Ronald Coase and Spectrum Liberalization

September 4th, 2013 by Wayne Leighton

Over at MRUniversity, Alex Tabarrok has a short  video lecture on Ronald Coase and Spectrum Liberalization. Highly recommended, this twelve-minute talk gives a nice introduction to how the electromagnetic spectrum operates, and how government rules for its use have evolved over time. Coase, who passed away Monday, did more than anyone to help make it clear that the rules for spectrum use could be like those for most other resources — based on property rights that are freely traded in markets.

Alex points out that, during the Clinton administration, Congress finally approved the use of auctions for spectrum use rights, an idea that Coase had essentially proposed in 1959.

For those interested in why this reform took so long to come about, and how it actually happened, check out the case study in chapter six of Madmen. Ed and I describe the various interest groups that opposed reform, how Coase’s idea slowly won over one group and then another, and how the most powerful and resistant opposition (represented by congressional committees with FCC jurisdiction) were finally brought on board as well. It’s a classic story of political change. Madmen concludes the story as follows:

In the end, an idea worked its way from academic scribblers to intellectuals to madmen in authority. The latter at first included stubborn FCC commissioners and later applied to politicians with an interest in the status quo. They were not Third World dictators; they were simply political actors who were rationally resistant to change. But once it was expedient to do so, the madmen in authority embraced the idea and the policies it represented. And consumers won.