Property Rights and Markets Smackdown

Property Rights and Markets Smackdown

thanks for coming so this is joint work with Eric Posner and Eric and I have quite different personality types so I think Eric is probably personality type much more familiar around these circles he's like a real sort of Ben Stein you know style door technocratic and he loves to just like get into the details of policy design and you know me on the other hand I was multi colored hair socialist at the age of ten I was a Iran during Taman some of the real pleased or whatever I first want to try to open your minds a little bit to a different way of conceptualizing our politics possibly because it'll make space that you so to do that I want to take you on a journey of imagination sort of in the spirit of science fiction so suspend your disbelief a little bit to a city that I'm gonna call market Tokyo so mark mark Otto is defining feature unlike Zootopia is not the diverse and adorable mammals who live there but instead the fact that all major private property the land and the houses the buildings and the airplanes the intellectual property in the factories all these things are continually up for all who's allowed to possess fun as long she satisfies two conditions first she makes a payment of the amount that she bid as every month to a central clearinghouse and second she stands ready to surrender the asset to anyone who comes along to outfitter for control and while this principle is not applied to say family heirlooms or hats or things like this it is actually used for things we usually consider collective decisions things like will market Opia which is long been a member of the market union decide to exit or remain in a customs union with the rest of the market Union will it what routes will buses run along rule the park's be located etc except here rather than selling things to the single highest bidder there's going to be a variety of options and citizens are gonna place a bid on each of these options whichever option has the highest total bid will win and the funds that are raised in this way are continually returned to the citizens of market Jogia an egalitarian fashion as what you might call a social dividend or a universal as they do in Alaska with oil revenue or as public goods as they do in Norway so we knew first year parka trivia you probably your your first reaction is that this is the most extreme form of free market you could imagine something that even Adam Smith couldn't have come up with in a fever train because most of the assets that were used to this building most of the spectrum are not available for some competitive auction at any moment if you wanted to repurpose them for some new thing you know you want to take some TV station and turn it into the basis of some you know high-speed Internet you have to bargain with the current owner they'll probably charge you once they realize you've got something creative to do with it much above the market price because they know that they can get away with that and you know after years of bargaining you may well end up that the whole thing collapses or at least it drags on forever whereas in market Opia by the very nature of the system everything is nearly up for competitive auctioning everything is like this sort of super liquid asset the way things are on the stock market now that might sound interesting provocative but maybe not so desirable because you might worry that in this world the wealthy will dominate everyone else will buy up all the assets will control the economy and the only difference or dystopian situation but then you have to ask yourself what do you mean by the wealthy right wealthy is the adjective form of well and what is wealth after all other than land and businesses and ID all the things which a market Opia belong to no private citizen and owe the value of which is returned in equal shares to every citizen which those citizens can then use to Kontest for control yes in that sense market bogie is actually far more thoroughgoing intimate in any of the communist systems that he actually managed to inspire which inevitably is generated into the dictatorship of a small bureaucratic relief that was all the more iron within the capitalist oppressors so that socialism and free markets are opposites right that's supposed to be won over politics they're basically I get the notion that to have truly free markets who actually needed common ownership and the common ownership is only possible through a decentralized market mechanism it was not just a wide possible even actually a dogma in the field of political economy that gave birth to economic matters but also political science and sociology in the late 19th century and it was a firm belief of many of the people who you probably are familiar with like glam-doll Ross and William Stanley Jevons who founded the marginal revolution led to contemporary economics and was most closely associated with this guy so I have some people in this room with read the book so they're exempted from the following exercise but does anyone tell me this guy yes okay raise your hand if you knew that that was Henry George how many people recognize the guy on the right here and the guy in the left they seemed everyone knew this as well but turns out never George actually outsold those guys by a factor of three it was the best-selling author in the English language other than the Bible for 30 years he was actually the namesake of the progressive movement his book was called part progress in poverty and he I think it's safe to say it was at least for a time perhaps the most influential social thinker of all time and yeah his ideas are largely forgotten because in the cold war debate between capitalism and communism there wasn't much room for a free market socialist by say these weren't entirely forgotten they actually continued to develop within the field of economics into something called mechanism design and the field of mechanism design is was founded by this guy William Vickery and perhaps long as ideas are familiar to you because the FCC has used them quite heavily by you know the original goal that victory had was not like self spectrum or price ads on Facebook the goal was originally to transform society to eliminate the waste associated with capitalism and to address inequality and that vision unfortunately because victory was a bit of a nebbish ego I don't know if anyone here has ever met him he sort of mumbled and he never really presented his work he didn't publish most of the things that he did in fact how many people here for all as I gave the veil of ignorance to Vickery actually post that in 1945 in an American paper that has 250 citations so victory was not much of a Salesman but when he won the Nobel Prize he thought finally the moment forgetting to tell the world about the transformative missile design and then you got two days later and the goal of this book is to revive that agenda and offer it as a solution to what I think is the crisis of our times the crisis of rising inequality the political conflicts the DAT and you know the low productivity process and you do that we develop this broad political vision into five concrete policy first we argue for something we call the common ownership suffices tax which I think will be the primary topic of conversation today which is a regime under which the possessors of any significant asset would self assess the value that says Pia tax let's say 