Radio Spectrum and the Disruptive Clarity OF Ronald Coase
In the Federal Communications Commission, Ronald Coase (1959) exposed deep foundations via normative argument buttressed by astute historical observation. The government controlled scarce frequencies, issuing sharply limited use rights. Spillovers were said to be otherwise endemic. Coase saw that Government limited conflicts by restricting uses; property owners perform an analogous function via the "price system." The government solution was inefficient unless the net benefits of the alternative property regime were lower. Coase augured that the price system would outperform the administrative allocation system. His spectrum auction proposal was mocked by communications policy experts, opposed by industry interests, and ridiculed by policy makers. Hence, it took until July 25, 1994 for FCC license sales to commence. Today, some 73 U.S. auctions have been held, 27,484 licenses sold, and $52.6 billion paid. The reform is a textbook example of economic policy success. We examine Coase‘s seminal 1959 paper on two levels. First, we note the importance of its analytical symmetry, comparing administrative to market mechanisms under the assumption of positive transaction costs. This fundamental insight has had enormous influence within the economics profession, yet is often lost in current analyses. This analytical insight had its beginning in his acclaimed early article on the firm (Coase 1937), and continued into his subsequent treatment of social cost (Coase 1960). Second, we investigate why spectrum policies have stopped well short of the property rights regime that Coase advocated, considering rent-seeking dynamics and the emergence of new theories challenging Coase‘s property framework. One conclusion is easily rendered: competitive bidding is now the default tool in wireless license awards. By rule of thumb, about $17 billion in U.S. welfare losses have been averted. Not bad for the first 50 years of this, or any, Article appearing in Volume II of the Journal of Law & Economics.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: One University Drive, Orange, CA 92866|
Phone: (714) 628-2830
Fax: (714) 628-2881
Web page: http://www.chapman.edu/esi/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Klemperer, Paul, 2000.
"What Really Matters in Auction Design,"
CEPR Discussion Papers
2581, C.E.P.R. Discussion Papers.
- Milgrom,Paul, 2004.
"Putting Auction Theory to Work,"
Cambridge University Press, number 9780521551847, Junio.
- Thomas W. Hazlett & Roberto E. Muñoz, 2009. "A welfare analysis of spectrum allocation policies," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 424-454.
- Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1998.
"Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions,"
Papers of Peter Cramton
97jems, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1997. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 497-527, 09.
- Kwerel, Evan R & Rosston, Gregory L, 2000. "An Insiders' View of FCC Spectrum Auctions," Journal of Regulatory Economics, Springer, vol. 17(3), pages 253-89, May.
- David P. Porter, 1999. "The effect of bid withdrawal in a multi-object auction," Review of Economic Design, Springer;Society for Economic Design, vol. 4(1), pages 73-97.
- Banks, Jeffrey & Olson, Mark & Porter, David & Rassenti, Stephen & Smith, Vernon, 2003. "Theory, experiment and the federal communications commission spectrum auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 51(3), pages 303-350, July.
- Rosston, Gregory L., 2003. "The long and winding road: the FCC paves the path with good intentions," Telecommunications Policy, Elsevier, vol. 27(7), pages 501-515, August.
- Hazlett Thomas W. & Spitzer Matthew L., 2000. "Digital Television and the Quid Pro Quo," Business and Politics, De Gruyter, vol. 2(2), pages 1-46, August.
- Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
- Bazelon, Coleman, 2009. "Too many goals: Problems with the 700Â MHz auction," Information Economics and Policy, Elsevier, vol. 21(2), pages 115-127, June.
- Moreton, Patrick S & Spiller, Pablo T, 1998. "What's in the Air: Interlicense Synergies in the Federal Communications Commission's Broadband Personal Communication Service Spectrum Auctions," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 677-716, October.
- Minasian, Jora R, 1975. "Property Rights in Radiation: An Alternative Approach to Radio Frequency Allocation," Journal of Law and Economics, University of Chicago Press, vol. 18(1), pages 221-72, April.
When requesting a correction, please mention this item's handle: RePEc:chu:wpaper:09-11. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Megan Luetje)
If references are entirely missing, you can add them using this form.