Rights in China (the lack thereof)

I know that Americans tend to make a very big deal about their Constitution, but it’s a big deal for a few reasons. One is the Bill of Rights, which was (technically) added to the constitution as the first 10 amendments in 1791.

The other day, I was thinking about the lack of rights in China. “But wait,” I said to myself. “Surely, there must be a few of the basic 10 in China!?!”


Amendment I: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
In China, the Communist Party of China (CPC) controls religion, speech, press, assembly, and assembly. These freedoms are not available.

Amendment II: A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.
In China, the CPC controls access to guns and the Army. This freedom is not available.

Amendment III: No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.
In China, the CPC has “stationed” party workers in Uigur homes.

Amendment IV: The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
In China, the CPC decides who gets searched or seized in a closed process without due process.

Amendment V: No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
In China, “justice” and punishments is administered via closed courts. China has the highest number of state executions in the world. Private property is routinely seized without just compensation.

Amendment VI: In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defense.
In China, trials are often slow. The accused can be held for long periods without charge or trial, access to lawyers and/or evidence against them.

Amendment VII: In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.
In China, trial by jury is unknown. The common law is not observed. In many commercial cases, defendants are found guilty without a hearing.

Amendment VIII: Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.
In China, defendants are held without bail and massive fines have been levied against “enemies of the state.” Executions are common.

Amendment IX: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.
In China, the CPC controls rights and tells citizens if and when they have rights.

Amendment X: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
In China, power is centralized in the CPC. There is no such thing as provincial and/or popular powers.

My one-handed conclusion is that the Chinese do not have the rights of Americans, and that affects how governments and citizens interact.

Failure is an opportunity #failforward

I wrote this for our students, but it applies to all of us, young and old:

There’s a lot of stress over failure, getting “low” grades, and other types of under-achievement within our amazing student body. I am sure that you’ve had bad days or outcomes, but how have you “processed” them? As something shameful to hide or an opportunity to learn or dial back your expectations?

Anyway, this article reminded me of this topic (worth reading), and I want to try a bit of “celebrating failure” here, with my own example:

I was 21, just graduated from university, didn’t know what I wanted to do or where to work. I took an unpaid job with a start up (building a platform for matching real estate borrowers and lenders) and got to work. I was going to make a market! Well, the timing was wrong and my boss was abusive — blaming me for not being loyal enough or working hard enough, even though I was earning 80% of the firm’s revenue at times (we staffed from 2 to 6 and then back to 2).

It turns out that I was not to blame. My boss was just an asshole who used abuse to control rather than working as a partner with respect.

After 2 years of that, I was nearly burnt out but realized (via a girl I started dating) that I was in an abusive relationship. Oh, and it doesn’t help that my boss was also my step-father. (My mom had died 4 years earlier…)

I got out of there, and within a few weeks I got 3 job offers (paid!) on the same day. I took the best one (with the Vets — another story)

My one-handed conclusion: Bosses who make you feel bad are bullies, not leaders. I learned that there are always other jobs out there with people who will appreciate you. I learned from my failure…

So what’s your story of embracing and learning from failure? [hit reply!]

Interesting stuff

  1. Read: I’ve had “bad” sleeping habits (waking up in the middle of the night for 15 min to a few hours) for many years, so it’s interesting to read about our pre-electricity, pre-industrial revolution (alarms!) habit of “two sleeps.” Anyone else sleep this way?
  2. Listen: I always thought that burn out was a European thing (you know, not enough vacation), but now it’s hit the Americans.
  3. Read: Why journalists struggle to cover climate change
  4. Read: Italians thought pizza was for poor Neapolitans until Americans found it.
  5. Read: How fictional spies ruin real spying, e.g., thinking torture works
  6. Listen: WeTransfer is more than just file sharing. It supports creators, researches the desires of millennials and more!
  7. Read: No, I am not sorry for this delayed reply.
  8. Read: Chinese are having too few children, and the CPC is freaking out. I sure hope this doesn’t turn into The Handmaiden’s Tale. (Don’t forget how terrible the CPC was when people were having too many… just a few years ago! Engineers at work!)
  9. Read: CC and tornadoes. More? Maybe. In different places? Definitely.
  10. Read: Banks are circumventing domestic carbon prices by lending to polluters abroad (no surprise)

Review: Dead in the Water*

This book, with the *subtitle “a very angry book about our greatest environmental catastrophe. . . the death of the Murray-Darling Basin” is not subtle.