7% a year on the value of an asset but I've just hand ready to sell the asset income if applied to all assets in the economy our latest calculation is this could do something like increase GDP by 40 percent and at the same time even if you ignore that just like with distributive effects this would raise enough revenue to eliminate all of the taxes on capital a town most of the national debt and still a $24,000 social dividend every family States increasing their incomes by about three times what they've risen since nineteen seventies the second proposal is an alternative to the ways that we vote that creates a market mechanism or block the decision making under which every citizen especially members of minorities would be able to defend their own interests rather than relying on judges or political elites to defend them by being allocated a budget of voting credits voiced friends that they could spend for and against candidates that they for issues that they support or oppose but to avoid say someone dumping all of their hoods on the one thing they care most about it just being any sweetness we become increasingly expensive to get so the cost will be quadratic in the third they argue for a new system of migration which is borrows a lot from assistant native Canada but tries to rather than how all the benefits of migration just go to migrants or the wealthy people who employed them so that you get support from sort of capitalists and rich people for migration good opposition from the working class instead allow every citizen to sponsor migrants and take some responsibility for their adjustment in exchange for the migrant being allowed to make some payment to clear that money so that would offer a real economic state to ordinary citizens and more migration moolah for a much higher level but on earth we argue that competition policy is critical to the operation of the market economy you can't have markets without competition anymore than you can have you know a one-party state democracy but we argue that competition policy hasn't really been tried what do we mean by that we argue that about 90% of the market power currently existing in our society is completely ignored by existing antitrust enforcement first there are a few investment firms Blackrock State Street Vanguard etc that only about a quarter of the whole corporate economy and that are four of the five largest investors in essentially every large company in American and Delta in Walgreens and CVS and therefore have no interest in seeing the consumers or for workers or perhaps most importantly a political process and we've seen increasing evidence that this is leading to precisely what you would think it would lead to increased prices reduced wages and control by capital um second we argue that existing antitrust policy focuses on the power that firms have over consumers but anyone who's ever worked a job knows that firms have far more power over the people they employ then over people who buy their products in antitrust of course which is completely ignores this and there are simple solutions to these problems they can easily be addressed by simple antitrust interventions finally we argue that the data that we produce every day on Facebook and Google are the and other places in the internet Microsoft are the fuel for the machine learning and artificial intelligence algorithms that everyone is telling us is going to throw us out of the job so rather than thinking about the coming automation this machines replacing people we should really think of it as unpaid labor replacing paid labor and that if we start compensating people data if we create a real market maybe we can actually have an optimistic future for technology and even get better quality data technology the analogy I always give is that when Thomas Edison invented what became the movie camera he got a patent on it but only for a limited use case which was videotaping people naturalistically and selling that as movies and he actually had a rhetoric that's very similar to current artificial intelligence he talked about how the camera was automating acting and how you work in heat actors anymore we were just gonna you know these things would watch that instead and it was gonna and and then under that bottle all the rats would have floated capital and you would have gotten some pretty awful movies because no one would have been able to develop a career as an actor he would've had a Screen Actors Guild to protect them you wouldn't have had credits and so forth but that you could around evidence patent the French a French filmmaker decided they would compose and so we get the modern films and I think we're in a very similar situation right now and what we need is countervailing power from a new sort of labor movement to get fairer terms for these data and also to help manage our attention to help deal with these censorship and take news type issues ok so this is a pretty radical vision these changes would uproot fundamental social institutions that we're very familiar with these are not things we want to see done overnight we have in each of these chapters very incremental steps in each of these and in fact with Tom we'll be talking about I think some spectrum which is I think in a technocratic policy area where there's a lot of openness to experimentation on these ideas in fact we worked a little bit with John on some of this issues but we portray this as a broader ideology because we think it's something that the world desperately needs right now there's rising inequality there's stagnating economies this there's huge dissatisfaction with our political system and its lack of democracy and the people who are supplying the vision that goes along with this you know people want alternatives and they're getting it from Steve Bannon they're getting it from Jeremy Corbyn and in the absence of action by those relatively deserved courses more and more power is being captured by a few platforms and our popular culture is not supplying a lot of tools for us to confront this and it seems to me that if someone has to play the role of social philosopher of actually as Marx and George and Keynes did reimagining how we could organize our our social life and there's actually real demand for that out there there are people that are really waiting for there are people like my mentor at Princeton who's got an optimistic vision of how we could try to have both the liberal diverse society without fixed identities that they become too rigid but you know he needs tools the power to actually implement that open policies there's people like italic he's actually here with us today imagine ways of new design technologies that are don't centralized so much power and allow for greater diversity I'm neutropenia Minton Beddoes editor of The Economist Lu if you read Berger manifesto a couple months ago largely embraced a lot of the rhetoric of the book and many of the policy proposals as well as a way of having a new radical liberalism that could offer an alternative to the populist then well politics will always be slower than these other domains Margaret did the stay or the European Commissioner for antitrust and likely to be the next head of the European Commission is you know comes from a party in Denmark the ready candidate events to a party which was founded based on Henry George's principles and is you know trying in a wrong way to use markets as in Galilee reinforced through competition