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February 14, 2015

The Regulatory Leviathan [CBD]

telephone.jpg

Conservatives tend to criticize overlarge government on general principles: it is inherently inefficient, it doesn't do a good job at...well...anything, it slows economic growth through its maze of fees and licenses and controls over exactly how things should be done. These are all excellent reasons to eviscerate the state and its control over commerce.

But perhaps the most dangerous of its effects on the economy is what doesn't happen -- innovation.

Here is Coyote Blog in one of his regular and worthwhile rants against the regulatory state. There is a bonus too: he skewers Kevin Drum!.

Here is what regulation, particularly utility-style regulation, tends to do -- it locks in current business models and competitors. It makes it really hard for new entrants to challenge incumbents with innovative new business models or approaches, because regulations have been written based on the old business model and did not take the new one in account. So a new entrant must begin business by getting regulators to allow their new model, which never happens because by this time incumbents have buildings full of lobbyists aimed at the regulatory process. Go ask Tesla and Uber and Lyft about how easy it is to enter a heavily regulated business even with a superior new business model.

I used to pay $.25/minute for a long distance telephone call. And a large fee for my paving brick-sized rotary phone and the line into my house. And service was fine most of the time, except for international calls, which were a crap-shoot.

Now? Since the breakup of the telephone monopoly, telecommunications has exploded into dozens of companies with unbelievable technology and services that are much less expensive and much better than anything available before the AT&T breakup in 1982. Of course innovation would have driven incremental changes to our telephone services regardless of the consent decree, but does anyone believe that we would have what we have today were it not for the opening of the telecom markets to vicious, cutthroat competition between the many telecommunications companies, the hardware makers, the software shops....etc?

The true damage of regulation is not what we can see...it is what we will never have.

Any NY/NJ Morons reading this screed? We are in discussions for a Moron Meet-up in Hoboken for the first week of March. Please e-mail nynjmeet at optimum dot net to express your interest or disgust. And a preference for weeknight or weekend would be helpful.

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posted by Open Blogger at 12:00 PM

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