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"Honest Policy Wonks" Prevented Net Monopolies
Monday, 11 April 2011 22:26

Ray_Tomlinson“Honest policy wonks can play a very useful role,” Prof Shane Greenstein writes http://bit.ly/fA3w6G, explaining why the Internet wasn't monopolized when it went commercial. He goes on to make an important point, that the information superhighway metaphor is “misleading for policy aimed at economic growth through broadband.” Far too many “studies” have only looked at positive effects while ignoring the many negative ones. (Bookstores closing, teachers being laid off, newspapers dying.) Shane makes the provocative comment
“The Internet is everywhere but the economic payoff is not. Urban leadership dominates the geography of economics of the Internet, as it did computing." He adds "Physical capital is not evenly distributed. The Internet enhanced what was already working. Prior investment tended to concentrate in major cities. Skilled human capital abundant in cities. There are Marshallian externalities for IT specialists, who are more abundant in thick labor markets in major cities. The returns to investment depend on finding specialists." Therefore the "Returns to Internet investment are higher in cities. Especially during the first wave of investment."

     Shane is becoming one of the best policy economists and a voice in D.C. because he does the work to find the empirical data. A warning though: This presentation is by an economist, writing for economists, loaded with terms in their technical meaning. If you don't recognize a "Fogelian error," be doubly careful taking remarks out of context.

Shane suggests these "six myths," mostly only part true. 

The gov’t funded the Internet to design a network that could survive nuclear war.
It was cheap and easy to transition the Internet from government to commercial management.
Government funding accelerated the arrival of the Internet.
Openness made the commercial Internet more innovative.
The commercial Internet is like a highway.
The Internet led to the death of distance.

And his (tentative) corrections

The Internet’s invention involved a collective effort from many participants, initially nurtured through government funding.

  1. The commercial Internet faced the dual challenges of monopoly and rent-seeking.
  2. Government funding can and did shape the direction of innovation in inter-networking technology.
  3. Open structures can enable challenges to leading firms, and this did matter during the Internet’s commercialization.
  4. The commercial Internet involves shared use and partially shared governance of some of its components at the transport layer.
  5. Urban leadership shapes the economic geography of the Internet’s impact.
Last Updated on Thursday, 30 June 2011 15:18