policy so I actually think there's a huge demand for this type of imagination and perhaps that's the reason why over the last months we've just seen a huge outpouring of interest in these ideas there have been all sorts of startups and projects and investments by large companies in these types of ideas there's been there's known about a dozen affinity groups with something like 30 members each around the world that are doing things like this I've probably given 100 talks on this over the last six months there are artists doing science fiction it's just outpouring of everything from scholarship to art to activism working with African governments on things like this so to help coordinate all of this we're putting together a conference called radical exchange that will be in Detroit in March and bring together about 500 people from these different communities and the leadership the organization represents the diversity of the community we poked around this we've got four tracks ideas and research contra nation technology arts and communication and African government because we don't believe that you implement fundamental social changes like this from the top down you experiment and the ideas confused and they affect people's notions of legitimacy all of these different aspects need to coordinate with each other and so like within a research you know I'm an economist by training but actually any of these researchers in 98 Chakravarthi he's a post-colonial historian at Georgetown an incredibly brilliant person but we've got comparative literature people sociologist philosopher there's our we have a wonderful artist Jenna Maroney who does this really cool stuff on data slavery and to incorporated herself and sold off a bunch of her data on eBay and at different art places to sort of represent what's going on and while most of those people maybe come from a tree more traditional quote left background actually they've gotten a huge outpouring of support from the libertarian community so actually our African government track is led by mark letter who is a GM you graduate a PhD and the probably the most cultural tours to the advocacy so I hope some of you will be inspired in whatever way fits with your world to think about experimenting with these ideas and the ways in which you know you might help engage with making a vision for the future that embraces technology that embrace apartments that embraces openness and diversity but uses those to address the problems that are facing our society there's actually group starting up [Applause] it's ultra separation wireless technology anybody tells you something for technical reasons is always given by the lawyers but no idea what the technology is but they know at the right policy and it's very handy by the way you can use it so that's it thank you very much Glenda for being provocative writing a book that was intellectual there's so much going on it comes at you fast and furious he doesn't want to be fortuitous but but here is go ahead and buy the book and have an experience marketing and a few of the things point out I mean this you know chapter two I do baby remembers multiple quotes we got the bulk buying later I think you crossed over and went back on both line I think you're on both sides of that there's a lot of interesting stuff that this doesn't make you think the immigration selling the immigration slice and distributing the sort of the property rights to that was now this is just attachments to a private vehicle I've never had a fetishistic attachment to a private vehicle but I'm thinking about getting one but really another boy private property is a wonderful institution through history it's developed through thousands of years you can see it the animal kingdom you can see it in society I think a lot of positive aspects of it that really do have public and certainly there are there's refuge there's a recognition that again there's a lot of recognition of diverse and so thoughts of the book and here's another example so yes probably limitations markets happened in the engines of spectacular success and it's nice to see victory reprise and so faithfully and eloquently and I haven't I did meet many occasions I did a year at Columbia University Business School he went to all the seminars this was nearly 90s and he did a lot and you didn't know what he was going to say the Q&A and he would say something and he would talk about prices reputation and you know it was originally deserved what he did when the Nobel Prize tragically died a few days later and yes this book does let the imaginations run a while that we certainly as academics and thinkers and you know policy activists could appreciate you know the experiments that are ongoing whether they be aetherium which is in the marketplace and being tested every day every second you know with financial markets but these experiments that are going will make the difference and putting on the table that makes a difference as well but it is as you say not top-down so the the theme of the block and then I will talk about I will try to give you some diversity of viewpoint on this endemic market failure theme and here here's one of the citations from the book market power is fundamental for our view of the economy of market power simultaneously retard its productivity and depresses employment I think this is actually rather of the movie in a way of thinking about it by that I mean that there's some sort of standard optimization that should take place it's also been called the Nirvana fallacy there really is only a choice between alternatives realistic practical real-world are turn alternatives and and of course that's where it really the experimentation comes between actual actual market situation so they have a categorical combination really it goes the other way I mean first of all this market power that we see and we do see a lot of it I agree completely but the market power whether it be Microsoft or Google or Netflix or or or Apple and so forth and so on that is what's driving the economic machine and certainly I take a variation of the D kind of the Schumpeterian view but this is where the innovation kicks in and so market power is not the problem and as a general a perfect competition the absence of market power by definition is not the solution and certainly Deirdre McCloskey and other economic historians have a very strong time series take on this that really when the market power the property rights kick in that's when you get the 30x improvement that's you know that's that's that's real market to real market you get that through these capitalist property rights and of course she talks about trade tested betterment so experimenting with ideas of the marketplace those that win have some efficiency properties that are discovered not imposed so I will talk more about wireless but just this idea that commoditization and perfect competition our ideals I really can't ignore plea reject that the modernization is in whether it be Google ad sales or any other option process that a pleat appears to drain out all the inefficiencies and can be tested even in laboratory experiments to do that in the laboratory experiments are certainly very valuable to testing mechanism design that does not mean that they are superior categorically to some other kinds of contracts that are developed and discovered as a fish of the marketplace including wireless and so this is one of the ideas that I think important now