THE MASTER SWITCH was written to be readable and hopefully entertaining.   But its real goal is to urge readers to examine our relationship with all forms of centralized power.  There are deep contradictions between a fully centralized society and a free one; indeed I am not sure the two can co-exist.   Its message to libertarians is this:   if human freedom is truly the value that matters most, we need pay attention to the size of the institutions that govern the most important human functions.

As this suggests, while my book is designed to be relatively easy reading, at deeper levels it is a meditation on human freedom.  And while this may be unkind, I will respond to Thierer’s review to show how I think that contemporary libertarianism has begun to lose its way and betray its own creed.   Instead of a philosophy of freedom, it is at risk of becoming a theory of villanization, where every single wrong must be traced, somehow, to “government;” to say otherwise is to betray the movement.   To my mind that’s not true libertarianism in the tradition of John Stuart Mill, but just another theology of blame.

(N.B. I am grateful for Adam for inviting me to post a response.   Why we disagree in profound ways, I am flattered by his engagement with the book, and his readiness to give me space to respond).

Let’s get to the basics.  I define a libertarian as someone who is, at the deepest levels, prioritizes freedom over other values.  He is willing to forgo a preferred substantive outcome he might prefer, in exchange for a system that gives him freedom.  The classic example, of course, is the speech system: many of us might prefer that certain people to shut up forever (pick your favorite), but nonetheless still support a system of free speech.

Anyone deeply interested in freedom as a value should, by implication, be interested any non-chosen limits on that freedom, no matter what the source. Whether you are kidnapped or wrongly arrested, the fact is that you are no longer free.  If you do not speak your mind for fear of being shamed or fined, the fact in both cases is that you do not speak your mind.  All of these are limits on freedom, which, as we’ve said, is the value paramount to a libertarian.   That their source is “public,” “social” or “private” matters a little, but not completely, if, again, if you really believe it is freedom that matters most.

While Mill agreed explicitly with this point, 20th century American libertarians tend to elevate one category, namely state-based infringements over any other.   The main reason is obvious and a very good one.  For people like Hayek, the experience of fascism and communism proved convincingly that a totalitarian, centralized state is the greatest enemy of basic human freedom ever invented.   Furthermore, the path from here to there is often premised on excessive optimism and good intentions; that’s the point of The Road to Serfdom.

But the question remains:  even if state rules are the worst, why pointedly ignore all of the other threats to human freedom?   What about everything else?   Here is, I suggest, where contemporary libertarianism is in deep danger of betraying its creed.  For any attachment to a value – say, a deep hate for all “law” or “regulation” – necessarily takes you away from a view that freedom is paramount.   It creates a blindness to other limits on freedom,  tolerates excessive concentrations of private power as “natural.”

The point is obvious with my kidnapper / wrongful arrest example.  One is the fault of too little law, the other the fault of too much.   But if you hate law and the state more than anything, you become blind to the kidnapping as an infringement of freedom because there’s no state power involved.   It might, rather, be described, rather, as the market in action.  You’re worth a ransom, and supply has simply met demand in the market for kidnapping services.   To borrow another trope, it is simply “natural” and not a cause for concern.

This example is exaggerated, but it makes an important point.  You can be a committed deregulationist or a libertarian, but not both.  For you either care about freedom most, or something else.    You cannot serve two masters.

This leads me to my criticism of Thierer’s review.  It is so fixated on my relatively mild recommendations of federal oversight at the end that the review is mostly blind to the deeper issues of human freedom that the book is really about.  Instead, Thierer is like the Freudian who suspects a childhood fixation  must lie behind every problem.  It must always, in the end, government that is the cause of all that ails us – no other villain is allowed.

The truth is that my book is full of both heroes and villains, private and public, sometimes combined in a single figure at different stages.   The FCC is terrible from the 1920s through the 1960s, but does brilliant work in the 1970s.   The leaders of the Hollywood studios break the censorial hold of the Edison Trust in the 1910s, but then themselves become censors in the 1930s.   The book refuses to dish up a theory where government or private industry is consistently evil or good, because that just isn’t how it was.   The real villains in my book are excessive centralization, stagnation and suppression of speech or innovation.   And unfortunately no man has a monopoly on that.

I don’t blame Thierer for his approach for he is merely following the libertarian speech code of our times.   As in the Hollywood endings in the 1930s, you can tell whatever story you want, but in the end you must blame Government for all manifest evil.  It is the conformity demanded of a movement supposedly dedicated to non-conformity.   Blaming one set of enemies for all of our problems is an easy and indeed comforting way to look at the world.  But it is a one note instrument, and after a while, nothing but a squawking sound.

The point also leads me to address Thierer’s argument that I am too pessimistic.   I am surprised to hear this criticism from a so-called libertarian.  A libertarian by nature ought not, perhaps, be paranoid, but certainly wary of infringements on human freedom.   What Thierer calls “optimism” can quickly and easily become good old fashioned worship of power.   And, to repeat what I said above, Hayek pointed out best, excessive optimism is, in fact, the road to serfdom.

I’ve gone on long enough on this.  For my part, I think that one thing libertarians in our time should be thinking about are three harder questions:

One is the relationship between freedom and centralization – a favorite topic of Friedrich Hayek’s.   In other words, they should ask whether Joseph Schumpeter’s vision of capitalism as a series of successive monopolies is, say, good enough for J.S. Mill.  Perhaps it is, and perhaps not: I don’t know the answer, but I do know that there are inherent dangers in centralization that ought not be ignored.

