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.


Is another example of 'free riding' making a book with a very similar cover and title to another bestselling book about microeconomics in the public domain?

When you happen to be suing the author of that book for libel?

When trying to argue for the ability of markets to maximize social utility, it seems to me that TV and radio advertising, and mass media in
general, constitute poor examples, as many many reasonable people are dubious as to whether we are actually better off with than we would be without
mass media.

Who is Mary Rosh?


You refer to Lott as "this disreputable author", on what basis do you impune his charactter (for his entire body of work, for one particular controversy, what)?

I have both bought and read Freedomnomics and fully agree with Tyler that it "has plenty of interesting economics." What I think is most interesting is his emphasis upon the role that reputation plays as a counter to corruption. I found his discussion of the optimal penalty for various types of crimes very "interesting econimcs."

Tyler may be right that the "Lott-Levitt" dispute may be a distraction (I'd be with Tyler in being largely disinterested in watching lawyers josting in defamation hearings), but I do think that the contrast between Freakonomics vs. Freedomnomics in terms of emphasis upon reputation is anything but a distraction. This point drives another book I read recently and found full of "interesting econmics": "The Company of Strangers: A Natural History of Economic Life" by Paul Seabright.


My mistake; sorry. Also apologies to Alex; its either that I have not had sufficient caffine or a senior moment, or both.

...mass media in general, constitute poor examples...

Whatever you may think of the "social utility" of the mass media, the use of advertising to pay for radio does appear to constitute a very good example of companies in a market solving a free rider problem. One can, and should, distinguish the question of whether and when the market can solve free rider problems, from the question of whether the mass media are ultimately "good for society".


You just trashed a man without providing a single verifiable source. Of course, you are under no obligation to do so, but from my perspective you don't come out looking to good yourself. (I read about Lott and "Mary Rosh" when it happened and know the details, but that is beside the point.)

"Actually, I had half planned on noting here that we might any minute see a "Jeannie Sue"
claiming to be a grad student at "George Madison University" who would claim that she and
her office mates had read the book and thought it was the greatest thing since The Wealth of
Nations, and how there is some secret blog where one can get 11 copies of it for the price
of 10, and so forth, you get my drift."

No. I don't get your drift. Are you insinuating that Alex Tabarrock or Tyler Cowan (or both) would post under pseudonyms with the intent to fool us into think they have ardent supporters, or are you insinuating that Lott would show up here and do something similar?

And when you say "I had half planned on noting here..." you are, actually, "noting here" so to speak. Does that mean your so noting was half-unplanned?

"Consequently, some believed that government would have to provide the service"

Sweet -- I have been conjecturing for some time that too many people are willing to decide the following is a legitimate intervention strategy:

1) Identify market failure (any one will do)
2) Identify policy (ignore any private responses to (1))
3) Declare victory (nevermind actual outcomes)

The actual existence of radio and used car sales should be enough to question that line of thinking, but it does not.

Um, Michael, if you claim to be "aware" then claiming that somehow I am suggesting
that either Alex T. or Tyler C. are somehow posting under p-nyms here is absurd.
My only commment on this is to note that Tyler has censored previous comments I
have made about our dear subject. T.C. made it clear that he did not do so because
he thought that I had said anything inaccurate. No, he did not wish to be sued
by this individual that you think I am overly criticizing. Get real.

"indinan jim"? Well, I do believe you are who I think you are and not "Mary Rosh."
Given the complete b.s. handed out by "Michael Giesbrecht," whom I do not know from
a dog turd on the ground, it is a relief that you are you, and not some entity who
frightens the likes of Tyler Cowen with potential pointless, assinine, despicable,
and beneath contempt lawsuits. Have I made my case strongly enough?

My, my, Mr. Rosser is awfully hot under the collar ...

Steve S.,

Yes. And for that reason, and not to worry our hosts too much, I shall
so no more here about this matter. Feel free to think that the gentleman
in question deserves the Nobel Prize, if you wish.

I see from the cover image that Lott put his "Ph.D." on the cover.

Obviously he hasn't read Prof. Cowen's posts on counter-signaling.

"The bottom line: When it comes to titles, if the book lists "Ph.d." after the author's name, run the other way."

The Other Brock,

Your selectively quoted the very next sentence in the post indicated, as it obviously has to, that this signal is imperfiect; the caveat posted that you omitted is:

"Gregory Stock's The Book of Questions is one notable exception to this rule."

Are you claiming that an imperfect signal is perfect? I hope not.

Sorry about the duplicate post; I don't know how it occurred.