I really do want to talk about Wireless because the book does use it was a paradigm attic example for radio Specter property rights and of course it's you know it's of interest you know to some of us who spent our lives on it but it's really a great example of how property rights can be formed it can be carte alized and misused and mystifying and and then be opened up and in fact just produced pretty amazing new stuff and so this is the case that in fact you know Eric's isn't here excuse me let says appear that you know we we mention our first name is Eric so so anyways so this idea that television yeah yes there is a holdup problem television it is not property rights it's not transaction cost between private players enjoying the right okay this is this is this is regulatory lock-in and it's about time you get away from it so society wage so that so this is not directly from the book as you can see but related work and we need a new kind of license and so forth by licensees and it says also the secondary markets inspectors don't work and we really need to have much more active mechanism designed by regulators to get us past this and personally the real estate intellectual property other other kinds of stuff is going on what's blocking the current transition to to advanced wireless technology well that's also lock-in and a huge swathes of spectrum not held by broadcast stations with low viewership could be put to better use for wireless internet well that's absolutely absolutely correct but the lock-in and the way we're going on specifically the 3.5 gigahertz allocation is ok so I think it's right here yes we do have we do have so yeah so there is a holdup there's a hole where is it well it's a 1927 radio act and in fact the first sentence of the radio I've said there could be no private property and there was a conversation and there was a rent-seeking coalition the broadcaster's regulators got together and did it and since then the standard has been to specify all the uses and technologies and business models in the license not to have effect spectrum licenses respective rights but to have broadcasting or wireless licenses that are very specifically defined of course everybody confidence including the regulators on the long delays and putting out new rights now the suppresses entry and innovation and the premise for the whole system has been that there's been endemic market failure now this is in some way I can't I can't I can't plain blend for that some ways it mirrors the current arguments as the United States Supreme Court once said without the government planning and administering these rights and making sure that works together there would be a cacophony of competing voices and yes the Supreme Court misspelled cacophony the misspelling and as I say in the book it's not it's not the only error in the proposition anyway so that's that's what we've had since 1928 this is a beautiful diagrams but by hand by regulators locked in locked in by color what could be doing done with radio spectrum so that's not a reallocation that's allowed to the market that is tied up in a rule so of course Ronald Coase questions this many years ago and he comes up with a property rights proposal and he doesn't immediately say that property rights to frequencies decentralized the market can do a better job he says we ought to try it we got to see if that you know because it really passes the cost benefit says you know with real transaction cost number play and second I didn't think would be insurmountable I was speculating but one thing I knew is that the existing system was highly imperfect now you may in your book you maybe go with some similar intuition on a lot of your proposals as well maybe the new stuff won't work so well its tested but you know so of course when he gives us theory about property rights he goes to the FCC and they say tell us professor coast are you joking are you saluting this and he wasn't by the way here's a little tip Abba Lerner who election where you should market socialism the Bible market socialism the economic role 1940 right so then how many have read it there's a learner and he got into a lawsuit of the University of Chicago to sell property rights and radio spectrum out it was a license sale and also a proxy right sale first I'll get to the differences just a half a second and then Coast picks it up from Herzl the lawsuit so anyway so you're right the line so anyway so here's a way that system works this is just mother mae-eye this is thirty Seconds one of the great inventors of the last century got wealthy on patents of AM radio comes up with a better mousetrap but he's got to go to the regulator for spectrum yeah he can't buy spectrum in the marketplaces matter there is a Columbia University where he's a professor for a long time ended up a major in the United States Army doing radio on both world wars but he preferred to call himself major at Lamar Howard Armstrong but any rate he FM radio and he goes to the FCC takes a few years finally gets licenses to operate they get out to 500,000 receivers by World War two when all civilian production stops at the end of World War two that's the 1941 radio the videos for FM radio at the end of World War two the FCC at the behest of television broadcasters immediately appropriates the entire FM allocation of Exxon Salina reach one of the 500,000 expensive radio receivers and the transmitters for that matter and literally an FCC theory sunspots I'm not making it out as it sounds and he commits suicide over this the entire technology is suppressed and in fact FM turns out to be superior when it's finally allowed to compete the 1960s it takes about 15 years for it to completely surpassed AM radio now what happens here after this horrific series and there's there's a whole graveyard of these technologies that are suppressed not not because of private actors not not reallocating spectrum because of the regulators quietly you may not have noticed that radio has 42 to 50 vendors 40 to 50 records that was the band that they originally allocated the FCC for FM radio 42 to 50 that was uprooted and made obsolete and you know 88 to 108 is the F F ban of modern times that was done in 1945 42 to 50 what did the FCC have it was so important by the way for 42 and 50 that they had to move it TV channel water anyway so this is to the passengers of the first order and it's absolutely emblematic of what happened some of these property rights administered by administrative allocation Lerner but this is not how it actually happens it's not FCC auctions now actually see auctions are great I've long advocated him since before there were FCC auctions it's a great way to assign licenses by competitive bidding arms like transactions it's wonderful and I see Evan Ferrell wants to you so what happens is the real the real liberalisation of air that's the tip of the iceberg the auctions the initial allocations what happens is this and like Edwin Howard Armstrong need it's the spectrum for his radio in 2005 there was another new radio that needed spectrum and he was it was soon to be iconic but there was no FCC allocation involved he didn't buy that point because of liberalisation because of the seeding of property rights to the market de-facto private property Specter now existed in the form of licenses for mobile service still a very politic of a small part of the spectrum at very specific slice but open liberal delegated rights to the market to