Blast from the Past

by on February 23, 2007 · 14 comments

Harold Feld has a long screed accusing “the Libertarian/anti-dereg crowd” (which I assume includes us, although I kind of thought we were the pro-dereg crowd) of failing to be suitably awestruck by the awesome power of regulations to improve consumer welfare.

I think it’s quite fitting that he invokes “the New Deal-type ideal of using regulatory power,” because he clearly hasn’t learned anything since the New Deal. Not, for example, the lesson of the ICC, which corporate shill Ralph Nader attacked in 1970 for operating a cozy transportation cartel at the expense of consumers. Nor the lesson of the CAB which that notorious right-winger Jimmy Carter (and a Democratic Congress) abolished in 1978. Nor, I suppose, the way that the broadcasters’ cartel has used its power with the FCC to enrich itself at the expense of competitors and consumers.


Nope, it’s still 1933, and government regulations can only do good. That’s why we can not only skip having a debate about whether to regulation, we don’t even have to spend much time talking about how to regulate, because we can adopt “network neutrality and network attachment rules precisely because they have worked so well in the past.” Never mind that modern cell phones are radically more complex than the old-fashioned telephony networks to which Carterfone was applied. We’ll just put Feld in charge, and he’ll figure all those nitpicking details out for us.

To his credit, Wu does not stake out this extreme and rather silly position. Wu argues that “regulation, if necessary, should be a last resort.” He seems to recognize that new regulations do not always work out precisely the way their authors intended, and so it’s important to weigh costs and benefits and proceed with caution.

Fundamentally, Feld is guilty of what Will Wilkinson dubs the “fallacy of asymmetric idealization” (yes, Will, is a giant nerd). Feld attacks libertarians for blind faith in the efficacy of the market, while simultaneously demonstrating precisely the same kind of blind faith in the regulatory process. In the real world, both the market and the regulatory process have flaws. Our task as policy analysts is to compare the two and try to figure out which of them is likely to have more flaws in any given situation.

We libertarians are more apt to see flaws in the regulatory process, while those on the left are more apt to find flaws in the market. That’s part of healthy debate. But Feld is clearly not interested in a serious comparison of the strengths and weaknesses of different policy options. He’s already made up his mind that more regulation always increases consumer welfare, and the only question before us is whether we have the political will to use it.

  • http://bennett.com/blog Richard Bennett

    This is a good post, especially that “fallacy of asymmetric idealization” deal.

  • http://bennett.com/blog Richard Bennett

    This is a good post, especially that “fallacy of asymmetric idealization” deal.

  • http://www.blogger.com/profile/14019452 Steve R.

    Great post. Like Richard, I find the “fallacy of asymmetric idealization” to be very much to the point.

    I would like to suggest that the task of policy analysis is not limited to uncovering which approach has the most flaws, but to suggest the implementation of a policy that promotes the progress of science and minimizes the number of flaws based on balancing market liberty with market regulation.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    Great post. Like Richard, I find the “fallacy of asymmetric idealization” to be very much to the point.

    I would like to suggest that the task of policy analysis is not limited to uncovering which approach has the most flaws, but to suggest the implementation of a policy that promotes the progress of science and minimizes the number of flaws based on balancing market liberty with market regulation.

  • http://weblog.ipcentral.info/ Noel Le

    I’ll make sure to bring up the “fallacy of asymmetric idealization” analogy the next time someone raises makes the idiotic argument that IPRs are simply “government granted monopolies” and that because they are a form of “regulation,” we should per se do without them.

  • http://weblog.ipcentral.info/ Noel Le

    I’ll make sure to bring up the “fallacy of asymmetric idealization” analogy the next time someone raises makes the idiotic argument that IPRs are simply “government granted monopolies” and that because they are a form of “regulation,” we should per se do without them.

  • http://www.wetmachine.org Harold Feld

    Must dispute the charge of “fallacy of asymetric idealization” (although it is a term I must remember). I do thank you for spotting the typo (corrected). As you observe, spelling is not a strong suite.

    To make clear (as I have tried to do in other posts): regulation is a tool of public policy. There are many tools of public policy. Market incentives are also a tool of public policy. It is a good tool, as far as it goes. So is regulation– for its purposes. Government subsidy is another tool: usefull for the appropriate job.

    All these tools are useful where appropriate in somne cricumstances and absolutely destructive in others. A chain saw if great for cutting down trees and lousy for surgery. A scalpel is good for surgery and awful for cutting down trees.

    Libertarians, as far as I can determine, regard reguation as an intrinsicly lousy tool for everything, and justify this by pointing to the places where it is used inappropriately. (My experience is that Libertarians, being human beings, also suffer from asymetric idealization.) Many also consider it impossible or unjustifiably arrogant for government to even imagine that it should set economic policy (beyond certain limited catagories such as protecting property rights).

    It’s not an intrinically irrational view. But it carries costs. My frustration and associated mockery comes in with the refusal to acknowledge the associated costs and trade offs of the Libertarian philosophy v. a New Deal-type maximizing collective welfare philosophy which sees a considerable role for government policy.

    The accompanyingsource of frustration is the belief that we are talking economics, rather than political philosophy. To claim that, as a general rule, relying on market forces maximizes consumer welfare if a defensible position — albeit one with which I disagree. But to ignore evidence that exclusive reliance on market forces fails to maximize consumer welfare in the face of explicitly evidence to the contrary is to move from economics to political philosophy.

