The Progress and Freedom Foundation is a Washington DC-based think tank that we've discussed quite a bit recently, mostly because it's hard to match what they keep claiming back to reality. A few weeks ago, I noted that it seemed like a big part of the reason why they seemed to diverge from many others when it came to understanding free market economics was their failure to understand the concept of "zero."
It sounds silly, but historically zero has been one of the most difficult concepts to grasp -- stunting the development of math and physics for thousands of years in some cases. Lately, it seems to be stunting PFF's understanding of economics. Basically, it appears that PFF believes that any time you enter a zero into an economic equation, the economics break down completely. This isn't that surprising if you think of economics solely as the study of resource allocation under conditions of scarcity. The "zero" takes away the scarcity, so you might think it's a problem. However, in many cases, that's not true at all. The zero means there's no scarcity, but it doesn't mean the basic economics fails (as we've shown repeatedly with intellectual property issues). This misunderstanding of zero seems to extend beyond just intellectual property at PFF, to another of their pet causes: spectrum allocation. Earlier this year, they came out with a report saying that unlicensed spectrum stunted innovation
-- despite a variety of counter-examples of products (WiFi, cordless phones, etc.) that make use of unlicensed spectrum, and have clearly created huge, innovative, industries, while also aiding in innovation throughout many other industries (think of how much WiFi has contributed to increased productivity). Meanwhile, on the closed spectrum side of things, development and innovation has moved at a much slower pace. The folks at PFF are back beating this drum again, focusing on how the FCC shouldn't turn "white space" spectrum into open spectrum
, but instead auction it off to the highest bidder. White space spectrum is (more or less) spectrum the TV broadcasters have been granted, but don't use, which the FCC is looking to get into the hands of those who might actually use it.
The article then goes into a discussion about just what a bad idea unlicensed spectrum is, again, suggesting that it somehow harms innovation by not effectively allocating the spectrum -- and repeatedly hinting at the fact unlicensed spectrum supporters are somehow socialists, talking about how it's supported by those who believe in the "commons" model, and saying that unlicensed spectrum is "just a new version of a centralized allocation system." In other words, WiFi is communism and central planning, whereas selling the spectrum to a few oligopolists is capitalism and free markets. Of course, for anyone who understands this stuff, such claims are ludicrous. Unlicensed spectrum is hardly a "centralized allocation system," and it's hard to see how anyone could make such a claim with a straight face. The level of competition and continued innovation within open spectrum should make that pretty clear. The problem, again, is the failure to understand zero. PFF is interpreting unlicensed spectrum to be a government hand out, and filling in that there must be
scarcity issues, even when there aren't. Most existing open spectrum developments have been much more focused on applications where interference (scarcity) isn't
an issue -- and there's no reason to believe that the same wouldn't be true with this spectrum as well. The real question is whether or not the spectrum will be put to good, and efficient, use. Whereas PFF believes it only gets put to good use when it's been paid for (giving incentives to those who paid for it to get the returns), what those who understand zero recognize, is that unlicensed spectrum turns spectrum into a free input, lowering the costs and allowing companies to provide products that serve the market at much more reasonable rates. It's not about socialism, communism, central planning or anything like that: but about making the inputs into the system less of a barrier to providing the market with products that they want.