competing players and yes there was a reallocation from the existing services to hosting the iPhone and in fact Apple was able to buy access to radio spectrum indeed the iconic machine that they were producing the radio was so in demand that the carriers been against each other and paid Apple significant chunks of the equity in their company's first AT&T and than others after that the rest is in fact history this is how this gets to the market without a holdup without a 30-year delay without incumbent interest being able to lobby against it and blocking and that flexibility in fact as for the regulator's who would describe this pretty much the way I just did you go to the National Broadband Plan the FCC issues of 2010 it says yeah this is where the mobile data tsunami came from flexible property rights now 5g wasn't it in 2010 but yeah this is what happens you get reallocation of the spectrum for 1g 2g 3G 4G this is not mandated by the state anymore it's ceded to the to the marketplace so this is where the ecosystems come in and then finally this is a few years ago you notice that only a very small percentage of private property exists in the market but that private property extremely productive and that's what you get you get all kinds of innovation because there's no mother mae-eye and in fact all of these services in a fair with each other this is a cacophony of competing voices only it's not cacophony in fact it's completely managed by it by the networks by competitors by their vendors by the pricing system by the fact that there are these facto private rights videos so everything comes over they all compete with each other for precious spectrum yes there's a delicate appearance everywhere and it's handled by the market now we have it usual the buyer-seller both you know economics proves that it's something against something else these are experiments and you have to observe whether the transaction costs all the way around the fact is that the administrative allegation system was a very expensive system transactionally to actually produce consumer welfare and to manage the interference in a in a pro consumer way we have unit that auctions can be arranged and can and in reality the spectrum is also expensive it has costs it needs to be compared to what the alternative uses are and how markets work the idea that markets have failed to reallocates factor might just categorically reject I mean this I don't know if you familiar with the fact that we have four national networks in the United States and we have about seventy thousand licenses this is the FCC count that I got in April I think it's an undercount I don't think the FCC knows how many licenses today but this is a minimum this is this was on the FCC website so I'll give you credit for at least having a system we can look at this is what the FCC account was and this has been all aggregated by secondary market transactions okay you could say the correct number is four that's what the market is and that works and this is all been aggregated into efficient bundles relative to the alternative relative the fragmentation and the high cost of getting getting the actual mobile networks done so you get efficient aggregation you also get vertical integration that is to say you don't get commoditization of the spectrum traded back and forth people actually buy services and that is to say I got one spectrum I want to be able to buy spectrum like this oh yeah I can I can go ahead and access the spending of a secondary market right now so I just I just I just accidents transaction the efficient why they want to make it easy for me to spend my money and they do and so there are hundreds of billions of us to do that just within the United States thousands of prices billions of applications this stuff is completely extraordinary in terms of the allocation system there is no possible way that the administrative allocation system allows this and to think that there has been this this holdup yes there has been and we know exactly where the holdup has been that is to say we started with 81 channels for 486 Meador is allocated a TV in 1953 and it was like we don't be allocated it so and efficiently by the way in terms of what got access well we had three national networks so we got no question when optic profits we got you know a distributional issue we had all kinds of efficiency problems and slowly over time we've been whittling it down but we have to go to the regulators to do this and even where they call the auction bathrooms had done the last haters over still this huge hold up and over the air channels anybody else 2.7 million interference pairs and that was the TV station problem okay and that's why the government had to do the TV reallocation this recent reallocation dew point centrally interference Pierce are you kidding me you think that's complexity it's a bet there's a better answer actually to this that's fan of it who would know if there's an appearance in the 2.7 million interference parents who if a TV station broadcast in the forest and it interferes okay so there's no in appearance and this is what the FCC is spending all this computational power on okay that's exactly what happened there okay by the way the last 10% essentially doesn't watch television but even if they do they can watch it on cable and satellite this is completely this is a vestigial organ over-the-air broadcast television the opportunity cost of going on the air essentially zero we've known this by 2001 paper talked about this and this is what people want for over-the-air television and we're blocking that allocation because we're doing an auction system that actually locks in the old technology so the auction scheme on that the mechanism design is wrong and the FCC ID had more to it they don't need to save I Love Lucy over broadcast television okay we're past that but we've got to locked in on this and the idea that the property right to the problem that is not right the entire landscape in the spectrum universe is driven by a beautiful and complex mosaic of competing rent seeking profit seeking firms and so this is just not replaceable under system of government auctions okay now the next frontier you mentioned your book is 3.5 gigahertz Scott's apoplectic that I'm running too long and this is in the weeds I'll just say if you don't mention 3.5 this is the next 5g allocation a lot of your spectrum the US in 2015 decided allocate woefully inadequate a hundred fifty megahertz right track you feel badly about that I'm going to say it's mostly inadequate compared to European Europe another country and only 70 megahertz could be allowed to be bid that what science valued use by auction and only freer terms nor expectation or a middle of auctions all the time this is this sort of vendek's but as well was talking about perhaps for property rights to real estate tiny little tiny little license areas census tracts so be over five hundred thousand license areas because there's seven seven licenses per market and no package bidding this is remarkable the fragmentation from you talk about real estate now you can't build networks you can't build developments because of the transaction cost is exactly because of this kind of a scheme there's no package bidding on this and that is extraordinary that is a certain air that there wouldn't be because that is to create the tragedy in the anti-commons you're talking about curing in other areas so this extreme fragmentation