Monday, October 29, 2007

A Shotgun Blast for Competition

The chairman of the Federal Communications Commission, Kevin J. Martin, has announced that all contracts between owners of apartment buildings and cable providers for exclusive service in their buildings will be nullified. The chairman's blast of his regulatory shotgun, if upheld by the courts, will shred thousands of contracts across the land.

The justification for this assault on the sanctity of contract and property rights is "competition." Somehow, by denying apartment owners the right to negotiate terms with cable companies for service in their buildings, the chairman will be enhancing competition among cable companies. Exactly how this will transpire is not clearly stated. He doesn't have to explain it, since the real justification for his action becomes clear when he says, "cable prices have risen about 93% in ten years," and adds that high cable prices disproportionately affect low income people, particularly Hispanics and blacks, who more often live in apartment buildings.

So, the real reason for this contract shredding has nothing to do with promoting an undefined "competition," but with a desire to forcefully transfer wealth from apartment owners and cable companies to politically favored pressure groups.

The doctrine of altruism states that the purpose of a man is to live for others. He does not have a right to his own life. The shredding of these cable contracts is altruism enforced by the cruel hand of regulation. To hell with property rights if it means providing HBO for less to poor people. The appeal to "competition" is an afterthought thrown in as a meager attempt to justify this action.

Unsurprisingly, not only is the FCC chairman's action immoral, but it will not "help" the poor or anyone else. The key to understanding this is the observation of the cable industry association that "cable companies were often granted exclusive rights to buildings after agreeing to make major capital investments in upgrading systems." Thus, a principal reason for these exclusive deals is so that apartment owners can negotiate with cable companies to pay for the wiring of their buildings. A wiring upgrade means higher bandwidth, and therefore more channels, faster Internet service, and enhanced telecommunications service. Strike down the exclusive deals and you cut out future wiring upgrades and the enhanced services it brings.

Unfortunately, in a literal sense the FCC chairman is correct. His action will reduce the cost of cable service, but the apartment residents will be getting exactly what they pay for: slow Internet speeds, fewer channels, fewer telecommunications options. In other words, they will get cheap service that is lousy.

In direct opposition to fostering "choice" or "competition," the FCC's action will be taking away the free choices of customers and cable companies to get the level of service that they mutually agree to and want. Instead, the FCC chairman singlehandedly interposes himself between these thousands of voluntary agreements and declares, wittingly or not, that no one shall have relatively expensive and high quality cable service.

Competition is an anti-concept. Used by the FCC chairman, it only refers to competition on price, but in an unfettered market competition exists on more dimensions than just price. There is competition in innovation, competition in quality and variety, and competition in price. The chairman of the FCC, by allegedly promoting price competition, is actually destroying competition, if that term has any meaning at all.

He does all this to hand out the goods, goods that aren't his to hand out. Such is the nature of pressure group warfare and the thinly veneered legalized lawlessness it spawns in a mixed economy.


Burgess Laughlin said...

Thank you for writing this article. You have brought to life an event that I would have otherwise dismissed as merely one more stick of statist oppression piled on the camel's back. You have made the chairman's action painfully visible as legalized thuggery in the name of a false ideal, egalitarianism.

I have one suggestion. Rather than say the chairman's use of "competition" is an anti-concept, I would identify it as the fallacy of the frozen abstraction. I am still wrestling with these ideas, but my understanding is that an anti-concept is an invalid "concept" that has several characteristics:
(1) The term that names it is usually a neologism (e.g., "McCarthyism" and "polarization").
(2) The idea is "defined" (if at all) by a nonessential characteristic.
(3) The function of the idea is to obliterate a valid, more fundamental idea (e.g., debate on basic political principles, for "polarization").
(4) It destroys through intimidation. (For "polarization" -- You wouldn't want to set people at each other's throats, would you?)

(See "Anti-Concepts" in The Ayn Rand Lexicon.)

The first item above does not apply here. Nor does the fourth item apply. Instead, "competition" here, in the chairman's usage, relies on capturing the audience's allegiance to a valid concept which they value as a consequence of freedom of choice. A case might be made for items 2 and 3 applying to "competition" as it is being used by the chairman, but I am not convinced.

A frozen abstraction, by contrast, is an attempt to "define" a legitimate concept by referring only to one instance subsumed by the legitimate concept. Using "competition" to mean only price competition would be, I think, a case of frozen abstraction. (See "'Frozen Abstraction', Fallacy of" in The Ayn Rand Lexicon.)

Thank you again for the article. It is a reminder to me that while I am watching out for attacks by Christian fundamentalists, Islamo-fascists, and advocates of "global warming," traditional egalitarian statism is still continuing to advance against freedom.

Burgess Laughlin

Galileo Blogs said...


Thank *you* so much for taking the time to educate me on the proper identification of fallacies. I am going to do a little bit of research in the Lexicon, and become a clearer thinker and writer as a result.

I agree from your description that competition, as used by the FCC chairman, is a frozen abstraction. It is a very popular one, at that. In economics textbooks, competition is nearly universally discussed only in terms of price competition.

Technological competition -- innovation -- is sometimes discussed as if it were incidental, but not the fundamental hallmark of a capitalist economy. Most modern textbooks simply assume that all technologies are equally accessible to everyone. They deliberately assume away technological innovation in order to make their theories more tractable.

Interestingly, if economists knew their logical fallacies, as I am beginning to, they would more properly define competition to include all forms of competition, in particular technological competition. With a proper concept in their grasp, they would have to drop their support of antitrust laws, for example. The antitrust laws address only price competition and completely ignore technological competition, which these laws actually undermine.