I want to respond to two comments on previous blog posts. On the issue that I call "market failure," meaning the ability of incumbents to block trial-and-error innovation, I mentioned education. It turns out that Michael Strong has a nice essay on the topic.
Microsoft will constantly face challenges to its standard (the transition from DOS to Windows was due to the challenge presented by Apple; Java and the web represent a different challenge). By contrast, the government school educational standard possesses a larger market dominance than does Microsoft; depending on how it is defined, one could argue that more than 96% of students are educated at schools that adhere to the dominant standard. Moreover, unlike Microsoft's dominance, the government school standard is enforced by law in dozens of ways, including property tax support for government school funding, state-sanctioned teacher credentialing systems, federal financial aid for those enrolled in state-certification programs, and obstacles to for-profit management of education.
the accreditation process gives law schools a virtual lock on bar admission. Rather than considering lower cost alternatives - like on-line education, allowance for accelerated coursework or a two-year curriculum - the virtual monopoly on bar admission accorded to the 200 ABA approved law schools excludes prospective attorneys who cannot afford the cost of a legal education in the way in which it is currently delivered. There are many who could be qualified to practice law by reason of skills and knowledge they could acquire by alternative means.
Another commenter asks how I can attack Jonathan Gruber, since he is such an excellent health care researcher. Well, his research did not predict that the Massachusetts health care reform would drive up health care spending. Mine did. In fact, health care spending in Massachusetts did rise sharply. Nothing personal against Gruber--I am sure he honestly believes what he says. But he isn't being paid the big bucks because he is right. He is being because his work can be used to promote greater concentration of government power.