How Should Libertarians Think about The Master Switch?

by on November 29, 2010 · 2 comments

Former TLF blogger Tim Lee returns with this guest post. Find him most of the time at the Bottom-Up blog.

Thanks to Jim Harper for inviting me to return to TLF to offer some thoughts on the recent Adam ThiererTim Wu smackdown. I’ve recently finished finished reading The Master Switch, and I didn’t have have my friend Adam’s viscerally negative reactions.

To be clear, on the policy questions raised by The Master Switch, Adam and I are largely on the same page. Wu exaggerates the extent to which traditional media has become more “closed” since 1980, he is too pessimistic about the future of the Internet, and the policy agenda he sketches in his final chapter is likely to do more harm than good. I plan to say more about these issues in future writings; for now I’d like to comment on the shape of the discussion that’s taken place so far here at TLF, and to point out what I think Adam is missing about The Master Switch.

Here’s the thing: my copy of the book is 319 pages long. Adam’s critique focuses almost entirely on the final third of the book, (pages 205-319) in which Wu tells the history of the last 30 years and makes some tentative policy suggestions. If Wu had published pages 205-319 as a stand-alone monograph, I would have been cheering along with Adam’s response to it.

But what about the first 200-some pages of the book? A reader of Adam’s epic 6-part critique is mostly left in the dark about their contents. And that’s a shame, because in my view those pages not only contain the best part of the book, but they’re also the most libertarian-friendly parts.

Those pages tell the history of the American communications industries—telephone, cinema, radio, television, and cable—between 1876 and 1980. Adam only discusses this history in one of his six posts. There, he characterizes Wu as blaming market forces for the monopolization of the telephone industry. That’s not how I read the chapter in question. Although Wu certainly suggests that market forces tended toward consolidation (which seems obviously correct), he also makes it clear that the government played an active role in the process, through the patent system, the Kingsbury Commitment, turning a blind eye to industrial sabotage, and later through explicit pro-monopoly regulation. Adam’s only specific quibble with Wu’s history is his failure to mention the nationalization of the telephone network during World War I. Maybe that’s an important oversight, but I’m not sure it would have changed Wu’s story very much. Certainly I think characterizing this section of the book as an anti-free-market screed is unfair.

The Master Switch takes an even more explicitly libertarian tone in its discussion of broadcasting. Wu makes it plain that everything about the radio (and later television) industries post-1927 was the result of heavy-handed government regulation. He tells how federal regulations robbed the inventor of FM radio of the opportunity to commercialize his invention, and how the FCC delayed the introduction of television by more than a decade to give RCA (then the dominant radio firm) time to perfect its own television technology.

It’s easy to imagine chapters 5, 9, and 10 being published by Cato or the Mercatus Center. Consider, for example, this passage describing the FCC’s decision to delay the introduction of television (p. 144):

Consider for a moment the oddness of this phenomenon in the putatively free-market economy. The government was deciding, in effect, when a product that posed no hazard to the public health would be “ready” for sale. Consider, too, how incongruous this was in a society under the First Amendment: a medium with great potential to further the exercise of free speech was being stalled until such time as the government could agree it had attained an acceptable technical standard. Rather than letting the market decide what a technology in its present state was worth, a federal agency—not even a democratically elected body—was to forbid its sale outright.

Whatever else you might say about this passage, it’s certainly not blaming anything on market forces!

One of Wu’s central points is that during the 20th century, the communications policy world was divided along different ideological lines. On one hand were the champions of monopoly and central planning—Wu chooses legendary AT&T president Theodore Vail as its intellectual father. On the other hand were champions of choice and competition. It’s worth emphasizing that Adam and Wu are on the same side of this ideological battle. In 1930, 1950, or 1970, all of us would have been teaming up to oppose monopolistic regulations.

We would have regarded AT&T, RCA, and other state-sponsored monopolists as our common enemy. If we’d submitted amicus briefs in the Carterfone or MCI proceedings, we would have made largely the same arguments. Of course, we wouldn’t have agreed perfectly on our long-term policy agenda, but we would have regarded that as a relatively minor area of disagreement compared to the pressing problem of repealing blatantly monopolistic government policies and bringing some degree of competition to communications markets. And for most of the 20th century we would have been the underdogs. In 1950, the monopolists were not only utterly dominant in Washington, D.C., but their ideology still had a great deal of cachet with the intellectual class.

Vail’s corporatist ideology has fallen so far out of favor that today it’s hard to find anyone who’s willing to defend it forthrightly. The remnants of the once-great monopolists have been forced to adopt the rhetoric of the free market and pretend to care about choice and competition. And it’s only in this new intellectual environment that Adam can plausibly
portray Wu a “cyber-collectivist” at the opposite end of the ideological spectrum from me and Adam. The Master Switch reminds us that much less separates Adam from Wu than separates either of them from Theodore Vail and David Sarnoff.

Adam began his first post by stating that he “disagrees vehemently with Wu’s general worldview and recommendations, and even much of his retelling of the history of information sectors and policy.” This is kind of silly. In fact, Adam and Wu (and I) want largely the same things out of information technology markets: we want competitive industries with low barriers to entry in which many firms compete to bring consumers the best products and services. We all reject the prevailing orthodoxy of the 20th century, which said that the government should be in the business of picking technological winners and losers. Where we disagree is over means: we classical liberals believe that the rules of property, contract, and maybe a bit of antitrust enforcement are sufficient to yield competitive markets, whereas left-liberals fear that too little regulation will lead to excessive industry concentration. That’s an important argument to have, and I think the facts are mostly on the libertarians’ side. But we shouldn’t lose sight of the extent to which we’re on the same side, fighting against the ancient threat of government-sponsored monopoly.

My friend Kerry Howley coined the term “state-worship” to describe libertarians who insist on making the government the villain of every story. For most of history, the state has, indeed, been the primary enemy of human freedom. Liberals like Wu are too sanguine about the dangers of concentrating too much power in Washington, D.C. But to say the state is an important threat to freedom is not to say that it’s the only threat worth worrying about. Wu tells the story of Western Union’s efforts to use its telegraph monopoly to sway the election of 1876 to Republican Rutherford B. Hayes. That effort would be sinister whether or not Western Union’s monopoly was the product of government interference with the free market. Similarly, the Hays code (Hollywood’s mid-century censorship regime) was an impediment to freedom of expression whether or not the regime was implicitly backed by the power of the state. Libertarians are more reluctant to call in the power of the state to combat these wrongs, but that doesn’t mean we shouldn’t be concerned with them.

By casting every argument in terms of a Manichean struggle between “cyber-libertarians” and “cyber-collectivists,” Adam misses a lot of the value of The Master Switch. Many of the stories Wu tells are too complicated to fit comfortably at either end of the free-market-vs-regulation spectrum. For example, until I read The Master Switch, I didn’t realize how important, and harmful, patents were to the early development of communications markets. Should these stories make libertarians more skeptical of patent law? I’d be interested to hear Adam take, but he was too busy railing against Wu’s alleged cyber-collectivism to discuss the topic.

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