"Regulation and Technology"

**Comments before the New York Chapter**

**Of the FCBA**

**By Harold Furchtgott-Roth**

**June 7, 1999**

It's good to get out of Washington.

You've heard all about waste. Extraordinary waste.

Bloated bureaucracies.

Bloated salaries.

And for What?

Nothing works!

And I'm only talking about the Baltimore Orioles. \$81 million a year

Salaries won't go as far as it used to. Look at every sports team in

Washington -- football, basketball, hockey. We spend lots of money, more

than most and no results. The city is cursed this year. No prospects of

playoffs anywhere. At least in NY, when you spend lots of money, you get

some good results.

New York and Washington do share something in common: great museums. You
can walk into any history museum in the world and marvel at the
technological accomplishments of past generations. If you get enough
people to work on a problem, they can do almost anything. Sometimes
using more sweat than brain power.

We have learned from earlier generations. What took them years to do, we
can do far more rapidly. We know the limitations of past technology. We
have learned from them. We know that we can do better. And we are
confident that future generations will have even more advanced
technology.

If you are a technologist, it is a good feeling.

I'm not a technologist. I'm a regulator.

Do we do better at regulation than past generations?

Do we have any confidence that future regulation will be better?

Do we even know what good regulation is as distinct from bad
regulations?

You won't find a history of regulation museum. You'll have a hard time
even finding a book or course on the subject.

But what can we discover.

Think about the Yankees.Was the '98 team as good or better than the '78
team? Or the teams from the 50's and early 60's. Or the 1920's and 30's?

What was the best Yankee team?

Lot's of people have opinions. Different opinions, to be sure. But at
least there are some objective criteria: Wins -- losses. Battery
percentages.

ERAs.

One of the wonders of baseball is how much success and failure can be
quantified.

Not so with regulation.

Oh, you will hear regulators take credit for market successes and new
technologies.

As if umpires could hit a home run. As if spectators win games.
Sometimes they do. But they lose a lot as well.

Don't ask how many technologies have been delayed by regulation.
Practically everyone.

Technology gets better over time -- progress. Measurably better, not
merely rhetoric.

What transmits over time are knowledge, information and technique. Not
plant, equipment, or even training.

Consider transportation. Steam engine boats. Rail Automobile. Air
traffic

In each case, newer technologies made older investments obsolete.

Even within one broad class of technology, such as automobile or air,

the rate of technological obsolescence is rapid.

Technology is not so much embodied in plant and equipment as it is
transmitted by the technologist who make them.

What is the role of government in technology?

1\. Preserve property rights, including intellectual property.

2\. Enforce contracts

3\. Consistently enforce minimal set of rules.

[Technologists don't look to government for the following:]{.underline}

1.  Become wedded to specific plant, equipment or training.

2.  Set prices.

3.  Determine quality and quantity characteristics.

4.  Make direct investments.

Although, clearly, some firms lobby government because they may believe
that they can game the system.

Transportation is one matter, but communication has witnessed ever more
rapid technological advance. Telephony, broadcast, wireless, satellites,
the Internet, computers. The technology of 20 years seems charmingly
quaint. Archaic and obsolete -- but quaint.

Again, what transmits over time are knowledge, information, technique.
Not plant equipment and training.

For those of you my generation, we spent a lot of time perfecting punch
card techniques. Brilliant punch machines. Brilliant boxes to hold the
cards

Brilliant training. An entire industry of clerical staff and punch
cards.

I could punch 60 an hour, could manage and carry stacks of boxes

could take enough No Doz. and coffee to stay awake and submit my cards
to the mainframe between 11:00 and 6:00am---the cheap time.

You essentially rented CPU in blocks. The entire mainframe had not more
than 512K.

Each submission would take tens of minutes. Each run cost dozens of
dollars, even during cheap time. You got the printout of the run.

You took it back to debug.

In the old days, there was no package software. You wrote your own in
FORTRAN. A successful run might take days of several runs. You planned
each run in excruciating detail.

Today, the technology of 25 years ago is obsolete. The technology of
today is not directly embodied from the plant, equipment, or training of
the past.

Now suppose that someone had come along 1972 and proposed that every
school in America:

1\. should have an IBM 370,

2.  a technology plan

3.  training in key punching

4.  training in FORTRAN

Oh, it would have been grand. We might have locked in key punch
technology forever. And perhaps we could have paid for it with a tax on
telephone usage.

What is the proper role of government with new technologies? And how can
we tell if we are making progress in regulation? Doing a better job than
before?

When you visit a history of technology museum, you marvel at
technologies, old and new.

Behind almost every technology, however, are efforts at government
regulation. Taxes. Limitations on entry. Limitations on exit. Universal
service. Special homage to the king. Banning certain technologies

You name it; it's been tried.

Oddly enough we don't marvel at past regulation when we visit technology
museums.

Regulation and regulators are the footnote, in history.

Regulation only affects technology, and usually only for the worse.

How are we doing? Who knows.

We can't compare the 1999 FCC with the 1999 SEC, let alone the 1979 FCC

with the 1999 FCC.

There is no world series of regulation. There aren't ever any useful
quantitative measures. No on-base averages. No ERAs. No home runs.

No wins and losses.

So I have a few suggestions.

You might call it a baseball writer's approach to evaluating regulators.
You can quantify it a little bit, but not too much. Enough ambiguity and
vagueness to be the subject of endless columns.

Here are my 9 criteria to good regulation. 9 is a good baseball number.

A.  Follow the law as it is written:

> Hard to measure. Sort of like hustle-
>
> Controversial --
>
> You might measure court set backs.

That may depend on the quality of your litigation-

> And also on how much your opponents are willing to go to court, or
> whether they are frightened to go to court.

B.  No secret deals:

> This applies to administrative agencies and not the DOJ. Openness is a
> virtue in regulation. The worst part is that secret deals can't be
> seen or measured. Here again is a hard trait to measure.

C.  Benefits exceed costs:

> A simple concept, perhaps not easily quantified. Surely every agency
> has a Web site listing the costs and benefits of regulation.
>
> No agency does.
>
> No agency even tries.
>
> No agency in the federal government has procedures to estimate the
> costs and benefits of all its regulations, either on a prospective or
> retrospective basis.

D.  Efforts to measure cost and benefits:

> The sins of not even trying must be punished twice.

E.  Preservation of property rights:

> Does the agency go out and expropriate property,
>
> Or devalue marketable property, or harm intellectual property.
>
> If so, the agency does poorly,

F.  Enforcement of contracts:

> Does the agency allow contracts to be enforced?

G.  Consistent enforcement of rules:

> Does the agency have clear rules and does it enforce them
> consistently?
>
> Simple questions---
>
> Of course, the FCC flunks for lack of rules and arbitrary approaches
> to license transfers

H. No setting of prices, quantities, or quality of service.

Bad economics.

I.  No peculiar attachment to specific plant, equipment, or training.

> Let's not have the government mandating IBM 360s in every school
>
> in America.

Come to think of it, all of these criteria are hard to measure.

It is sort of like baseball, though \-\-\-\-- Good material to write
endless columns.

\- FCC -