Richard Beasley is smart (his critiques are top notch), angry (rightfully so, given the incompetence on display), and well-founded (he makes legal briefs digestible) in his critiques of the Australian government’s catastrophic (fucking obvious) and monumental (total failure to deliver) implementation of the Water Act of 2007 and (dependent) Basin Plan of 2012.

tl;dr: You should get this book (which seems to have limited international distribution outside Australia) if (1) you want to learn about an environmental policy failure driven by the greed of a few politicians and short-term thinking of the water-consuming industries (90% farmers and 10% water “optimizers”), (2) you are willing to wade through endless examples — documented — of failure and obfuscation, and (3) you can’t wait to laugh at Beasley’s quips, footnotes and fuck you’s [redacted].

It’s a long book, but never boring, and definitely infuriating (*hence the subtitle).

This book’s theme and the recklessness of its protagonists matches — in terms of frequencies of wtf? and magnitudes of delusion — the water situation  in California (which I know well), as well as maybe 80 other countries, from Saudi Arabia to China to India to Spain, Chile and Mexico. (Just fill in your choice, and there’s bound to be a case where environmental protection — the type that keeps us alive — is discarded in favor of “cheaper” farming or affordable housing urban sprawl.)

So, yeah, anyone can learn from this, in terms of recognizing all the games, lies and shenanigans that politicians will pursue to meet “co-equal goals” of, for example, delivering both “yes” and “no”.

Wait a sec…

I’ve just scrolled through my 30+ notes and highlights on the e-book I have, and I can’t really see the point of copying or commenting on the text. The  book is best seen as a piece — an angry, well-documented denouncement of feckless, relentless, not-accidental corruption.

The fact is, and has always been, that there’s an impact of taking water from the environment. In many cases, that can be “sustainable” as ecosystems can adapt. And food is surely useful. But there are then so many greedy cases in which diversions kill ecosystems for green lawns or cheap cotton, when the trade-off has gone from “socially responsible” to “let’s turn the nation’s water into our paychecks.” That’s a fail. It’s common, and it happens in places as civilized as Australia.

My one handed recommendation: Anyone involved or interested in the management of bulk water for agriculture, the environment or society (all of you, right?) should read this book. FIVE STARS.

Here are all my reviews.

Interesting stuff

  1. Read this interesting paper on the relationship between governance and water quality for around 3,000 (!) drinking water systems in California.
  2. Read: “Slow productivity” means working fewer, better hours
  3. Read: There are businesses that will “clean” your online reputation as well as businesses that will “dirty” it. Sometimes they are the same.
  4. Read: You’ve probably heard that plastic “recycling” is a sham promoted by the industry, but did you know that the petrochemicals industry has subsidized expansion of its product lines for decades, as a means of dumping oil-byproducts into other markets? And consumers have been “forced” to consume plastics (which cannot be disposed of properly) by companies switching from paper, metal, glass and other “more expensive” materials? Read more here, then ask yourself if we humans even deserve to live as a species on the planet we’re fouling…
  5. Read: “The temperance movement [Prohibition] wasn’t an example of American exceptionalism; it was a globe-spanning network of activists and politicians who tilted not against sin but against economic exploitation.”
  6. Watch: A dinosaur pleads “Don’t choose extinction”. Are we listening?
  7. Read: Oh, the (tragic) irony: Shell Oil, via climate chaos, is killing the very animals whose mantles the company logo represents. Related, read how EU airlines are flying empty planes to protect their landing slots. Time for reform of the rules, yes?
  8. Watch: SoCal’s anti-vaxxers are deluded about their “healthy lifestyle”
  9. Read: Will Britain fall apart?
  10. Watch (amazing!): “What language [X] sounds like to non-speakers

H/T to CD

Martin Luther King day…

…was Monday. (He was born on 15 Jan 1929.)

