Fifty years ago this month a seminal paper challenged the prevailing intellectual orthodoxy on markets, technology, and regulation. We would be wise to revisit it today.
In the United States no one may operate a broadcasting station unless he first obtains a license from the Federal Communications Commission. These licenses are not issued automatically but are granted or withheld at the discretion of the commission, which is thus in a position to choose those who shall operate radio and television stations. How did the commission come to acquire this power?
— Ronald H. Coase, “The Federal Communications Commission,” 1959
It is no accident that today’s liberals call themselves “Progressives.” For them, the Progressive Era is not just a nostalgic memory, it is a blueprint for the future. Like the Progressives of old, the Neo-Progressives see market failure as the source of most problems, and government as the centerpiece of most solutions. Healthcare costs rising? Create a “more efficient” government plan. Financial system in trouble? Pass off more control to the “independent” Federal Reserve. The Progressive Conceit—the notion that well-intended elected officials and dispassionate bureaucrats can systematically improve the workings of the marketplace and civil society—is firmly back on top in American politics.
Fifty years ago this month, writing in the Journal of Law and Economics,1 economist Ronald Coase directly challenged these foundational Progressive assumptions. In the process of explaining why government should not own and control the broadcast spectrum, he showed that where Progressives mistakenly had diagnosed market failure, the real problem was government’s failure to create enforceable property rights. And, where Progressives had promoted government control, Coase minced no words in demonstrating its failings. His work—expanded upon a year later in “The Problem of Social Cost”2 —ultimately won him the 1991 Nobel Prize in Economics, “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.”3
The full text of this article is available on The American website.