  • http://www.wetmachine.org Harold Feld

    Must dispute the charge of “fallacy of asymetric idealization” (although it is a term I must remember). I do thank you for spotting the typo (corrected). As you observe, spelling is not a strong suite.

    To make clear (as I have tried to do in other posts): regulation is a tool of public policy. There are many tools of public policy. Market incentives are also a tool of public policy. It is a good tool, as far as it goes. So is regulation– for its purposes. Government subsidy is another tool: usefull for the appropriate job.

    All these tools are useful where appropriate in somne cricumstances and absolutely destructive in others. A chain saw if great for cutting down trees and lousy for surgery. A scalpel is good for surgery and awful for cutting down trees.

    Libertarians, as far as I can determine, regard reguation as an intrinsicly lousy tool for everything, and justify this by pointing to the places where it is used inappropriately. (My experience is that Libertarians, being human beings, also suffer from asymetric idealization.) Many also consider it impossible or unjustifiably arrogant for government to even imagine that it should set economic policy (beyond certain limited catagories such as protecting property rights).

    It’s not an intrinically irrational view. But it carries costs. My frustration and associated mockery comes in with the refusal to acknowledge the associated costs and trade offs of the Libertarian philosophy v. a New Deal-type maximizing collective welfare philosophy which sees a considerable role for government policy.

    The accompanyingsource of frustration is the belief that we are talking economics, rather than political philosophy. To claim that, as a general rule, relying on market forces maximizes consumer welfare if a defensible position — albeit one with which I disagree. But to ignore evidence that exclusive reliance on market forces fails to maximize consumer welfare in the face of explicitly evidence to the contrary is to move from economics to political philosophy.

  • http://weblog.ipcentral.info/ Noel Le

    Harold, those are some good points. Yes, some libertarians can sound like anarchists, who believe there is some primordial and absolute free market with perfect competition that societies should strive for. If such a notion did not sound funny enough philosophically, wait til you see it clothed in copyright and patent policy language.

  • http://weblog.ipcentral.info/ Noel Le

    Harold, those are some good points. Yes, some libertarians can sound like anarchists, who believe there is some primordial and absolute free market with perfect competition that societies should strive for. If such a notion did not sound funny enough philosophically, wait til you see it clothed in copyright and patent policy language.

  • http://weblog.ipcentral.info/ Noel Le

    Oh yeah, the religious sect of the libertarian wing does not just fight government regulation, but has taken on vilifying corporations. So, who are these folks that downplay the importance of government and the industrial private sector? They must be really important, and part of some revolution, huh.

  • http://weblog.ipcentral.info/ Noel Le

    Oh yeah, the religious sect of the libertarian wing does not just fight government regulation, but has taken on vilifying corporations. So, who are these folks that downplay the importance of government and the industrial private sector? They must be really important, and part of some revolution, huh.

  • http://www.techliberation.com/ Tim Lee

    Harold, thanks for commenting.

    To ignore evidence that exclusive reliance on market forces fails to maximize consumer welfare in the face of explicitly evidence to the contrary is to move from economics to political philosophy.

    I’m not sure who you’re referring to specifically, so I’m not going to defend this in general, but it seems to me that your post went further than that. It’s one thing to complain that libertarian analysts are refusing to acknowledge evidence of market failure in industry X. In fact, I made precisely this point myself.

    However, the fact that market forces produce an outcome that’s not as good as the best regulatory scheme we can imagine does not come anywhere close to proving that it’s worse than the regulatory regime we would actually get if the FCC or Congress decided to impose Carterfone and NN regulations on the wireless industry. The technological and regulatory environments have changed dramatically in the last four decades, and the issues that regulators would face are a lot more complex than those the FCC faced in 1968.

    So our choice is not between the flawed markets we see in the real world and the ideal regulatory state you see in your head, any more than it’s between the flawed regulatory state that exists in reality and the idealized markets that some libertarians see in their heads. Both systems have their strengths and weaknesses, and it doesn’t make sense to jump to conclusions about which is better without knowing the details of how the regulatory scheme would work. And the mere fact that Wu has found some problems in the marketplace certainly does not demonstrate that any given regulatory scheme would be an improvement.

  • http://www.techliberation.com/ Tim Lee

    Harold, thanks for commenting.

    To ignore evidence that exclusive reliance on market forces fails to maximize consumer welfare in the face of explicitly evidence to the contrary is to move from economics to political philosophy.

    I’m not sure who you’re referring to specifically, so I’m not going to defend this in general, but it seems to me that your post went further than that. It’s one thing to complain that libertarian analysts are refusing to acknowledge evidence of market failure in industry X. In fact, I made precisely this point myself.

    However, the fact that market forces produce an outcome that’s not as good as the best regulatory scheme we can imagine does not come anywhere close to proving that it’s worse than the regulatory regime we would actually get if the FCC or Congress decided to impose Carterfone and NN regulations on the wireless industry. The technological and regulatory environments have changed dramatically in the last four decades, and the issues that regulators would face are a lot more complex than those the FCC faced in 1968.

    So our choice is not between the flawed markets we see in the real world and the ideal regulatory state you see in your head, any more than it’s between the flawed regulatory state that exists in reality and the idealized markets that some libertarians see in their heads. Both systems have their strengths and weaknesses, and it doesn’t make sense to jump to conclusions about which is better without knowing the details of how the regulatory scheme would work. And the mere fact that Wu has found some problems in the marketplace certainly does not demonstrate that any given regulatory scheme would be an improvement.

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