Nicole Hannah Jones used excerpts from MLK’s speech to a hostile audience without telling them the words were King’s. The transcript below is worth reading, to remember what he (and others) fought for, and to notice how there’s still a ways to go…

I was invited to give an MLK speech today and a small number of members of the group hosting me wrote and then leaked emails opposing my giving this speech, as it dishonored Dr. King for me to do so. They called me a “discredited activist” “unworthy of such association with King”

So, I scrapped my original speech and spent the entire first half of it reading excerpts from a bunch of Dr. King’s speeches, but without telling anyone that I was doing so, leading the audience to think King’s words were mine. And, whew, chile, it was AMAZING.

Here is some of it:

“It was in the year 1619 that the first BLACK slave was brought to the shores of this nation. They were brought here from the soils of Africa and unlike the Pilgrim fathers who landed here at Plymouth a year later, they were brought here against their will…”

Wherever you see Black in caps, it’s bc I subbed out Negro to not give it away.

“For more than 200 years Africa was raped and plundered, a native kingdom disorganized, the people and rulers demoralized and throughout slavery the BLACK slaves were treated in a very inhuman form…”

“White Americans must recognize that justice for black people cannot be achieved without radical changes in the structure of our society… The evils of capitalism are as real as the evils of militarism and racism…”

“The problems of racial injustice and economic injustice cannot be solved without a radical redistribution of political and economic power. A nation that continues year after year to spend more $ on military defense than on programs of social uplift is approaching spiritual death

“The crowning achievement in hypocrisy must go to those staunch Republicans and Democrats of the Midwest and West who were given land by our government when they came here as immigrants from Europe. They were given education through the land grant colleges…”

“These are the same people that now say to black people, whose ancestors were brought to this country in chains and who were emancipated in 1863 without being given land to cultivate or bread to eat; that they must pull themselves up by their own bootstraps…”

“What they truly advocate is Socialism for the rich and Capitalism for the poor…

“We know full well that racism is still that hound of hell which dogs the tracks of our civilization.”

“Ever since the birth of our nation, White America has had a Schizophrenic personality on the ? of race, she has been torn between selves. A self in which she proudly professes the great principle of democracy and a self in which she madly practices the antithesis of democracy.”

“The fact is, there has never been a single, solid, determined commitment on the part of the vast majority of white Americans to genuine equality for Black people.”

“The step backwards has a new name today, it is called the white backlash, but the white backlash is nothing new. It is the surfacing of old prejudices, hostilities and ambivalences that have always been there…”

“The white backlash of today is rooted in the same problem that has characterized America ever since the black man landed in chains on the shores of this nation.”

“Whites, it must frankly be said, are not putting in a similar mass effort to reeducate themselves out of their racial ignorance… with each modest advance the white population promptly raises the argument that BLACK AMERICANS HAVE come far enough.”

“…for the good of America, it is necessary to refute the idea that the dominant ideology in our country, even today, is freedom and equality and that racism is just an occasional departure from the norm on the part of a few bigoted extremists.”

“If America does not respond creatively to the challenge to banish racism, some future historian will have to say, that a great civilization died because it lacked the soul and commitment to make justice a reality for all men.”

“Why do white people seem to find it so difficult to understand that the Black people are sick and tired of having reluctantly parceled out to THEM those rights and privileges which all others receive upon birth or entry in America?”

“I never cease to wonder at the amazing presumption of much of white society, assuming that they have the right to bargain with the BLACK for their freedom…”

Oh, the uncomfortable silence as I read Dr. King’s words at a commemoration of Dr. King’s life when people had no idea that these were his words. When I revealed that everything I said to that point was taken from his speeches between ’56 and 67… Can you say SHOOK!

