Friday, April 16, 2010

Ars Technica and Seidenberg: Forget About Penetration and Talk About Innovation and The Right to Make an Honest Buck

Ars Technica posted an article fact checking Verizon CEO Ivan Seidenberg's recent comments about broadband penetration.  The article begins by quoting a large swath of discussion by Seidenberg, which includes the following quote:

Seidenberg: "So my point is it's a fallacy to allow a regulatory authority to sit there and decide what's right for the marketplace when it's not even close."

I'd like to observe that I still think that Seidenberg made a fundamental mistake in arguing that the government was mistaken about conclusions and that, in effect, we're doing a good enough job so they should just leave us to it rather than publishing and acting on a national broadband plan.  He doesn't mention or even hint at the idea that the government shouldn't intervene because we're supposed to be a free society where no one is forced to do anything.  In a free society, people are able to do more things and get better quality goods and services than they can produce themselves because of of the alignment of self-interest into mutual win-win trade scenarios, which is possible only by a system which respects rights to property.

Ars gets stuck on numbers and never talks about ideas.  They don't take up the more important economic points that Seidenberg addresses:

MURRAY: Do you fear that that's going to stifle your ability to make the investments you need to make to build up --

SEIDENBERG: I fear that when industry -- not just us, but any company -- makes capital allocations decisions, if we start out with 2, 3, 4 billion dollars worth of government mandates that really don't have any reality in how the market works, I worry about that, because that just adds costs, it reduces our incentive to invest in this country, and it affects hiring, and you know all the other things that go with that.

This is a valid point and it has everything to do with rights and the morality of rational self-interest.  The internet is a technological marvel which requires a lot of technology and rapid innovation.  This is the sort of field where people have to go really deep, become serious experts, and create products based on their knowledge and their unique ideas.  But in order to go that deep, which is another way of describing an investment of lots of time and money, you need to know that someone isn't going to make you do it handcuffed and blindfolded and you need to know that someone is not going to come along and steal your lunch money after you've worked so hard.

What does that depend on?

  • It depends on the idea that it is right and good to earn profit by your honest hard work, i.e. by your research and investment.  To put this another way, profit is moral.  
  • And it depends on the freedom to acquire knowledge and to act on that knowledge such as it is without the interference of others.   To put this another way, you need to be free to act on your own judgment.  You need to be free of arbitrary regulation and government thugs which expropriate your profits (which were likely to serve as future investment capital - either your own or for someone else).
  • Unless you are independently wealthy, you will probably need investors which means that other people also have the right and moral sanction to risk their savings according to their own judgment in the hopes of making those savings grow.  To put this another way, they need to be able to profit too, otherwise, why bother with risk?

You might say that government has a role in ensuring competition, but competition isn't a primary when you're talking about the structure of a society.  Only a man's right to exist for his own sake is.  Moreover, competition is driven only by new entrants seeking profits, not by government regulation which usually serves to make cost of entry prohibitive to new entrants. For an example of this, you may compare the condition and cost of housing in rent controlled cities, vs. non-rent controlled cities which usually present you with a choice between outrageously expensive luxury free of regulation, and a tight supply of affordable but run-down slums.

You might say that the Internet has become indispensable and people can't live without it.  Therefore, the government now has the right to come in and tell us how to do things, how much to charge, and whom to provide service to.  But if you do, you are also saying a quite bit more:
  • You are also saying that the government can regulate or redistribute anything that is deemed useful to people.  
  • You are saying that anyone who produces something useful loses his rights to that which he has created by virtue of the fact that it is useful to others.  
  • You are saying that the good of some can be placed above the good of others whom must bear the expense for it and that this is to be implemented by force (i.e. that rights belong to the collective, but not to minorities or individuals).  
And the sum of all of that is that you are saying: don't create anything useful, it becomes public property.  And slowly, but surely, you will create stagnation by your government regulation.  For an example of this, you may observe the state of telecommunications between WWII and the 1996 Telecommunications Act.

This is the relationship between the right and moral sanction of making a profit by your judgment for your gain, and the unparalleled innovation that you find in this country decade after decade when the free market is permitted to operate.  And it is found in other countries when that condition is met as well.

Profit and Individual Judgment are moral, in that they are consonant with life as a rational being, which depends on existing in a society of rights, the protection of which should be the sole function of the government.  Government action beyond that sphere increases costs, reduces competition, and slowly suffocates profit and of innovation.  If we want the quality of the Internet and our lives as such continue to improve, we need to stop focusing on useless statistics about broadband penetration and focus on the real facts on which our lives depend.  And then we need to get the government back to it's proper task of the protection of rights and remove its involvement in economic matters.