is an FC secret and you know it's a problem so I'll take that now the FCC has just recently gone the other way on this the got on the right direction of my opinion they didn't go down far enough there's still three thousand franchise areas the point is if you allow the market to bid these resources at our highest values there's no question you get in definite terms you get something resembling private property ownership you have large national networks put together for aggregation we've seen this already in the marketplace that's the efficient way to get your services and whether to be your phone or your other devices in fact we are running this experiment this is this is where we can engage there are other countries that do it radically different than the United States and of course you like some of the EU regulators well guess what they're much more photon quote from property rights what do they think the right number is four licenses seventy four thousand three thousand no they think one they've got four competing licenses in Germany they're coming out they've got three or four in every country the United States has even out 21,000 licenses seven times three thousand and that's under the new plan the script is way back so in the United States that's very little spectrum that's actually going to be offered for sale these rights are little they are open to multiple technologies services and business models and it's a that's a great step in the right direction the whole world is got in that way and some countries have gotten a lot of spectrum out 400 options scattered almost 400 IR over 350 and so forth there there you know I predict that that works better than the United States will see there's also an unlicensed component going to do here but it's all the same direction property rights will help you saw the anti-commons problems particularly if the government does the initial assignment with combinatorial bid which they should certainly auction theorists so you site have always been in favor of combinatorial bidding across a wife swap you mentioned it to hear that you'd like to see in the land aggregation so confident Oriole bids taking this actually blocks down tutorial bidding Oh in the United States has done it this is easily I'd like you getting from Europe yes paying in other countries they get the licenses they're going to watch ok crickets in the United States why we've gotten in a much more micromanagement direction with mechanism design being being the fruit that's tangled it doesn't always work in the direction that the theorists take it if they're not going to look at the transaction costs in a symmetric way exactly as post criticized big ooh they would criticize the mechanism design that in fact tries to micromanage and commodified can monetize the the environment when in fact the efficient way to get the market structure and the contracts that work for consumers and produce the greatest wealth for society is to a lot of competition between private property owners so there's a lot of and of course radical markets does you know suggestible we've seen an incremental policies or regulatory experiments and this is what's going on with 3.5 so I will all be engaging on one way or another I look forward to that I hope we have some good discussions in the future I think the what happened with TV white spaces from 2002 to present shows us what's going to happen with with 325 there was supposed to my spectrum chariot in fact while TV TV fans that word legalized and licenses for exclusive rights and then sold to the market they host hundreds of millions of mobile users in fact the white space as I counted about mine and made headlines for the book manuscript 594 that's not hundreds not thousands millions 594 devices and that's over a 15 year period property rights for for that to work [Applause] yeah and so any conventional wisdom is a you have that kind of business though whether they also have more rigid allocations course technologies hi there I agree three four the point of property or actual population might have there are which is this notion of flexibility i actually think our primary difference what ICU he's actually lead to a far more flexible things are very good that idea is not mine that idea it's straight out of that ball Ross the founder of alleged publisher he says declaring private ownership over land means ending the poetry competition because if you say that it's in large chunks you'll end up with the you know guys who have game farms and if this is not some wild innovation this is actually taps the book one of the most possible ideas in all the local economy and coasts talks about is quite a bit actually in its work as well so this is not this is really not someone criticizing the actual fragmentation there's impose by for example truncating property rights to three-year ownership now you say well we're just gonna keep auctioning by the way that's not the reason I'm critical of that is because I see how markets operate and how efficient contracts are written and you don't see them in the building the wireless the spectrum with the spectrum inputs being used and those markets you do not see those contracts you suggest the opposite you do see the long term contracts and you do have investment you can't advertise the networks that they're building over three years and that's that's what their argument is you have to match the ownership rights with the investment depreciation schedule and and they will and in fact it's simple have a common Victoria I have no doubt that if you had a good kind of Victoria auction the license rights would sequentially be purchased so that that I might turn that I really disagree with the reason I disagree with that is there's several reasons a critical nature becoming a change and when you have a small number of licenses you get locked into a particular version of that combinatorial thing at all right look what you were saying was true that the market will just take care of it and then you don't need to worry about the way in which it's like stuff they comment or a bidding with either oh yeah in common truth in what's relevant Tommy for your videos run for you Tony you matters how its packaged and if it matters how its packaged that may change over time based on uses so each just like you cannot have it both ways like unless you think your your policy is mind-reading use an antitrust policy centralized ways it's completely misinterpret what you said in the book and what you said right now because if if you have what I'm saying if you have efficient long-term holdings an aggregation so that networks can be built that are wide area networks in the last a long time you're saying that sufficient you're declaring that's efficient you're the ones who's against I'm observing the market I'm observing what happens of a market what people pay for what comes in there's a presentation that goes on a particular set of uses and you're just buying what people pay for what people build what the entrepreneurs are able to come in with when when there's an innovator happen yes to a market how old uses change and morph into new ones that is observed in the market and there's extreme flexibility when you have the competition between you just said if we have fragment to think that you're not going to be able to throw a market process just get them back together into those transaction costs on that absolutely by having a permanent license look you have