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Radio Spectrum and the Disruptive Clarity of Ronald Coase

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  • Thomas W. Hazlett
  • David Porter
  • Vernon Smith

Abstract

In "The Federal Communications Commission," Ronald Coase exposed deep theoretical foundations via normative argument. The government controlled scarce frequencies; spillovers were said to be otherwise endemic. Coase saw that regulators limited conflicts by restricting uses and that property owners routinely perform such functions via the price system. The fundamental insight was that analytical symmetry was demanded, accounting for the net benefits of both regulation and markets. Coase augured that the price system would outperform administrative allocation, a conclusion mocked by communications policy experts. Yet one specific slice of the Coasean program, competitive bidding for licenses, commenced at the Federal Communications Commission in 1994. Today, over 70 U.S. auctions have been held, 31,305 licenses sold, and $52.6 billion paid to the Treasury. The reform is a textbook example of economic policy success, even as it raises the question, why have market mechanisms not been further implemented in the spectrum allocation process?

Suggested Citation

  • Thomas W. Hazlett & David Porter & Vernon Smith, 2011. "Radio Spectrum and the Disruptive Clarity of Ronald Coase," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 125-165.
  • Handle: RePEc:ucp:jlawec:doi:10.1086/662992
    DOI: 10.1086/662992
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    2. Hahn Robert & Passell Peter, 2013. "Spectrum Policy and the Evolution of the Wireless Internet: Some Thoughts on Where Economists Agree and Disagree," The Economists' Voice, De Gruyter, vol. 10(1), pages 29-37, December.
    3. Thomas Hazlett, 2014. "The Rationality of U.S. Regulation of the Broadcast Spectrum in the 1934 Communications Act," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(3), pages 203-220, November.
    4. Thomas W. Merrill & Henry E. Smith, 2011. "Making Coasean Property More Coasean," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 77-104.
    5. Mary M. Shirley, 2016. "Ronald Coase: the makings of an iconoclast," Chapters, in: Claude Ménard & Elodie Bertrand (ed.), The Elgar Companion to Ronald H. Coase, chapter 1, pages 7-17, Edward Elgar Publishing.
    6. Valentiny, Pál, 2018. "Coase-kép másképp: középpontban a közszolgáltatások [Coase otherwise: Public utilities]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 346-381.
    7. Bustamante, Pedro & Gomez, Marcela & Murtazashvili, Ilia & Weiss, Martin, 2020. "Spectrum anarchy: why self-governance of the radio spectrum works better than we think," Journal of Institutional Economics, Cambridge University Press, vol. 16(6), pages 863-882, December.
    8. Isher Judge Ahluwalia & P.K.Mohanty & Om Mathur & Debarpita Roy, 2019. "Finances of Municipal Corporations in Metropolitan Cities of India," Indian Council for Research on International Economic Relations (ICRIER) Report 19-r-06, Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India.

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