One of the comments left by a reader (Bob Danielson) of the Net Neutrality article presented an interesting point. In a footnote regarding AT&T today I stated, “In the end however, it is still their network and their property to use as they wish.” The reader had the following question:
Tim, I wonder if you would entertain this possibility: there is a difference between property accumulated as the result of decades of astute competition, and property accumulated as the result of decades of congenial regulation and rent-seeking.
This is an important question. While my article was written to discuss the economic side of property rights, I think Mr. Danielson raises a valid point, albeit ethical in nature.
In addition, one should also ask will the government make a more fair property assignment? Will the market correct for past injustices? I think the answers are No and Yes.
Like all State-subsidized monopolies, I also think AT&T’s property is highly questionable. And at the time of the breakup, I’d have been happy to see them disbanded and their possessions homesteaded. However, that’s not an option, and we have to ask what’s the most likely fix going forward.
This is interesting timing, because earlier today Christopher Westley sent along a note regarding telecom deregulation in New Zealand. The announcement alone, that the State-protected monopoly would be opened up to outside competition, knocked the stock price down over 10%; over $1 billion in market capitalization. This in part shows how the market as a whole truly values an entity without the legal monopoly. [Update: see Peter's comment below]
Special thanks to BK Marcus for his insights.
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This in part shows how the market as a whole truly values an entity without the legal monopoly.
Not accurately though. Unless this announcement was a totally out-of-the-blue dictate by one person, there was probably speculation going on about this beforehand, which caused the price to go down, hedging for the possibility of this announcement. The revelation of what would actually happen removed the remaining doubt and caused the stock price to further recede. The portion of value due to monopoly was therefore at least 10%, but probably substantially more.
Interesting point, it actually did come out of the blue, the government hadn’t planned on announcing it for 2 more weeks:
Tim,
Nice Threads.
Though, in : “While my article was written to discuss the economic side of property rights”
Do you not mean “the financial side”, as opposed to “the economic side”?
And, in: “I think Mr. Danielson raises a valid point, albeit ethical in nature.” Isn’t the point being raised beyond mere Ethics and, truly, Economic?
The line of argument: “their network and their property”, taken by the Telcos and Cable companies to support their stance for the tiering of the i-net, is fraudulent, no?
Are they not converting, onto themselves, property that would have scarcely been afforded, but for the many franchises and monopolies, tied to public service commitments, they received?
Keep up the good work.
This is interesting timing, because earlier today Christopher Westley sent along a note regarding telecom deregulation in New Zealand. The announcement alone, that the State-protected monopoly would be opened up to outside competition, knocked the stock price down over 10%; over $1 billion in market capitalization. This in part shows how the market as a whole truly values an entity without the legal monopoly.
Note: NZ Telecom hasn’t been a legal monopoly for nearly 20 years. It isn’t even a de facto monopoly. What’s happening now is that the government is forcing Telecom to allow its competitors to put hardware on its premises, and access its exchanges, wires, etc., with the government deciding the price. It’s probably what the government should have done 16 years ago, when they sold Telecom, but at this point it’s simple theft [Evo Morales, welcome to NZ!]
(See Liberty Scott for the NZ Libertarian reaction)
Even if you could find out what part of the company unfairly benefitted from monopoly privileges, the value of this privilege has already been capitalized and sold on the stock market. Today’s owners did not profit from it, only yesterday’s owners did.
There’s also a slippery slope argument. Since there are so many monopoly privileges that so many people benefit from, there’s a nearly limitless amount of restitution claims that can be made.
Urbanitect, I was going to make the same point. AT&T’s previous shareholders may have profited unjustly from government interventions but what does that mean for AT&T and its present shareholders?
I had this same thought when people wanted to penalize MCI following its bankruptcy. After the bankruptcy the assets clearly transferred to a new set of owners. Why punish them for the transgressions of the agents of the previous owners?
“Why punish them for the transgressions of the agents of the previous owners?”
Even more basic, at the point of marketing? or strategy? is the fact that “homesteading” and similar actions like in NZ are NOT market/peaceful transactions. Once you start down that path, you’re going to have to start arguing with every wannabe lawyer type who (or whose client) claims his “homesteading” of another’s property is as legitimate.
As unfair as it is, it seems to me the only appropriate path to dealing with past injustices is through market pressure and personal responsibility. Refuse to do business with those who are benefitting from their past transgressions, etc.
To me, it’s an issue in the same vein as whether you can justify a minarchist state.
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