Regulatory fantasiesPaul Krugman has become

Regulatory fantasies
Paul Krugman has become just a bore, which is a great disappointment. He used to write well about economics. About his professional work, I have no comment, because his field is international trade and finance is well outside my own interests. His New York Times columns, however, have become little more than foot stomping temper tantrums. Even his ventures into economics are getting weird. In today’s column, he urges greater FCC regulation of telecommunications. Sadly, he draws on transportation regulation as his metaphor.

Everyone talks about the “information highway.” But in economic terms the telecommunications network resembles not a highway but the railroad industry of the robber-baron era — that is, before it faced effective competition from trucking. And railroads eventually faced tough regulation, for good reason: they had a lot of market power, and often abused it.
In Krugman’s little tale, the Interstate Commerce Commission protected everyone from the big bad railroad monopoly until competition from truckers took over. This was not credible when Krugman started graduate school in 1974. Specifically, it is disappointing that Krugman does not know that the ICC fostered monopoly in transportation, rather than controlling it. When trucking came along, the ICC began regulating them as well, preventing them from competing with the railroads, to the detriment of truckers and shippers. Maybe Krugman should bother checking with, say, Thomas Gale Moore at Hoover, who actually knows something about surface transport. Or maybe Paul MacAvoy, who knows a lot about the long-standing mess in telecommunications regulation? MacAvoy used to be at MIT, and certainly during his time at MIT Krugman encountered regulatory expert Paul Joskow. Joskow is a lot more comfortable with government regulation than I am, but knows better than Krugman’s robber baron stories for 10 year olds.