Thursday, June 2, 2011

The argument against AT&T/T-Mobile merger

I spend a lot of time criticizing libertarians when they make crazy arguments. Rand Paul has a particular habit of doing that. But there are plenty of smart libertarians out there not making crazy arguments. Most of the time I'm going to agree with them on civil liberties. Its when the topic is economics that I'm going to disagree with them the most.

But on this topic libertarian Timothy Lee makes a classical liberal (which in modern terms can be either liberal or libertarian) argument against a big merger. First he lays out the Lockean view of property rights:

The legitimacy of a property rights system depends on it being open to everyone. True, we’ll never have a society in which everyone is a landholder. But our system of land ownership gives everyone the opportunity to purchase land at market rates. And the diversity of land titles means that those who don’t own themselves have many landlords from which to choose.

That's a true free market. Everyone is able to participate. Thus the consumers can influence the market. And producers or potential producers can influence each other. Here is Lee describing why the cell phone market is not like the land or housing market:

Spectrum is different. If I want to use the electromagnetic spectrum in a novel way, at power levels above those allowed by the unlicensed bands, I need to buy (or more likely rent) spectrum from someone. And in the contemporary American market, there are only a handful of firms to choose from. These firms are vertically integrated and place tight restrictions on what kinds of signals can be transmitted.

In other words, there is not “enough, and as good” spectrum “left in common for others” to use for their own purposes. A handful of parties have claimed for themselves all the available spectrum and tightly constrain how it’s used.

The way I read that argument is that because of limited ownership of spectrum the cell phone market isn't a completely free market and thus not subject to the same self-correcting mechanisms that a more free market is. And because of that AT&T might be able to do things that turn out to be bad for consumers and those consumers would find it difficult to use their power to influence the company, as would other companies within the market.

Now that I spell that out I think its not really a libertarian argument, even though its coming from a libertarian. I think its a modern liberal argument. Instead of adhering to a hard and fast rule that the gov't should always stay out of the economy it acknowledges that this situation doesn't exactly mirror the situations that the original theory worked under. That's why I enjoyed Lee's take. He gives Locke's argument and then shows how the situation is different than the one Locke is talking about.

The logical thing to do when shown that we are looking at a different situation than what your core theory spells out would be to look for a different answer than what your theory suggests. Or you should at least spell out why your answer would still solve the problem. And I don't find the "let the free market work itself out" answer all that compelling for reasons Lee spells out.

The problems liberals face when confronted with these situations is that the status quo position is to keep the gov't out of things. All of the facts could point towards the need for gov't involvement but liberals will have a tough time selling it because our system is biased towards the status quo. And because the Obama administration doesn't like political fights it will go along with the status quo for the sake of reaching an agreement. So that's probably why something like this merger would go down despite liberals wanting Obama to do something.

No comments:

Post a Comment