In praise of Coase (again)

I will conclude my series of blog posts on the allocation of launch licenses with a paean to Ronald Coase’s classic 1959 paper “The Federal Communications Commission” on the FCC’s allocation of TV and radio frequencies. In brief, to this day, if you want to operate a TV or radio station, you will have to apply for a license from the FCC and explain how you will use your license in a way that is consistent with “the public interest.” How does the FCC verify that you will use your assigned TV or radio frequency to promote public values? It holds a “beauty contest” — i.e. a costly and time-consuming administrative hearing.

Back in the late 1950s, soon after the Russians launched the first man-made satellite into orbit (Sputnik 1 on Oct. 4, 1957), Professor Coase launched a powerful critique of the FCC. Instead of allocating TV and radio frequencies using beauty contests, Coase proposed treating these frequencies like private property and auctioning them off to the highest bidder on an open market. At the time, however, Coase’s simple proposal was totally unfathomable to those in the broadcast industry. In his 1959 FCC paper, Coase even cites the following exchange between Frank Stanton, the president of CBS, and a member of Congress during a committee hearing:

As Coase himself notes in reply: “This ‘novel theory’ (novel with Adam Smith) is, of course, that the allocation of resources should be determined by the forces of the market rather than as a result of government decisions.” At the end of the day, we must ask, Why doesn’t the same logic apply to outer space, especially given the problem of satellite congestion?

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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5 Responses to In praise of Coase (again)

  1. I believe I first heard about this paper from a free class I was taking on Coursera.

    https://www.coursera.org/learn/internetgiants

  2. Pingback: Year in Review (2021) | prior probability

  3. Pingback: Why not use auctions to allocate orbits in outer space? | prior probability

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