Wednesday, February 19, 2014

Cable Internet In America: A Useful Lesson In Economics

Americans: We love paying more for less, by @DavidOAtkins

Information super-highway robbery.  Paying more for less is the modern American way, on healthcare and broadband.  It doesn't have to be.
Why is this? Doesn't standard economics dictate that free markets provide greater competition and lower cost? Well, yes--in theory. There are many and very large wrinkles in the classical economic model, but in a perfectly efficient market where manufacturing the product is easy, and the public has the option not to buy the product or to substitute other products, that can and does work. For instance, it's hard to overcharge for toothpaste or apple juice. They're pretty easy to make, and if one company overcharges for them someone else will make it cheaper or people will find a substitute. A free market in toothpaste or apple juice will generally provide a better product at lower prices than a centrally planned market will (provided that government regulation exists to ensure that those products are produced safely and actually contain the advertised ingredients.) But commodities like healthcare and the Internet are different. They're absolute necessities bordering on human rights, for which there is no substitute. They're enormous and impossible for an underdog to produce at a lower cost. And they're easy for ruthless corporations to monopolize and vertically integrate for exploitative, rent-seeking purposes absent government intervention. Allowing a "free market" in such commodities isn't free at all. It's insane. It's guaranteed to produce monopolies, high prices and terrible service. Which is exactly what we have in American healthcare and American internet: the world's freest, and therefore worst and most expensive, markets in essential services. The mark of a sophisticated mind is to understand that some solutions work in some cases but not in others. It's the mark of an idiot to think that the same model will work in all cases. People who think "free markets" work in healthcare or the Internet are just as functionally stupid about economics as the most hardline Communist who thinks that the government should exercise full control of the toothpaste market. Most of the world understands by now that the second guy is a dangerous fool. But we're at a weird point in history where the first guy undeservedly has more credibility. He shouldn't--and he won't for long.
Cast the free market idolaters out of the temple.

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