Then I read all the names that white Americans called King: charlatan, demagogue, communist, traitor — and brought out the polling showing more than three-quarters of Americans opposed King at his death while 94 percent approve of him now.

I left them with this: People who oppose today what he stood for back then do not get to be the arbiters of his legacy. The real Dr. King cannot be commodified, homogenized, and white-washed and whatever side you stand on TODAY is the side you would have been back then.

In fact, most white Americans in 1963 opposed the March on Washington where Dr. King gave the “I Have A Dream Speech” with that one line that people oppose to anti-racism like to trot out against those working for racial justice.

When the speech was over, Father Pfleger, who had been been cheering me on from the crowd, whispered in my ear: That’s what you call the “You Gone Learn Today” speech and I 💀. Because, yeah.

This is why the 1619 Project exists. This is why the decades of scholarship that undergirds the 1619 Project exists. Because if we do nothing, they will co-opt our history and use it against us.

Dr. King was a radical critic of racism, capitalism and militarism. He didn’t die. He was assassinated. And many, including Regan, fought the national holiday we’re not commemorating. If you haven’t read, in entirety, his speeches, you’ve been miseducated & I hope that you will.

One-handed conclusion: MLK was — and is — right.

An economic theory of clubs (Buchanan 1965)


James Buchanan and Gordon Tullock are among the co-founders of the so-called “Virginia School” of economic thinking, which draws on public choice (bureaucrats, as people, may serve themselves before citizens), constitutional design (read my review of Buchanan and Tullock’s 1962 Calculus of Consent) and law and economics (see, e.g., my comment on Coase’s 1959 FCC paper).

Thus it’s easy to see how Buchanan might be suspicious of “good government” solutions, and how Buchanan might not agree with Paul Samuelson’s opinion that the existence of “public goods” means that the government should create and/or fund them.1 Samuelson gave this opinion in “A pure theory of public expenditure” (1954), a three-page (!) paper in which he shows (or argues) that “the planner” should levy taxes to supply public goods in accordance with a “social welfare function” that aggregates the preferences of all citizens. (This paper’s reliance on mathematical innuendo over common-sense perspectives makes it hard to follow.)

I am grateful that Alain Marciano explained this tussle over public finances in his 2021 article [open access].

Buchanan opposed Samuelson’s model for three reasons: First, there’s no way to aggregate a social welfare function (to find out how much of the public good to provide) without knowing everyone’s preferences (such “interpersonal comparisons of utility” are hindered by “the knowledge problem“). Samuelson’s theory ignores this empirically important issue. Second — even if such a calculation of “necessary production” was quantified, Buchanan opposed the idea of taxing all citizens to pay for something that some will value at less than their taxes paid. Samuelson did not worry about this problem, since the Kaldor-Hicks model (read this post) justifies losses to some if net gains are positive. Third, public goods often suffer from under-provision, i.e., nobody wants to pay for something they can get for free (non-exclusion).

Rather than just criticise, Buchannan offered club goods as an alternative to government-proclaimed and taxpayer-funded public goods.

Clubs, communities and segregation

I had read Buchanan’s paper long ago, but I am re-reading it because I want to compare Buchanan’s work on club goods (this 1965 paper) with  Samuelson’s 1954 work on public goods (to which Buchanan was reacting), and the Ostrom’s work on common-pooled goods2 (1977, but as early as 1971). These three papers are relevant to my teaching and research (see this, this  and this), and this post is a “warm up” for integrating these ideas into my forthcoming Little Book of The Commons

Sign up here to be notified when The Little Book of The Commons is ready.

I have always assumed that exclusion (restricting demand) is trivial (“you’re in the club or you’re not”) and non-rivalry (providing supply) is easy to fix (“club members will cover costs”).I hadn’t expected controversy over funding club vs public goods, but the third concern above (under-provision due to insufficient finances) arises from the same concerns.

