Governments have played a major role in the IT sector

Great Debates
21

This is a crazy argument - When governments consume anywhere between 30 and 60% of the GDP of a nation, OF COURSE they are going to be involved in markets. This is not proof of anything other than the existence of big governments.

And no one disputes that government research labs can produce new technologies and breakthroughs. Of course they can. The question is whether they are uniquely capable of this, or whether the free market would engage in research and development without government funding or direction. Simply stating the existence of big government programs is not an argument against libertarianism.

There’s another logical problem here, which is that it’s easy to make a case for government when you only consider the benefits and ignore the costs. In the other thread, some of us have provided evidence that government R&D actually displaces private R&D (i.e. private R&D spending has gone up when government R&D spending goes down), and the same pattern exists for charity.

There is one obvious case for government R&D, and I’m surprised none of you have bothered to make it - R&D that is very expensive, and for which no known market exists. The Large Hadron Collider, the Cassini Orbiter, Hubble, etc. There is much dissention among libertarians regarding this type of R&D - some would say, “hey, if people don’t want to pay for it voluntarily, tough noogies.” I’m a little less libertarian that others in this regard, and I think there is room for government-funded R&D in basic research where it’s clear that no market-based solution exists.

The notion that the internet would not exist today without government just does not pass the smell test. In this case, there was clearly an increasing market demand for online services - they were was already a burgeoning market in it and big money was being invested. There’s nothing magical about TCP/IP - it’s just one protocol out of thousands. Had government never bothered with distributed networking at all, we’d still have an internet today - it would look different, and we don’t know if it would be better or worse.

You could even make the case that government slowed down the growth of the public internet, because it created a network that was made available to government institutions and educational facilities, lowering market demand for such a network, and then dragged its feet on making it available to commercial interests. That created a parallel private communications industry - CompuServe, AOL, The Well, thousands of BBS’s, modem companies like Hayes and US Robotics, etc. We’ll never know where that industry might have taken us had those government networks not existed, because you can’t know the path not taken.

The larger point made in the other thread though is that the initial backbones and protocols are not what ‘the internet’ is today. The real internet is the vast collection of web sites and services that have built up organically without any government direction at all. The internet today is largely the result of spontaneous order caused by a free market, not government planning. It is an example of a libertarian virtual society. Anyone can set up a web site. The barriers to economic engagement on the internet are very low. There is no government oversight ‘protecting’ internet users from each other. There’s just a whole lot of voluntary transactions.

As for the market consolidating around large companies and becoming monopolistic - first of all, not all Libertarians oppose anti-trust laws. Second, this effect is grossly over-stated in most cases. IBM didn’t lose its power because of anti-trust - it lost it because it didn’t anticipate the micro-computer and minicomputer markets and bet the farm on the IBM 360, only do see its market share get eaten by companies like DEC and Data General and Honeywell and others, and then later by Apple and other small computer manufacturers.

Libertarians would also argue that the best examples of monopolistic power come from companies colluding with government, or from the government itself.

22

The point is that the IT sector in general has been massively subsidized by the government over the decades which has played a big role in its evolution and growth. The subsidies have existed on many levels: R&D, technical education,hardware etc. It’s highly implausible that these subsidies merely displaced private sector spending. As a matter of basic economics, massive government subsidies for any good tends to increase the total supply. And the incentive for the private sector to do basic research from a purely profit maximizing point of view are quite weak. The glory days of Bell labs for example came in an era when the financial system was tightly controlled and shareholder pressure was much weaker. In recent decades, as noted above, shareholders have put pressure on corporate labs to do less basic research.

Also note that the government not only funds its own research it also subsidizes corporate research both directly and indirectly. Do you think that reducing subsidies for corporate R&D would increase corporate R&D? In a strict libertarian world we would probably have less corporate research along with much less government research. Without public universities around the world there would be far fewer computer science graduates. Without the public policy in Taiwan and South Korea, it’s unlikely their hardware sectors would have risen so quickly and prices fallen so quickly. Arguing that the IT sector and the Internet would have come along at remotely the same pace requires a massive leap of faith.

I don’t think libertarians understand how much “market competition” as it exists today is a product of government intervention through competition policy. This is because in many industries, a single firm in a monopoly position will make more profits than the sum of the profits made by competing firms. If Boeing merged with Airbus it would face much less competition and therefore could charge higher prices. It would also gain economies of scale and be able to eliminate duplication. This merged firm would almost certainly make more profits than the sum of the two firms’ profits today so shareholders would approve. It’s competition policy which prevents these kinds of mergers from taking place (and of course in this case it was public policy which created Airbus in the first place). Without competition policy you would see a massive increase of monopoly power across many industries especially those with large economies of scale. After all it was exactly this kind of merger wave in the late 19th century which led to the formation of “trusts” and “antitrust” policy to restrain them.

