a comment on Re: Krugman on "Digital Robber Barons", nyt 6 Dec and a reply from Solomon (do read down to his comment!!)

[Dave Farber <dave () farber net>]

From: Russell Nelson <nelson () crynwr com>
Date: Fri, 06 Dec 2002 14:24:49 -0500 (EST)
To: dave () farber net


> Paul Krugman, NY Times, December 6, 2002
> http://www.nytimes.com/2002/12/06/opinion/06KRUG.html
>
> Bad metaphors make bad policy.

Bad history makes bad metaphors.  I wonder if Paul Krugman actually
did any reading on the "robber barons", or if he's just repeating what
he learned in high school?  It's not very profitable to serve rural
areas -- not with telephones, not with electric power, not with
railroads, not with packages, not with mail, and not with Internet
service.  Very often only one company can afford to stay in business
in a rural area -- and it has to charge high prices in order to do so.

Given that, Paul Krugman concludes that railroads were charging
monopoly prices.  There is no harm to society from a company having a
monopoly.  The only problem is when the company uses its monopoly to
restrict production to raise prices.  It's not good science to assume
that a monopoly is charging monopoly prices.  You have to examine each
and every monopoly.

Krugman is not a very good economist.  He's careless.

------ Forwarded Message
From: Richard Jay Solomon <rsolomon () dsl cis upenn edu>
Date: Fri, 06 Dec 2002 14:46:43 -0500
To: Dave Farber <dave () farber net>
Subject: Re: comments

There's something in both arguments. We said in The Gordian Knot in
1997 what Krugman is now saying about the new robber barons, but we
indicated that their biggest enemy is themselves -- they will start
fighting among themselves over the spoils and that will bring
regulation, as it did with the railroads 100 years ago. We also
intimated that wireless will eventually win out and be the motor
vehicle for the telecom industry. We said that in 1997, and made a
presentation to the FCC in 1996 which was not exactly met with open
minds. Six years on, and our predictions are coming true. We also
said the'96 Act was a mess.

AT&T avoided the railroad catastrophe of the 20th Century by Theo.
Vail avoiding internecine fighting. He co-opted or bought out his
rivals, and co-opted the government by accepting regulation, which
kept new rivals from forming. The story is more complicated than
that, but that's why we wrote the book. That all lasted until AT&T
forgot it's history and repeated that of the railroads.


Richard

"The Gordian Knot: Poltical Gridlock on the Information Highway" is still in
print 

MIT Press, 1997. ISBN 0262140616.

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