Mark Hendrickson:
The Federal Communications Commission (FCC) has pulled the trigger. In the name of “net neutrality” they have decided to assert regulatory control over the vast, sprawling, ever-changing conglomeration of economic activities known simply as the “Internet.”
What will the FCC do now? Think of Nancy Pelosi’s infamous statement about the Affordable Care Act: Congress had to pass it for Americans to learn what it would do.
The FCC has bitten off more than it can chew. Its task will be somewhat comparable to that of the old Soviet price-setting bureaucracy in which my friend, economist Yuri Maltsev, once worked. Barely 325 bureaucrats were in charge of setting over 23 million prices—an overwhelmingly complex task that truly was “mission impossible.” The FCC is larger (1,720 employees according to their website) but the Internet, already used by two or three hundred million Americans in trillions of actions a day with new activities and uses continually being discovered is far beyond the capacity of a couple thousand regulators to manage.
Sooner or later, under FCC regulation of the Internet, there will be “regulatory capture”—large established firms exploiting regulations to suppress the emergence of small, creative startups. Because it will be impossible for the FCC to keep close tabs on thousands of Internet companies, they will find it expedient to limit the number of participants, finding it easier to oversee a few large corporations than countless smaller ones.
Think of the investment implications here: Who knows how many would-be startups that might have become the next Facebook or Twitter may be strangled in their cribs by FCC regulators? Think of all the new millionaires that won’t be created. Successful investing in the Internet will be influenced greatly by which companies the FCC’s policies favor, meaning that the homework needed to discover which companies have the best business plan may not be as important as following what the FCC regulators do.
The economic thinking (or lack thereof) underlying net neutrality is a retread of old, tired, pernicious errors. Net neutrality wants to stop companies from assigning priorities to Internet traffic. The problem is, prioritization is the most elementary and necessary feature of economic activity. In a world of finite resources, capacities, and time, rational humans assign priority to more highly valued options with the marketplace deciding what those values are. Saying that everything must be treated equally echoes Marx’s “from each according to his ability to each according to his need”—a deadly ethos of leveling which, in practice, has leveled wealth downward wherever humans have been misguided enough to live by that principle.