From Freakonomics p. 103-113 presents the argument that: "a crack gang works pretty much like the standard capitalist enterprise: you have to be near the top of the pyramid to make a big wage." p. 103

But they really don't mean this but wait until page 106 to say that what they really are talking about is "glamor professions- movies, sports, music, fashion . . . " That is what they are really talking about is a small subset of "standard capitalist enterprise".

Yet on page 103, apparently to broaden the appearance of applicability, one sentence after the sentence I just quoted from page 103, they said this:

"A foot soldier [in the crack gang] had plenty in common with a McDonald's burger flipper or a Wal-Mart shelf stocker."

This is hardly a glamor profession, and the analogy breaks down immediately, even their own words. In the next several paragraphs, after saying that crack foot soldiers are like typical capitalist grunts, they say this:

"Along with bad pay, the foot soldiers faced terrible job conditions.. . . foot soldiers risked arrest and more worrisome violence . . . you stand a greater chance of dying while dealing crack . . . than sitting on death row in Texas."

The risk of job related death to a food service worker is virtually zero. Not only that, food service workers in America often have benefits (health, insurance, pension, vacation, etc.) and training opportunities. My Uncle John lived out what I'd call the American dream pulling himself up by his bootstraps in the food service industry. He began work at a popular diner on the PA turnpike right out of high school as a dishwasher. He came in early and stayed late, helping out the cook. Years later when they needed a cook, John got the nod. He came in early and stayed late as a cook, now helping out the manager with inventory and ordering and accounting and taxes and book-keeping. Years later when the manager retired, John got the nod and became manager. Years later, at retirement he could look back at a successful career that had provided for his wife and three children. Does this sound like the typical life experience of a crack dealer? Of course not.

I simply do not agree with the statement that: "a crack gang works pretty much like the standard capitalist enterprise;" this strikes me as gratuitously anti-capitalist.

The experience of most wage earners under capitalism is not best characterized by a zero sum tournament, only a small subset of wage earners can be closely approximated in this way. Capitalism is a positive sum game and people acquire human capital with experience and training that makes them more valuable. Competition between firms for workers drives the value of those with more human capital upward. Workers typically climb career ladders getting incrementally higher wages all along the way, step-by-step.

add to that:

actually I thought what was interesting about Freakonomics (not, to my mind, a particularly inspiring book: I almost felt I had read it all before) was lines like

"a crack gang works pretty much like the standard capitalist enterprise;"

I thought this was insightful because:

- it showed that criminals, and particularly crack gang members, aren't irrational and that there is a method to the madness of their organisation. It makes the inexplicable explicable.

I can see why you objected to the language, ie the inference that drug dealing is part of capitalism, but actually I think drug dealing and organised crime are typical capitalist enterprises.

In that sense, i thought Freakonomics was a very interesting demonstration of the ability of the market paradigm to explain human behaviour, and therefore was not 'anti market'.

I think even defenders of capitalism would admit the market is a rough and brutal place: that's how its supposed to function.

"Was advertising unheard of in 1922? I don't think so." Bernard Yomtov

Advertising surely wasn't unheard of but for almost several decades private radio paid no salaries and people were unable to figure out how to get radio to pay for itself. That is one reason that the British adopted the model of a tax on each radio to pay for the government service. There was a very lively discussion about this market failure (people obviously valued radio but they hadn't figured out how to get the customers to pay for it). Some things that might seem extremely obvious afterwards are not always so obvious before hand. Imagine how different the political discussion in the US might be today if we had followed the British government funding solution to this so-called free-rider problem.

There are in fact many examples where profits were made by solving these so-called market failures.

"Imagine how different the political discussion in the US might be today if we had followed the British government funding solution to this so-called free-rider problem."

Actually, that's an (inadvertently) good argument for state intervention. Flip the dial in any British city, vs. any American one. The quality of the radio programs, be they music, news, talkshows etc. is far higher in Britain. The relative popularity of commercial radio and public radio tells you the public thinks so, as well.

Perhaps it was not inevitable that this be so, but it does undermine the converse case.


Isn't the constraint on radio stations bandwidth? *that* is why there is licensing? (besides rules on what is 'acceptable' public content eg should we allow Islamic fundamentalist radio?).

This is why pirate radio is such a problem (a good example of your licensing thesis, btw-- the authorities act to restrict stations that play 'alternative' music like gangsta rap, and that are not FCC regulated in terms of content).

But pirate radio can jam emergency and other channels.

In the case of private TV stations, they hold onto valuable bandwidth for which they paid nothing. As audiences dwindle (or access via cable) this becomes harder and harder to justify.

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