a few guys with all the thing you think they're gonna sell that on to the innovative entrance how do they get 60,000 licenses being traded look you're the one who said that you can't get the fragmented things together but then somehow you can get it when there's a few guys controlling all of it they're gonna then just turn it over to the SEC doesn't allow you to by the fragmented rights but the rights are not in the work the fragmentation that comes from unlicensed and from prohibitions on sales and the prohibition is that you can have contracts that go more than three years so you're you're imposing the restrictions on the market you're saying that somehow that that's like I'm not calling for three-year licensing over a big ball for three-year licenses not not in the article that we wrote yes the rows in the rules no that is not what our consent is Tommy is not broken what our article says he said perpetual the depreciating website which allows for greater flexibility on how that would be applied but you have rules thank you started with continuous is the best and you're certainly the harberger rule would have sort of the continuous Holy Ones car wash that's what the actual debate here is a trade-off between flexibility and investment to total strong women to say to computer us against something which is further centralized and we're going to further decentralized it just it's just you're like literally like the seventy five percent of your government was arguing against the system that we're that it's further away from the system that what we want is a system we're you create licenses and they can be fragmented or non-pregnant initially in fact I don't think the way you were talking about packaged licenses it's right because there's some real problems with that design and it's better ways to do it but anyways putting that aside you somehow auction them off beginning and then you have a call price that is reported by the current possessor they attack some that call receiving a license fee on that call price and then anyone can buy them out that if that call price that is an extremely flexible system that created an extremely liquid secondary market and the question is who is that tax on investment what rate should that be said it I can i it's very easy to show that if that tax is very low you get something that's much better already then having perpetual licenses without taxes but that loses almost no cost on the investment and then exactly which that optimal tax rate beat we started a little bit that's the rate debate to be happening is unprecedented tax rate should be all this talk about going back to an FCC management just has no relationship to anything that I'm advocating or that I think Jon's are so so you can have a zero tax okay so I'm in favor of the zero tax that is to say I'm not able to call option and the property rights do better than having the government set depreciation schedules for the license so in the case of the European where you get the composition I completely agree with the telcos that want to invest in that market I agree here with t-mobile that certainly kicked up the store when they got these short licenses they want to invest they're not the incumbent you know to to firms they want they want to come up there rolling in market share and your vision is that the only source of hold on problems that exists period you want 0% tax that means that you literally think that the market has zero hold outer monopoly problems that would work that that could be cured by even you even think I okay because you're assuming that the option is that there's no an efficiency by having that kind of regulatory process in the market and regular treatments that a point five percent tax with an option to purchase of that price that's a regulatory talk yes right that's a get those contracts it can be created by the market without the mandate and the fact is that the mandates are a disincentive because the mandates what do you think's happening in the etherion market definitely realistic all these people are trying to this precisely because they're worried about these problems you look at dissent reaction exactly what's happening with private property rights that is not a government mechanism design issue we already have the types of analysis between whether or not the private property owner feels the opportunity cost enough and has enough of a fluid and nine monopolistic interest in releasing to the Titan in optimizing and the real optimization is not releasing it you know selling into the secondary market the real optimization is investing in complementary assets that take that spectrum and make the most social value out of it and the idea is that the government somehow it's going to force these private sector actors that have transaction cost issues of monopoly optimization opportunities and it's going to force them through these free call options to get that stuff in the marketplace and turn it around in secondary market sales that's just not a free option you said it's a free option it's not a free option that takes a lot a lot of that shaves property rights it has a whole political rent-seeking process associated with it there's no flip I hate seriously you could run this literally it is being run on blockchains right now why don't we run it about you so why did you do it the spectrum but you don't need the government to do the auction that's that's that that's the argument that's being made 43.5 we won't talk about it but we can do it all you eat is the only form of property rights that's did you inches on is centralized in perpetual apps matter the straw man it's the best alternative given the options I didn't say it wasn't and I give you an alternative option which is being that exact sort of thing is being used to manage platforms in the private side look why don't we why don't we manage the government based platform just as efficiently as the private book you talk about Google winner they're managing things by continuous auctions of their things why don't you tell them that they should give perpetual rights to the search term Macy's in the search term radical markets and whatever that will be bid off and perpetually owned by whoever buys that is that was the efficient allocation in the market was doing why wouldn't it show up on Google and why don't we have the government run as efficiently as they do and have flexible by yours that's that's private property rights from creating a discovery with the efficient configurations are this is disk is not the FCC actually imposing restrictions of bike restrictions of three races that's a contract restriction what why is a perpetual license not a contract restriction that is a restriction it has to be no that's wrong like you can be lots of latency reconfigured at any moment there are all sorts if you have a non perpetual and you want to block the combination bidding so that their aggregation I never said I want to walk denomination video I think that their particular combinatorial video thing that you were talking about there's a great paper by 11-inch group is completely impractical he wants zero percent and there's no reason there's no there's no experiments has been done that shows that this is some kind of a superior more efficient configuration or rights to produce is something more we have but I'm saying is you you trust the market you trust no things that then emerged like we were using before the fact that