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Radio Spectrum and the Disruptive Clarity of Ronald Coase

Thomas W. Hazlett, David Porter and Vernon Smith

Journal of Law and Economics, 2011, vol. 54, issue S4, S125 - S165

Abstract: In "The Federal Communications Commission," Ronald Coase exposed deep theoretical foundations via normative argument. The government controlled scarce frequencies; spillovers were said to be otherwise endemic. Coase saw that regulators limited conflicts by restricting uses and that property owners routinely perform such functions via the price system. The fundamental insight was that analytical symmetry was demanded, accounting for the net benefits of both regulation and markets. Coase augured that the price system would outperform administrative allocation, a conclusion mocked by communications policy experts. Yet one specific slice of the Coasean program, competitive bidding for licenses, commenced at the Federal Communications Commission in 1994. Today, over 70 U.S. auctions have been held, 31,305 licenses sold, and $52.6 billion paid to the Treasury. The reform is a textbook example of economic policy success, even as it raises the question, why have market mechanisms not been further implemented in the spectrum allocation process?

Date: 2011
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