September 27, 2007

Pretending that economics is the right way to think about problems of justice

Background: NARAL PCA wants to use text messaging to send action alerts to members who sign up to receive such alerts. Verizon, citing a longstanding internal rule prohibiting text messaging about `controversial' topics, refuses to let NARAL PCA run this program with Verizon customers. (Cont'd below the fold.)

What's to be done? One response suggests expanding something called the common carrier rule to include text messaging, now that text messaging has become a major form of interstate communication.

Professor Wu pointed to a historical analogy. In the 19th century, he said, Western Union, the telegraph company, engaged in discrimination, based on the political views of people who sought to send telegrams. “One of the eventual reactions was the common carrier rule,” Professor Wu said, which required telegraph and then phone companies to accept communications from all speakers on all topics.

But this isn't the only response.

Some scholars said such a rule was not needed for text messages because market competition was sufficient to ensure robust political debate.

“Instead of having the government get in the game of regulating who can carry what, I would get in the game of promoting as many options as possible,” said Christopher S. Yoo, a law professor at the University of Pennsylvania. “You might find text-messaging companies competing on their openness policies.”

Well, yes, you might find text-messaging companies competing on their openness policies. Just the same way you might find organic foods being served at McDonald's and Burger King. Or the way you might find $500 in your winter coat next week.

The supply and demand model (which I presume Prof. Yoo is utilising here, the Times not having quoted him citing any more sophisticated model) assumes, among other things, that the marketplace is in a state of perfect competition. Primary features of this state include perfect and complete information (everyone knows everything), equal access (it's easy for consumers to move from one producer to another, among other things), free entry (it's easy to start up a new company in the market), and the independence of consumers and producers (the fact that my best friend chose to go with company A in no way influences my choice between companies A and B).

It should be clear that none of the assumptions made in the previous sentence obtain in the case of today's telecommunications giants. A quick Google search isn't turning up a nice chart or graph, so I don't have evidence, but AT&T, Verizon, and Sprint (I might be forgetting one or two prominent others) have almost complete control over the cell phone network within the United States. Critically, this includes the infrastructure, the physical network itself. A new carrier trying to enter the market must either pay one of these companies to use their infrastructure, or invest billions of dollars (and, most likely, engage in tedious legal fights) to build their own infrastructure. The big telecoms require customers to sign two-year service contracts, so buyers cannot easily move from one service to another. And, of course, the service contracts are specifically designed to encourage customers to use the same network as their friends, family, and co-workers, with significant discounts for in-network communications.

Again, a quick Google search isn't turning up the information I need to make good on this claim, but I think the cell phone networks in the US would be better described as an oligopoly. If this is the case, then both competition and collusion are likely, and a simple model can't predict with any reliability. For example, the telecommunications giants might start competing with each other to let NARAL PCA send action alert text messages. Or they might just as well all decide to ban NARAL PCA from their networks. Critically, in neither case do consumers have any real say over what happens. The ability of NARAL PCA to effectively communicate with its members using text messages depends on decisions made at the highest levels within the big telecoms.

Which leads to the real problem I have with Prof. Yoo's suggestion that we just let the invisible hand sort things out. There's a difference between NARAL PCA communicating action alerts to a list of members and what kinds of frozen pizzas we can find at the local megamart. The Times reporter recognises that difference, albeit only in one short sentence: `Messages urging political action are generally thought to be at the heart of what the First Amendment protects.'

The real, effective ability of citizens to express their political beliefs is at issue here. It's true that there are plenty of other ways for citizens to engage in political speech -- NARAL PCA has a website and sends out messages to its members by both e- and snail mail. But if Verizon is allowed to prohibit the communication of controversial ideas over its network, then mutatis mutandis so is FedEx, and so are landline phone companies and television stations and cable television and internet companies. Hence, by contraposition, if we accept a principle requiring these other common carriers to give NARAL PCA access to their networks (whether that principle is grounded in the First Amendment or something else), then we must accept a principle requiring Verizon to give NARAL PCA access to its text messaging network.

Finally, once we highlight this aspect, we realise that Yoo's economic argument (such as I assume he had; the Times just quoted his conclusion, not his reasoning for that conclusion) is a huge red herring. When we start debating the proper economic policy, we end up completely ignoring the deeper, and far more important, issue of justice: What impositions can and should we place on members of our society to ensure that everyone has a real ability to express their political beliefs?


Unknown said...

I think you're fighting a straw man. You've expanded a very limited and qualified statement from Prof. Yoo into something far more detailed and comprehensive than the quote provided. It's possible that Yoo meant precisely what you suggest, but it is by no means clear.

It is also possible, for instance, that Yoo merely meant that the economic factors at play may make legislative or judicial action (i.e., extending the common carrier rule) superfluous.

My reading of Yoo's statement isn't "We should let the market do what it will," but rather "If the market can reach the desired solution, so much the better." The relevant question we need to ask "What happens if we don't find competing on the basis of their openness policies?" If Yoo's answer is "So be it," then you're criticism is 100% on the money. If it's "Oh, well, then we'll need to look at a legislative or judicial solution," then it's entirely off the mark.

Either response is consistent with comments quoted by the article.

Noumena said...

It's true that I'm reading a lot into a very short statement. More accurately, I'm interpolating pretty spectacularly. But Yoo's quoted sentence could easily come at the end of an argument which I have seen on other occasions.

I didn't research Yoo when writing this post this morning, but it appears that his argument against net neutrality is more in the spirit of the `So be it' answer to your question.

But even if Yoo's answer was the second of your two possibilities, my last paragraph would still apply. I claim that looking at this issue from the perspective of neoclassical economics is a category error, and misses the fundamental issue of justice entirely. Indeed, look at the abstract I linked to above: Yoo's argument against net neutrality is that it might slow down `technological progress'. That's missing the point of the net neutrality debate even more spectacularly than the neoclassical argument I criticised in the body of the post.