Alex wrote: I suppose one could come up with explanations for why this used to be non-optimal but now is optimal (I await eagerly) but it seems to me that what these and other incidents teach (such as the auctioning of radio spectrum, for example) is that sometimes the best explanation for why something isn't done when economics suggests that it should be done is simply that people don't understand economics. — With the auctioning of radio spectrum, I think one could argue that this came about slowly precisely because a few actors did understand economics. In particular, those involved in creating the 1927 and 1934 Acts saw a rent-creation opportunity: broadcasters got spectrum for "free" while the feds got the ability to regulate a "public resource" in a way that (it is argued) skirted First Amendment concerns. Members of Congress are well aware of this dynamic relationship with broadcasters, even today. Have you ever noticed that broadcasters' license areas - called DMAs - are similar to the boundaries for congressional districts? My experience has been that the National Association of Broadcasters is one of those interest groups that a member of Congress will ignore only at his or her peril. Few do so. For a nice public choice explanation of how this came about, see Tom Hazlett, Assigning Property Rights to Radio Spectrum Users: Why Did FCC Auctions Take 67 Years? 41(2) JLE 529 (1998).
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META http-equiv=Content-Type content="text/html; charset=iso-8859-1"> <META content="MSHTML 5.50.4522.1800" name=GENERATOR></HEAD> <BODY style="MARGIN-TOP: 2px; FONT: 8pt Tahoma; MARGIN-LEFT: 2px"><FONT size=1></FONT> <DIV><BR><BR>Alex wrote:<BR>I suppose one could come up with explanations for why this used to <BR>be non-optimal but now is optimal (I await eagerly) but it seems to me <BR>that what these and other incidents teach (such as the auctioning of <BR>radio spectrum, for example) is that sometimes the best explanation for <BR>why something isn't done when economics suggests that it should be done is simply that people don't understand economics.</DIV> <DIV> </DIV> <DIV> </DIV> <DIV>— With the auctioning of radio spectrum, I think one could argue that this came about slowly precisely because a few actors <U>did</U> understand economics. In particular, those involved in creating the 1927 and 1934 Acts saw a rent-creation opportunity: broadcasters got spectrum for "free" while the feds got the ability to regulate a "public resource" in a way that (it is argued) skirted First Amendment concerns. Members of Congress are well aware of this dynamic relationship with broadcasters, even today. Have you ever noticed that broadcasters' license areas - called DMAs - are similar to the boundaries for congressional districts?</DIV> <DIV>My experience has been that the National Association of Broadcasters is one of those interest groups that a member of Congress will ignore only at his or her peril. Few do so.</DIV> <DIV> </DIV> <DIV>For a nice public choice explanation of how this came about, see</DIV> <DIV>Tom Hazlett, Assigning Property Rights to Radio Spectrum Users: Why Did FCC Auctions Take 67 Years? 41(2) JLE 529 (1998).</DIV></BODY></HTML>
