can we get there given the insights of public choice economics. If, to quote Jim Buchanan, public choice is “politics without romance,” then Madmen is about revolution without romance–how political change can occur in a democracy. One of my favorite stories in Madmen is about Coase’s idea to auction spectrum rights.

But to allow the market to determine even the question of assignment meant a significant change in the status quo. When he was called to testify before the agency shortly before his FCC paper was published [in 1959, AT], Coase’s reception was indicative of how political institutions—especially Congress but also the FCC—would view his idea for decades to come. Commissioner Philip Cross began with the question, “Is this all a big joke?”

A decade later one former FCC commissioner wrote:

The Commission has absolutely no intention of considering them now or in the foreseeable future. They are purely the mind-spinning of an academic bureaucrat.

Most interestingly, in 1969 the RAND Corporation commissioned Coase, along with William Meckling and Jora Minasian, to produce a report on “Problems of Radio Frequency Allocation.” The Coase/Meckling/Minasian report was written in 1969 but not released until 1995! The report had been deemed too politically sensitive to publish and had been suppressed.

Eventually, however, first academics then many politicians and then even the FCC became convinced that spectrum auctions were feasible and as it became clear that money was to made that they were also desirable. Even after the idea earned fairly widespread acceptance, however, it took many years to be implemented because the Congressional committees with oversight of the FCC and the industry did not want to give up power. The right to allocate spectrum gave the members of these committees power which they transformed into campaign contributions and political support.Spectrum auctions were not implemented until they were also crafted to give advantages to some groups that these committees wanted supported. The payoffs to the new technologies, however, were so large that even with transaction costs and rent seeking a bargain was possible, a truly Coasian bargain.

Rahul December 16, 2012 at 3:17 am

The Coase/Meckling/Minasian report, from RAND. Interesting reading indeed:

http://www.rand.org/content/dam/rand/pubs/drafts/2008/DRU1219.pdf

Ray Lopez December 16, 2012 at 6:50 am

Thanks, report looks dry and uncontroversial. I think the floodgates were opened with Alfred Kahn (http://en.wikipedia.org/wiki/Alfred_E._Kahn#Work_in_Deregulation) He’s dead? Damn! Note his deregulation efforts worked in the late 70s, when, as Alex says, the bureaucrats were already ‘softened up’ and susceptible to change. Bureaucracy moves slowly. An apocryphal story says a Euro bureaucrat had a sign on his desk: “never do anything for the first time”.

Enrique December 16, 2012 at 7:36 am

why not use Coase’s ideas to deregulate alcohol and drug regulation as well?

http://works.bepress.com/f_e_guerra_pujol/27/

Jobrane December 23, 2012 at 6:39 pm

Actually, I was always isneretted in everything concerning economical matters and this very fact determined my choice of profession. Now I work as a financial consultant and I’m absolutely satisfied with my job. Besides, I constantly work with people who need my advice and, therefore, I don’t lack communication. Some of my friends consider my job boring and annoying, but I don’t think so. Moreover, I’m occupied in one large and developed American company dealing with and I really like my job, even though, less people share my opinion.

Andrew' December 16, 2012 at 9:16 am

“The hands writing the checks tend to be a bit obscure, actually.”

You seem to have no problem informing us.

Okay, so executives benefit from private enterprise. The Pelosis and Clintons benefit from government. So far I’m still siding with people who make stuff.

Andrew' December 16, 2012 at 9:53 am

Btw, if government was worth anything, you’d think they could come up with ideas that weren’t so utterly opposed by the people they impact. That they can’t indicates they aren’t solving coordination problems.

Andrew' December 17, 2012 at 5:46 am

Btw, they have it bass ackwards right? You don’t get a concentrated interest to lobby for free enterprise do you? That’s why us schlubs have to argue for smaller government and lower taxes, because we have to be united for something and we have nothing specific we want. So, people like The Kochs, if the were actually evil, would be arguing for subsidies for distillation columns and not free markets. Right? Economists? Anyone?

Rich Berger December 17, 2012 at 10:06 am

Your comments referred to a comment by p_a which has disappeared. Why did it disappear?

genauer December 16, 2012 at 4:57 pm

for somebody like me, who is actually NOT happy with most economists

Coase 1960 paper was a very pleasant read
http://home.cerge-ei.cz/ortmann/UpcesCourse/Coase%20-%20The%20problem%20of%20Social%20Cost.pdf

Carefully crafted and argued, well versed in economics, anglo and continental law,
making an excellent case in a new field (FCC). One rare high light I came across in the last year.

I warmly recommend:
http://hbr.org/2012/12/saving-economics-from-the-economists/ar/1

And I like his quote:
‘if you torture the data long enough it will confess’

rana December 16, 2012 at 11:03 pm

Thanks for sharing this awesome article.
And I like his quote: ‘if you torture the data long enough it will confess’

Paulo Carmona December 18, 2012 at 11:52 am

It´s amazing to find good articles with a little bit of humor! Well done please continue with the good stuff…. I love his quote ” if you torture the data long enough it will confess ” it´s awesome.

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