Monopoly and Progress


The old broadcasing monopoly (oligopoly really) got me thinking.

There’s a school of thought that a lot of our current economic angst is due to actual slowing in technical change, improvement in productivity over time.  This is an alternative to focusing on the all the new wealth (and maybe some of the old) going to the already rich, because the point is simply a more slowly growing pie.  This phenomenom long predates President Obama by the way, just to make that clear.  About 1973 or so seems to be crucial.  Tyler Cowen has written a lot on this idea, and can be followed via his Marginal Revolution blog, and suggests we’ve run out of low hanging fruit in improved productivity.  I recommend reading his blog and books.

If so, though one could ask why are we out of technical improvements? 
One thought that I don’t think I’ve heard anyone else suggest is what is the effect of deregulation on technical change?

A lot innovation came out of Bell Labs including the transistor.  Bell Labs could exist at least partially because a fat and happy monopoly, AT&T could keep its profits at level below what would incur regulatory review by plowing some of them into pure research and science.  AT&T’s ability to subsidize research was parallel to the network’s subsidizing of their once great new organizing.  Much of that research would and did result in benefits far beyond those captured as profits by AT&T.

In the much less regulated business world today, Bell Labs as an alternative to pure research (not benefiting the bottom line) no longer exists.  Perhaps that is at least a part of what is ailing us.

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