Aside: I’ve always treated club and public goods separately because they are provided by markets and government/community, respectively, but I had forgotten an earlier step of “which channel?” Many debates over public provision, PPP, privatization, etc. focus on this channel issue, which is relevant to drinkig water but also prisons, schools, broadcasting, security, standards, housing, and so on.

Buchanan, in essence, argued that some “public goods” should not be funded by taxes or provided by government. Instead, he proposed that clubs should provide them to dues-paying members.3 The following two examples show how such a simple formulation could be troublesome:

Good club: You and your friends buy a boat together, sharing expenses so that everyone can use the boat on their appointed weekend.
Bad club: You and your friends start a school for your kids; kids from “the wrong families” are not invited to join the club.

It’s obvious that “freedom of association” includes the right to exclude others, but what if your association lowers quality of life for those excluded others?

Although public and club goods appear similar in supply (both are non-rival, meaning that everyone can consume as much as they want) and different in demand (people can be excluded from club goods but not public goods), it’s also really important to recognize that club goods can substitute for public goods.

Schools can, in theory, be funded and operated as club goods (a “private school”) or public goods (“a public school”),4 but when it comes to reality, we run into issues of “whose money, where?” that readers from the US will recognize. This money (or funding) question is important because some citizens are happy to support their private schools but opposed to their taxes supporting others’ public schools. The parallel with governance is the same: Parents care about their kids’ schools more than schools with other people’s kids (more here).

It’s not club vs public goods, but common-pooled taxes and governance.

By now I hope you are seeing how Buchanan’s theory of clubs can be misused to support separate but equal, justify rich private schools and poor public schools, explain how white flight eroded the tax base, and so on.

And although Buchanan doesn’t directly say that clubs offer a way for rich whites to avoid subsidizing poorer non-whites, his words in this paper certainly allow for it:5

Hence, the theory of clubs is, in one sense, a theory of optimal exclusion, as well as one of inclusion… If individuals think that exclusion will not be fully possible, that they can expect to secure benefits as free riders without really becoming full-fledged contributing members of the club, they may be reluctant to enter voluntarily into cost-sharing arrangements. This suggests that one important means of reducing the costs of securing voluntary co-operative agreement sis that of allowing for more flexible property arrangement and for introducing excluding devices. If the owner of a hunting preserve is allowed to prosecute poachers, then prospective poachers are much more likely to be willing to pay for the hunting permits in advance (pp 13-14).

Substitute “school” for “hunting lodge,” and you can see how a rich minority might use this logic to exclude the poor majority from “free riding” on their money, i.e., by avoiding taxes and/or undermining government’s ability to run schools. OTOH, you can also see the problem with public goods: Who will pay for them when they can free-ride instead? There’s no good answer to that one, but culture, solidarity and/or enlightened self-interest can play a role (topics covered by the Ostroms).

But what about clubs?

Whew! That’s a lot to consider, but don’t forget Buchanan’s insights:

  1. Clubs can limit demand via exclusion.
  2. Clubs can provide “efficient” supply to all members in proportion to each member’s willingness to pay (e.g., different levels of membership), without recourse to a “social welfare function”
  3. Due to these characteristics, clubs can avoid “tragedies of the commons” (too much demand from members) by altering internal prices, exclusion and/or supply.
  4. In this (#3) sense, clubs and well-managed commons (those in a “situation” rather than a “dilemma,” in the terms of Ostrom) are similar. A well-managed commons uses boundary rules to exclude outsiders and  sanctions to punish insiders who take too much or provide too little.
  5. Buchanan writes “Goods that exhibit some ‘publicness’ at low income levels will, therefore, tend to become ‘private’ as income levels advance” (p 12) because richer people can afford to form clubs to provide goods at less-efficient economies of scale because they can control quality and reduce free-riding. We see this when country clubs replace public parks, private beaches replace public beaches, private cars replace public transportation, etc. People who switch from public to club are not racists (minorities leave poor neighborhoods when they can). They are using their wealth to get a better mix of costs and benefits.