In the IT sector, IBM would have never allowed their business to be undermined by the PC industry and others in the 80’s in a world without competition policy. At the simplest they could simply have merged with their rivals like DEC to reduce competition. Against the fledgling PC industry they could have employed predatory pricing, financing it with profits from their other divisions. Probably they would used a combination of the two, threatening predatory pricing and also offering to buy rivals. With their massive clout they would have reduced their rivals’ access to suppliers and distribution channels.

Without competition policy I bet large companies would be vastly more skilled at destroying upcoming rivals. There would be specialized courses offered in business schools on just the right mix of tactics to deal with upstarts. Big companies would hire specialists whose only job is to identify potential competition and neutralize it. IBM would never allow the likes of Microsoft, Apple and Intel to threaten them and the Internet itself would probably be a walled garden controlled by AT&T. When evaluating the effects of competition policy, what matters is not so much the stuff that makes the news as the stuff that is so flagrantly illegal that most companies don’t even bother: like price fixing, or mergers between two dominant companies in an industry.
Finally you seem to be saying there are some libertarians who would accept government-funded R&D and competition policy. Fine but these are departures from libertarian principles and they are departures which have had a massive impact on the IT sector.

23

Well, just for one example Ron Paul(on GMA, I believe) has proposed eliminating or at least severely curtailing FEMA. I think that’s shortsighted and unhelpful in maintaining stability.

24

Sorry, Deeg, that reply was in response to JM.

25

No.

If I said, as I did in my example, “If it weren’t for Marie Curie, we would know nothing about radiation today!” and supported it with massive evidence about the signifcance of her contributions to radiation knowledge, I would not have met my burden or even established a prima facie case. I would have to further show that her contribution was unique in some way unlikely to have been duplicated by subsequent researchers.

There is no question that government assistance played a substantial role. I acknowleged that in the same post you quoted.

The question is: what evidence suggests that, absent government assistance, similar steps would not have happened via other factors? Failing to adduce that evidence is precisely the evil illustrated by the Hypothesis Contrary to Fact fallacy, and it is THAT claim that is poorly supported.

So in simple terms: yes, government assistance played a substantial role. But why should we conclude, if that role had not been played by the government, that private concerns would not have done something similar?

26

And you know this because… ?

See, it’s the if-then statement above I contend is unsupported. Why, if the government did not subsidize research, do you believe that far less research wqould have been conducted?

27

Because the didn’t. A hell of a lot of our technology came through providing technology for the space program, and for military uses.Perhaps you believe that should be in corporate hands. Then of course we would not have a wide use. It would have only provided what returned maximum profits.
We would still be trying to get to the moon.

28

I agree that we never would have landed on the moon if private enterprise were the only player in the space race.

But I don’t (yet) agree that the same thing is true for the Internet.

29

Is this a serious question? In general if the government subsidizes something it increases the supply and if it withdraws subsidies it will reduce the supply. The subsidies in question are very large so it’s quite reasonable to believe they have a large effect.

Beyond this general point, when it comes to research, governments often fund basic research where the commercial applications are not clear and which therefore the private sector does not have a strong incentive to conduct. At the same time this basic research complements applied research so that having done it and put the results on the public domain, it can form the basis of applied research. Less basic research very likely means less opportunities for applied research as well. Finally as mentioned, the governments also subsidizes corporate research thereby decreasing its cost and increases its quantity.

30

Seriously? If you note the concentration of the internet in corporate hands has resulted in slower speeds when compared to other industrial nations. I believe we are 17th in internet speed.
We gave the internet corporations a right to charge every single user an extra 5 bucks a month to upgrade the system. They pocketed it because without competition, they have no reason to innovate or to lower price or to upgrade, They didn’t do it.
Our internet is slower, more expensive and in more obsolete technical condition when compared to places that actually have government input and competition.

31

http://cache.gawker.com/assets/images/gizmodo/2009/10/raw.jpg Chart showing cost and speed of world internet. The government and competition are missing in our internet. It shows.

32

I don’t know, Bricker. Isn’t that precisely the thesis you’re attempting to advance? Care to let us know when you’ll furnish the least bit of evidence toward making that case?

Look, your so-called “Fallacy of Hypothesis Contrary to Fact” works both ways. You, after all, like the OP are trying to convince us of what the world would look like had the government not promoted IT research and development. The only difference between you and the OP is that one recounted the ways the government, a sui generis among actors (and this is why your Marie Curie analogy is inapt), actively made that research and development happen while you’re apparently reduced to repeating, essentially, “Nuh uh!”