Second, and here I will, however, concede a point to Adam’s review:  since writing the book I think I should have emphasized more explicitly the danger that any complex government schema, however well intentioned as a tool of competition, can easily become a tool of lasting monopolization.   The book points this out with reference to the 1913 Kingsbury commitment and the 1996 telecom act, both instruments designed to open competition that soon destroyed it.   The spectrum auctions are similar:  designed originally to open the wireless markets, they now help insulate Verizon and AT&T from disruptive competition.

Libertarians, then, should be trying to understand how pro-competitive regulatory systems can become the opposite; and whether it is possible to enact laws or take actions that actually have long-term pro-competitive effects.   Perhaps this leads to a greater taste for episodic breakups.

Third, libertarians ought to be asking whether open or closed systems are more conducive to human freedom.  I tend to think the former are but I there is definitively room for debate:  for example, some systems by their nature need to be closed to be what they are, like, say, a private home, or a private club.  When it comes to code, many West Coast tech libertarians are obsessed with this issue, without having to invent plots by the federal government.

My final message is this.  To my mind, real libertarianism is a philosophy of human freedom, not a theology of blame.  Worship of the private sector is simply another form of power worship of the kind Hayek warned of; I believe a libertarian should be wary of any concentrated power.   And in the end, resistance to any non-chosen limit on freedom should be the creed of any true libertarian; you can care about other things, but you should care about freedom most.

Adam Thierer’s claim that I am redefining monopoly in my Wall Street Journal piece is sowing confusion and misleading the public.  Hence this corrective.

A monopoly is any firm that has a dominant share in the market for a given good or service (legal definitions range between 40% – 70%) resulting in power over that market.   That is the beginning and the end of the definition.   There is no further requirement that the firm be evil, gigantic, have caused consumer harm, be long-lasting, or anything else.

What Adam is thinking about is what a lawyer would call an “actionable” or “unlawful” monopoly; or perhaps a monopoly that violates s. 2 of the Sherman Act.   But I never said in the Wall Street Journal that the Internet monopolies are unlawful.   The point was that these are firms in the early age of monopoly, indeed in a kind of Golden Age.

To be more specific, by the economic and legal definition, in one or more markets, Google, Apple, Facebook, and eBay are pretty clearly monopolists.   Google has market power over search.   Apple, portable music players and iTunes downloads.   Facebook, social media sites.   eBay, online auctions.

Amazon and Twitter are closer cases; it all depends on market definition.  Twitter’s market may be small, but the size of the market isn’t the point.

The key is understanding — and this is where a law degree can come in handy — that monopoly by itself is not unlawful in the United States.  It is abuse of monopoly that is actionable.

I post this corrective because, for example, Techdirt has become confused by Adam’s post, writing that “domination of a market, by itself, does not create a monopoly.”   Actually, Techdirt, it does.   That is exactly the definition of monopoly.

Finally, whether the monopoly may disappear tomorrow is an important question.   But it doesn’t mean there isn’t a monopoly right now.

One more corrective.  Adam says the piece  ” completely ignores the competition taking place among many of these giants.”

From the Wall Street Journal:  “There are digital Kashmirs, disputed territories that remain anyone’s game, like digital publishing. But the dominions of major firms have enjoyed surprisingly secure borders over the last five years, their core markets secure. Microsoft’s Bing, launched last year by a giant with $40 billion in cash on hand, has captured a mere 3.25% of query volume (Google retains 83%). … Though the border incursions do keep dominant firms on their toes, they have largely foundered as business ventures.”

End of corrective.

(Tomorrow:  a full response to Adam’s Master Switch review.)

[A guest post from Tim Wu]

Well its always fun to have two people you respect read your work and such is the case with Tim and Adam, though to be honest I probably enjoyed Tim’s analysis a little more.

Adam’s reaction is too strong, and doesn’t really get at the main points in the op-ed. The main point was this: that bandwidth has become an essential input in an economy that depends heavily on moving information. For that reason we must gain a sensitivity to the issues of supply and demand surrounding it. If anyone disagrees with that, I’d love to hear why.

I use the comparison to gas and energy because we all know that when gas prices go up or down, large parts of the economy are affected, from tourism through, say, bowling alleys. What I am saying is that bandwidth may have a similar nature: that if prices are high, it effects all of the information-related markets in interesting ways, from startup video services through google. It is still early in the age of the internet economy, so this may be less obvious at this point.

If you agree with this, you must care about industry structure and government’s role in suppressing or helping competition in that market.

Meanwhile, while the OPEC example may be a tad dramatic, harping on the fact that OPEC is comprised of nation-states, as opposed to firms, is a mistake. From an economic perspective, why do we care if it is, say, a worldwide private conspiracy setting prices as opposed to a conspiracy of nation states? The effect on prices is the same whether its four firms setting food prices (like in the 1990s, with the Archer-Daniel Midlands price-setting cases), as opposed to four foreign governments. It is harder to stop the governments, because they rarely respond to lawsuits — but the economic consequences, so long as the price-fixing conspiracy lasts, is no different.

A point made in the comments is also true – which is that telecom tends to be in the realm of state-supported or regulated monopoly, and so there is some confusion as to whether what we are talking about are really private actors in a pure sense. This is a point Hayek made quite well. If government helps create a monopoly, as it has in cable and telephone markets – then being concerned about the consequences of that monopoly makes much sense.

Finally, on Tim Lee’s post – I take much less issue. I’d just like to point out that I am also an advocate of greater propertization as well as more dedication to the commons—its the stuff in the middle I don’t care for. For example, as Tim knows, I would like to see the development of ways for people to own their own fiber connections (homes with Tails). I also believe that, in broad spectrum reform, there should be more propertization of the airwaves. The only silly position, it seems to me, is to maintain on principle that either a commons or private property is of no use whatsoever.