More Coase

June 3, 2010

Coase wonders why the government doesn’t sell broadcasting licenses, rather than giving them out for free:

Or consider the answers given by Mr. Frank Stanton, president of Columbia Broadcasting System and one of the most experienced and able men in the broadcasting industry, when Representative Rogers in a congressional inquiry raised the possibility of disposing of television channels by putting them up for the highest bids:

Mr. ROGERS. Doctor, what would you think about a proposition of the Government taking all of these channels and opening them to competitive bidding and let the highest bidder take them at the best price the taxpayers could get out of it?
Mr. STANTON. This is a novel theory and one to which I have not addressed myself during my operating career. This is certainly entirely contrary to what the Communication Act was in 1927 and as it was later amended.
Mr. ROGERS. I know, but if the Government owns a tract of land on which you raise cattle, they charge a man for the use of the land. Why would it not be just as reasonable to charge a man to use the avenues of the air as it would be to use that pasture? Why should the people be giving one group something free and charging another group for something that is comparable?
Mr. STANTON. This is a new and novel concept. I think it would have to be applied broadly to all uses of the spectrum and not just confined to television, if you will.
Mr. ROGERS. I understand that. Do you not think that would really be free enterprise where the taxpayer would be getting the proceeds?
Mr. STANTON. You have obviously given some thought to this and you are hitting me for the first time with it.

This “novel theory” (novel with Adam Smith) is, of course, that the allocation of resources should be determined by the forces of the market rather than as a result of government decisions.
R. H. Coase, “The Federal Communications Commission”, (1959), pp. 17-18
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2 Responses to “More Coase”

  1. Rrrobert! Says:

    Don’t we auction spectrum these days? I seem to remember being paid in high-school to test-drive FCC’s new auction software.


  2. Yes. In The Undercover Economist, Tim Harford talks about some auction designs the FCC has used to sell spectrum rights. Interesting stuff.

    I think we still don’t charge TV or radio stations or fire or police departments for their portions of the spectrum. On the other hand, that’s just a guess.


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