contracts don't involve that but in fact we see in Google the most extreme opposite of this they auction every instant the right to advertise so that emerges okay so therefore we should have closed that that no I'm noting the employee different learning experience in the private sector yes and we use that to make the public sector operate more efficiently rather than giving perpetual licenses which are like that's almost never the way that people were operating a platform well that's definitely not true you wanted that's not all deprogramming there's dozens of Papers written about all the things in way the ways in which I actually think it's an inefficient market if I could've been talking to Google about performing this thing to put in more property like because the market doesn't lead to efficiency all this is just crazy because there's monopoly power and murder so Google is exerting its monopoly by reason is that we're trying to get them to reform to actually give more property rights to the advertisers because there is a lot of capital investment in building your brand and then you just get that expropriated by having JCPenney come in and by Macy's search term I mean it's ridiculous but I mean any case like these are trade offs that you want that discovery process but that is not there by rewriting the rules of imposing invited by mechanism design experts at the FCC that's done in Google's private they have long term property rights but all that stuff including intellectual property and so and so this is exactly what sure I mean I said I just point out that like government-issued monopolies on spectrum or regulations stents to which property to which property rights the leads to kind of the kinds of bad consequences have been awful that monopoly to basically arises from I know the level of uniqueness of most licenses because we're not having monopolies it's part of an oligopoly they're part of it all the godly what are their profits what's their rate of return on the oh my god I don't know that's negative okay so so now you've got all the gapless that are making negative profits just like in your book you have airlines who are making holy godly profits and they the executive returns for 35 years I understand how you can just say property is monopoly and then you've got these furnitures enemy's name with the property system of trial in the actual systems we will give a point about every system of private property have some kind of concept of productive use embedded in them where they essentially there are some kind of rules by some kind of government authority to ensure that people are using so you inspected we have this notion of instructional partners by better fill out you have to build 70% of the pops for real estate you have property tax there's equipment things and other types of things are you suggesting that there should be nothing like that well it depends on the situation to fill out requirements because I wanted to see other business models like the performative or devices be able to have a chance to you know Microsoft you know wants more licensed spectrum they should be able to buy it the spectrum and use it you know natively without without a network attached to it in that situation right so it just seems to me that their country was actually a very elegant solution awfully deterministic notion of ensuring productive use of the spectrum you still have a burden you have a burden to prove that's more efficient than the alternative of giving what are called once your competitors home market we do to prove that what app we have to so and it does get a lot more efficiency by the way there's been several experiments that you show that things like this looks a lot more efficient so how to experiment in spectrum pretty sure that like blends particular proposal around supreme life the licenses of harberger taxes is like very substantially different from both yeah more fifty years ago and it's kind of licenses that expire in a fixed number of years he mentions the incentive auction as though that's the new way for mechanism design and that's my personal view on it and I know that's not my cooperative but I think the incentive option was terribly design and I actually the student is coming out with a paper about it was a real disaster well among other things but yes that was one of the biggest thing by the way I actually agreed with you on the thing this whole combinatorial whatever was like I actually think what they should have done is just sold off the things in a very simple way and then had liability rules if you interfere with someone I mean that's a much better way that allows the market to be much more flexible and this whole notion get this four giant computer running stuff was totally stupid and total way of turning it into like that the public actually but I think virtual not pieces but in any case like I do think that 5% license fee it's like almost let's see whether it makes the secondary market work a bit better I mean it just seems overblown say that some horrible imposition on people's runs yeah well I'd say yeah but I do there's some efficiency helmets for Henry George you know it's kind of nowhere nobody likes yes super almost all all right you want you want to do Henry George here you want to come to California and talk to the people who voted for prop 13 I think it's very unpopular but if you can get you can use nothing second for us like a really unproductive skin and also can be fun with very concentrated stock markets much more concentrated us if you go to Massachusetts and you look at Massachusetts anyway well that's right we have yeah we need to and I think that a good basis for experimentation is I use the server won the Nobel Prize and that are like you know and then are being adopted all over the place in the project sector and then like have 150 years of thought 20 like the idea that we might want to like try something like that out at least in a limited way somewhere seems to me like not some wild innovation that should be at the hundred and fiftieth place of our of our thing instead maybe we should give it a shot and and see whether like it leads to disastrous under investment or whether maybe it like allows for a little bit more flexible use it doesn't sound to me wild or crazy it sounds to me like what sensible policy innovation to the shop I hope I convinced you that the TV pad is not stuck in 1952 because of the private market transaction costs too much property I hope my condition at one point this really is an FCC and you have to give the rights to the market in the in the I mean we've got tons of Liberty I mean I most I would say probably we've got about one-third libertarian issue people one-third sort of centrist technocrats and one-third sort of socialistic so it's almost perfectly down those things honestly the main determinant of it not any of these other things it's basically sort of open-mindedness like younger people people who don't come from traditional backgrounds who aren't part of the like policy establishment this is where we're getting the most adoption there's almost no correlation with anything about political perspective or or anything like that so I think it's where innovation is happening and it's where the technology is going and the enocean that the government might think about adopting things like this it sounds like a good way for us not to get stuck in the past

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