July 29, 2009

More moronic antitrust actions to follow

The antitrust bureaucracy, having few real threats to take on, is once again just making shit up in order for them to keep their cushy jobs. First they busted up the Hollywood studio system -- and output did not shoot up, and prices did not fall. (See Arthur De Vany's Hollywood Economics.) So that's one they got wrong. Then they busted up AT&T, and Bell Labs along with it -- and the output of major new innovations virtually stopped the next year. And they really let their cluelessness show in the Microsoft case. (See Liebowitz and Margolis' Winners, Losers, and Microsoft.) I've included both of these must-read books in my Amazon frame above.

I don't pretend to know everything about every industry, but that would make me a better antitrust enforcer than the idiots who run things. They assume that they know the ins and outs of an industry that they are quite ignorant of -- Hollywood and Microsoft being the two greatest examples. Still, I know enough just from reading newspapers that I can outsmart the dolts in the antitrust division. For example, here's a description of their worries about wireless phone services:

The division's wireless inquiry is looking at, among other things, whether it is legal for phone makers to offer a particular model, like the iPhone or the Palm Pre, exclusively to one phone carrier. It is examining the sharp increase in text-messaging rates at several phone companies. And it is scrutinizing obstacles imposed by the phone companies on low-price rivals like Skype.

Oh no, a sharp increase in prices -- it can only be due to a rising monopoly! Because these idiots didn't pay attention in freshman econ class, I'll remind them of the law of supply and demand: all else equal, when demand increases, so does price. It's incredibly simple. Price could also increase if supply decreased (as when a monopoly restricts output), but it sure doesn't seem like text messages are becoming a scarcer and scarcer resource. So, just going with the basic laws of economics, rather than assume something unusual, let's ask if demand for text messaging is increasing. If so, then that's it, and the government should just butt out.

From an article just two days later about the dangers of driving while texting:

Over all, texting has soared. In December, phone users in the United States sent 110 billion messages, a tenfold increase in just three years, according to the cellular phone industry's trade group, CTIA.

What do you know, a tenfold increase in three years! There's your answer for why texting rates are shooting up -- the demand for them is too. It's probably a demographic change, in that more and more of the cell phone-owning population come from the more recent cohorts who prefer texting over talking. Or it could be due to something else, but we sure don't need to invoke monopolistic forces.

This same retarded view dominated during the housing bubble too -- the skyrocketing prices could not possibly have to do with skyrocketing demand, namely from the irrational exuberance that everyone was under. "OMG, I like have to buy a second house, or buy one and flip it -- prices only go up!" No, instead we heard a bunch of malarky about the decreasing supply -- not due to a monopoly (at least the story wasn't that stupid), but because we were supposedly running out of land everywhere, not just in the fashionable places like usual.

In the minds of the elite, there is no such thing as the effect of real, breathing human beings' demand -- i.e., their hopes, fears, and desires. They only grant causal powers to producers who can restrict supply to drive up prices -- the Big Evil Corporation screwing the little guy -- or flood the market with supply to make it cheap -- the Big Evil Corporation trying to get people hooked on cheap crap (fast food, Wal Mart furniture, whatever).

Unfortunately, the antitrust division looks like it still doesn't have a clue. At least for the one case that I could check with no more investigation than reading a few newspaper articles a day, training their crosshairs on the cell phone industry is completely bogus. All they need to do is to leave an industry that they don't understand alone, and go get a life.


  1. Text messaging is nice because it's one instance where the price is obviously not set by supply and demand.

    How do we know? Cell phone companies are charging about $1000 dollars per megabyte for text messages. They charge a few cents per megabyte for normal data transfer.

    There is no way that you can get 6 orders of magnitude of markup through normal supply demand forces. Your analysis is silly.

  2. That wasn't the basis of their concern, though. It was the "sharp increase" over time, not the discrepancy between two types of data transfer at the same time.

    I already said I know little about these industries -- but enough to know that the reasons they're giving smell bogus.

    Obviously they could be acting anti-competitively, but the reasons they give have to make sense. And here it made no sense. A "sharp increase" in price could easily be due to a tenfold increase in demand.

  3. Text messaging allows someone to get a vital piece of information to another person, without having to go through the rigamorole of actually having a conversation with that person and listening to them prattle on about how their kid got intentionally walked twice at his little league game because he is the next Barry Bonds or whatever.

    With texting, you can simply text something like: fix #5 b4 #3&#1 @9AM.

  4. It is examining the sharp increase in text-messaging rates at several phone companies. And it is scrutinizing obstacles imposed by the phone companies on low-price rivals like Skype.

    So not all else is equal.

  5. "Then they busted up AT&T, and Bell Labs along with it -- and the output of major new innovations virtually stopped the next year."

    Anyone with a passing familiarity with tech history knows this is blatant nonsense. "Innovation" within the AT&T monopoly might have stopped the next year, but you have to look at the big picture over the next ten or twenty years. Anyone who thinks that "innovation" stopped after the AT&T breakup has already lost the argument in the eyes of anyone who has any basic knowledge of the topic.

    Under the AT&T monopoly, innovation was strangled. You couldn't hook up a modem; AT&T wouldn't allow it on their network. You had to rent your phone from AT&T; wasn't that fun? There's no way in hell an AT&T monopoly would have allowed people to log on to the internet over AT&T's phone lines. We would have been stuck with whatever crappy internet service AT&T chose to offer, if any, and monopoly sycophants would have lauded this as "innovation".

    You want to see Telecom monopoly "innovation" in the internet age? Check out France's Minitel. A worthy system when the internet was not an option, no doubt, but charging monopoly prices and hardly innovative compared to free market alternatives.

    The AT&T breakup did not put an end to "innovation". Your argument is moronic.

  6. Anyone with a "passing familiarity" with tech history may think it's nonsense, but those with a greater familiarity know that it's true.

    Virtually every major high-tech invention from 1940 to 1984 was invented at Bell Labs. A decent handful of others were developed at the DoD. And then things stopped altogether.


You MUST enter a nickname with the "Name/URL" option if you're not signed in. We can't follow who is saying what if everyone is "Anonymous."