My one-handed conclusion is that clubs make it easier to efficiently provide the right quantity and quality of goods to its members, in comparison to a government- or community-directed program funded by taxes on all. At the same time, it’s also important to consider if or how clubs can undermine the provision “for the common good” or worsen the impacts of inequality.


  1. For a comparison of private, club, common-pool and public goods, see this post. I am not a huge fan of Samuelson, whom I think used too much math in “proving” his points, but this post is more about his public finance philosophy than his math (see that Marciano paper).
  2. You’ve surely heard of Garrett Hardin’s “tragedy of the commons” paper from 1968, but he was more concerned about over-population than goods. He was definitely not writing about sustainably providing, protecting or consuming common-pooled goods (i.e., solutions). The Ostroms were.
  3. Read this post on Coase’s ideas for pricing club goods. Buchanan disagreed, but his “solution” (willingness to pay) is harder to implement.
  4. There’s a lot of confusion over “public,” which can refer to the definition of goods, goods/services supplied by the government, and/or goods/services that any member of the public can purchase or use. I can’t resolve all of them here, so I am using “” a lot. Sorry if it’s confusing.
  5. Read this review of a book on American Conservatism to see Buchanan’s intellectual opposition to government programs aimed at “melting together” people of different incomes, preferences and (relevant!) races.

Interesting stuff

  1. Read: The economics of down coats (and Chinese eating)
  2. Read this very interesting post [in Dutch, so use translate as needed] about the “end of the Netherlands” via rising sea levels. Ties (who should be appearing on Jive Talking in 2022) and co-authors make the case that it’s “worth” protecting areas (due to land value) rather than abandoning them to 10s of meters of sea level rise.
  3. Watch: Balkan Beat Box has a pretty cool sound (and video)
  4. Think: Rather than install a “second brain” app to keep up with the firehose of information, maybe live with forgetting people, facts, places, photos?
  5. Read: Is the combination of conspiracy theories+”do your research”+influencers creating a new “religion”? Yes, if you take religious faith as the opposite of rational thinking. Be afraid.
  6. Read: The quest to trap carbon in stone (still way less effective than not omitted it in the first place!)
  7. Read: Amazon serves customers, Shopify serves merchants
  8. Read: Money has never felt more fake and (related) What will happen to inflation in 2022?
  9. Read: Billions of banknotes are missing. Why does nobody care?
  10. Read: Error 404 — Winter not found!

The Federal Communications Commission (Coase 1959)

I often tell students that Ronald Coase won the economics Nobel for two papers — The problem of social cost (1960), or PSC, and The nature of the firm (1937) — but I had also heard this article mentioned more than a few times. So I acquired a copy (sci-hub ftw!) and got to reading.

The paper has six parts. I will give a short summary of each part before commenting on the paper as a whole.

  1. The development of government regulation: A lack of regulation of radio spectrum can lead to interference among broadcasters, with the powerful drowning out the weak but most broadcasters interfering with each other. The US Navy (!) attempted to take control over radio spectrum after WWI, but regulation was eventually handed to the FCC in 1934.
  2. The clash with the doctrine of freedom the press: The First Amendment does not allow censorship of the press but interference among radio broadcasters (and other users of spectrum from everything from TV to mobile phones and wifi) meant that total freedom might lead to chaos. Regulation could prevent chaos, but it could also allow censorship, i.e.,

    “Some interpreted the fact that the Commission was denied the power of censorship as meaning that it would not concern itself with programing but would simply act as “the traffic policeman of the ether.” But the Commission maintained — and in this it has been sustained by the courts — that, to decide whether the “public interest, convenience or necessity” would be served by granting or renewing a license, it had to take into account proposed or past programing. One commentator remarked, that by 1949, the “Commission had travelled far from its original role of airwaves traffic policeman. Control over radio had become more than regulation based on technological necessity; it had become regulation of conduct…”
    [p8, bold added]

    The result was that the FCC had the power to choose who got (or maintained) access to valuable spectrum, which gave it significant power. How did the FCC allocate licenses? The popular term among economists is via a “beauty contest” in which various supplicants competed to promise the “most beautiful” use of the spectrum. Such a subjective system can lead to mistakes in allocation, but it can also encourage corruption, i.e., FCC staff deciding based on relationships, favours and bribes.

