Michael Powell, the Chairman of the Federal Communications Commission, is stepping down. In my book, I included an essay on Powell's Hayekian approach at the FCC.
The FCC oversees industries in which competition is messy. Broadcasting and telecommunications do not resemble the economist's model of "perfect competition," in which there are no economies of scale or network effects or information asymmetries or dominant firms. In spite of all of these deviations from the ideal of perfect competition, Powell favors reducing the weight of the hand of government.
By defending markets even when competition is messy, Powell is being Hayekian. Friedrich A. Hayek, awarded the Nobel Prize in economics in 1974, viewed Competition as a Discovery Procedure. He wrote, "market theory often prevents access to a true understanding of competition by proceeding from the assumption of a 'given' quantity of scarce goods. Which goods are scarce, however, or which things are goods, or how scarce or valuable they are, is precisely one of the conditions that competition should discover."
The inside-the-Beltway approach to telecommunications regulation is micromanagement. They have a "natural monopoly" theory of telecom that is somewhat self-fulfilling. Even when the theory obviously breaks down and competition enters from new sources, the old regulatory structure is retained. Powell fought against this regulatory culture as hard as anyone could.
With the rise of the Internet, the FCC is arguably the most important (and anachronistic) Federal agency. I hope that the person who is named to replace Powell comes from far outside the K Street axis and shares Powell's willingness to question the regulatory conventional wisdom.
For Discussion. In what ways has the importance of the FCC increased in the Internet era?
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