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Is This What Market Failure Looks Like?

Steven Titch
January 5, 2010, 3:22pm

As the annual Winter Consumer Electronics Show (CES) is set to convene in Las Vegas tomorrow, it will be interesting to see the temper of the policy climate. On the federal and state policy level, the hostility towards every facet of the high-tech sector has done nothing but grow. Not too long ago, politicians were extolling America's high-tech leadership as the its primary vehicle for continued global economic leadership. Now it seems the entire tech sector, from semiconductors to wireless phones to TV is under attack from the White House, to Congress to state-level bureaucrats.

Just this week, as Adam Theirer reported at Technology Liberation Front, the left-leaning Free Press has inexplicably gone on the offensive against the idea of pushing TV to wireless devices. Such activists are no doubt emboldened by the example of the current administration, which has launched an antitrust campaign against Intel (just as the European Union was all but surrendering its own),  and continues to press for antitrust action against Google before, as antitrust chief Christine Varney has freely admitted, it is "too late"-- that is, the speed of technology change undermines the government's case, as it did in in the Clinton era Microsoft suit over browser bundling.

Add to this the California Energy Commission's ban on big screen TVs, the FCC's push for sweeping new Internet  regulations under the guise of "network neutrality,"and the Internet, in general, being blamed for everything from the decline of newspapers to postal rate increases to weight gain in teenage girls (for more, type "Internet blamed for" into the search engine of your choice), and one might expect the mood at the show, at least in the policy sessions to be dour. Even if I am watching from afar, I await to see if this will be the case.

The Left has been drumbeating about high-tech market failure for more than 10 years (plus ça change: see this rebuttal paper from 2001). The big difference is that today's Washington technocrats have bought in, despite all the evidence to the contrary.  Berin provided some solid data on mobile OS competition earlier today. Here's some more data courtesy of Digital Society as to the growth of applications and revenues in this alleged stagnant, failing sector:

– Number of e-mails sent per day in 2000: 12 billion
– Number of e-mails sent per day in 2009: 247 billion
– Revenues from mobile data services in the first half of 2000: $105 million
– Revenues from mobile data services in the first half of 2009: $19.5 billion
– Number of text messages sent in the U.S. per day in June 2000: 400,000
– Number of text messages sent in the U.S. per day in June 2009: 4.5 billion
– Number of pages indexed by Google in 2000: 1 billion
– Number of pages indexed by Google in 2008: 1 trillion
– Amount of hard-disk space $300 could buy in 2000: 20 to 30 gigabytes
– Amount of hard-disk space $300 could buy in 2009: 2,000 gigabytes (2 terabytes)

Metrics such as these are the best weapon against attempts at regulation, especially from an administration keen to find a "market failure" rationale wherever it looks. High-tech consumer electronics remains a bright spot in what has been a down economy. It is best left on its own to thrive.



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