  3. The rationale of the present system: [As of 1959], the FCC allocated licenses based on the vague directive of “serving public interest, convenience or necessity.” A judge claimed that FCC regulation was needed because demand exceeded supply. Nonsense, says Coase: Markets resolve scarcity problems all the time. The FCC’s economist (!) argued against prices because markets were not perfect (!) and many users were non-commercial entities such as the military or weather stations. A law student, Leo Herzel, countered with a defence of prices and property rights in spectrum. He pointed out (correctly) that the FCC only needed to create rights that could be auctioned to (and resold among) users. Even further, government entities might “waste” free spectrum. This discussion of creating property rights and then allowing trade to allocate those rights to the party who valued them them most (and thus might be able to put them to the highest and best public use) will be familiar to anyone who has read PSC.
  4. The pricing system and the allocation of frequencies: Coase uses humor and sarcasm to undermine FCC claims of efficiency (licensing applications could take years to process), honesty (existing radio operators paid nothing for valuable TV spectrum), and accuracy (they could not — as Hayek pointed out — hope to summarise information as well as prices do). This section alone could should crush claims of government advantage in  operating or allocating private goods (anything from spectrum to school places to land).
  5. Private property and the allocation of frequencies: Coase invokes the case of the doctor and candy maker (Sturges v Bridgman) — which appeared one year later in PSC — to explain the value of property rights as well as how trades will occur if willingness-to-pay exceeds willingness-to-accept. He does this to highlight the value of spectrum to those claiming they deserve to get it for free and why radio and TV stations with “free” spectrum are sold for high prices. (Coase also notes that markets in rights should be replaced by regulation if too many participants — and thus transaction costs — make it difficult to make deals. This observation is central to PSC.) This section more or less sets up Coase’s case for auctioning rights as the best way to (a) raise revenue and (b) allocate rights. The FCC didn’t auction spectrum until 1994!
  6. The present position: Coase summarizes with the recommendation that the government create, sell and enforce property rights in spectrum as a separate step from regulating particular programming. The Public has an interest in promoting and enjoying the highest and best use of scarce spectrum, but the Government (FCC) is not the body to decide such use. That question is best solved with markets in property rights.

My one-handed conclusion is that this paper is interesting for both its contribution to Coase’s PSC and its clear discussion of how and why government regulation can go wrong.



Interesting stuff

  1. Listen: Why the Price of Wooden Shipping Pallets Has Soared (lots of interesting insights)
  2. Listen: A really interesting podcast on Russian military hacking on US political systems, Ukraine and the Olympics
  3. Listen: Finally, a guy who uses his watch as a tool (while exploring the world)
  4. Listen: Claudia Goldin on women’s work and greedy jobs
  5. Read: China’s leader Xi is right to focus on inequality (“common prosperity”) in China and elsewhere (as a way of calling attention to US failures), but he risks dragging the rich down (aka, command and control) more than the poor upwards.
  6. Read: How China subtly nudges foreign “influencers” to parrot government views, e.g., Uyghurs are not in concentration camps.
  7. Read: Climate change chaos will be gross, i.e., the rotting bodies of dying flora, fauna and ecosystems. 
  8. Read: What to expect in Year 3 of the pandemic
  9. Read (and study): Sharks kill around 4 people per year, world wide. People kill around 100 million sharks per year. So who’s the ruthless killer? For more information, I recommend this “virtual lecture” with Justin in Cape Town. Related: Will the world dial back on illegal fishing 2022? We can only hope.
  10. Think: The economic impacts of Covid (and spending to avoid them)