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Henderson on Hazlett and the FCC

Summary:
Most histories of radio in the United States will tell you that the Federal Radio Commission (FRC)—the predecessor of the Federal Communications Commission (FCC)—came into being as a necessary response to the chaos that prevailed when signals from multiple radio stations interfered with each other. But according to Clemson University economist Thomas Winslow Hazlett, in his recent book The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone, that story is wrong. In fact, in the first years of radio, the early 1920s, the U.S. government’s Commerce Department had figured out how to recognize radio stations’ property rights in various parts of the electromagnetic spectrum. With such well-defined property rights,

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Henderson on Hazlett and the FCC

Most histories of radio in the United States will tell you that the Federal Radio Commission (FRC)—the predecessor of the Federal Communications Commission (FCC)—came into being as a necessary response to the chaos that prevailed when signals from multiple radio stations interfered with each other. But according to Clemson University economist Thomas Winslow Hazlett, in his recent book The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone, that story is wrong. In fact, in the first years of radio, the early 1920s, the U.S. government’s Commerce Department had figured out how to recognize radio stations’ property rights in various parts of the electromagnetic spectrum. With such well-defined property rights, the problems of interference were minimal to non-existent. What led to interference was U.S. Secretary of Commerce Herbert Hoover’s decision in 1926, in response to a federal court decision, to no longer enforce property rights to the airwaves. That’s when chaos ensued.

Why Hoover did this is an interesting story, which I’ll get to later. Indeed, The Political Spectrum is chock full of interesting (and true) stories told by a master storyteller with a great sense of humor. We learn how Hoover’s decision started a path leading to government control that is still with us today. Hazlett shows that the FCC has, for over 80 years, set itself up as a central planner, creating the usual problems that central planning creates. The planners are in the dark about the best uses of the electromagnetic spectrum, but that hasn’t stopped them from planning. Hazlett shows how FCC regulation slowed FM radio, cable television, and cellular phones by decades, destroying many hundreds of billions of dollars of value. And, as a bonus, FCC regulation reduced free speech on radio and TV, something that still exists today.

This is from David R. Henderson, “How the Electromagnetic Spectrum Became Politicized,” Defining Ideas, January 2, 2018. It’s my review of Tom Hazlett’s excellent book The Political Spectrum. In case it’s not obvious, I highly recommend the book.

My favorite paragraph of my review:

Just as the FCC slowed FM by decades, it also hobbled cable TV for well over a decade. Cable TV began in the 1950s, serving communities that were beyond the reach of TV signals. But in the 1960s, cable began to compete with TV stations, and those stations found an ally in the FCC. Although the FCC had not been given authority over cable in the 1934 legislation, in 1963 it refused to issue a license to a radio operation that wanted to transport broadcast TV signals to a cable TV operator in Wyoming. How did it justify extending regulation beyond what was authorized in the 1934 law? By arguing that such authority was necessary to, in Hazlett’s words, “protect its authority over old media.” In 1972, the Supreme Court upheld the FCC’s power over cable. Hazlett notes the circular reasoning. The original justification for the FCC’s power was that the electromagnetic spectrum was limited. Cable TV was a way of relaxing that constraint. But rather than celebrate this outcome, the FCC justified reining in cable TV to, as Hazlett puts it, “preserve the very limitations that justified regulation in the first place.”

I also recommend reading my whole review.

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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