The Spirit of Radio

The Lott-Levitt dispute is a distraction but John Lott’s Freedomnomics has plenty of interesting economics.  I liked this bit regarding free-riding and the early history of radio:

…free-riding problems initially seemed almost insurmountable in providing radio service….some peope doubted there was any way to make listeners pay.  In 1922, Herbert Hoover, then Secretary of Commerce, declared: "Nor do I believe there is any practical method of payment from the listeners."  Others assumed that radio transmissions would eventually be funded by paying subscribers, but no one could devise a method for limiting broadcasts to subscribers’ receivers.  Consequently, some believed that government would have to provide the service…

So what happened?  Did private businessmen throw up their hands and invite the government to run the industry?  Was society denied the benefits of radio because no one could solve the free-riding problem?  Of course not.  The problem was eventually resolved in 1922 when AT&T discovered that it could make money by selling radio advertising airtime….With enough at stake, companies find amazingly creative ways to solve free-riding problems.


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