August 17, 2004 · Tim Wu
Economists who study government (public choice theorists) have since the 1970s been interested in the “Loser’s Paradox.” Can it help explain the content of our copyright and telecommunications laws?
Economists have noted that a surprising amount of government support goes to ailing sectors instead of expanding sectors. Classically, agriculture, textiles, clothing, footwear, steel and shipbuilding are the examples of industries on perpetual life support. Each has been in decline for decades, yet get more help from Government than any other. Conversely, expanding industries, like the high-tech industry, rarely if ever receive government assistance. In short, economists conclude, Government picks losers.
There are several explanation for why this is. One, associated with economist Anne Kruger, is that governments have an “identity bias” — they care more about people who lose jobs than people who fail to get jobs. Another, from economists Richard E. Baldwin and Fr�d�ric Robert-Nicoud holds that losers don’t fear market entry and so lobby harder. As a consequence, “it is not that government policy picks losers, it is that losers pick government policy.”
That’s the theory. Can the Loser’s paradox help explain the content of the copyright and telecommunications laws? I’ve long thought so. A crucial thing to understand that its not entertainment or communications that are in decline. People are probably willing to spend as much as they ever were to be entertained. Rather, it is specific technlogies or channels of distribution that are threatened– most clearly, the model of the shiny disk. These declining industries that ceaselessly demand, and get, government protection.
So seeing things this way you can appreciate that there’s not much a conceptual difference between something like the Induce Act on the one hand, and the farm subsidies for corn corners on the other. Each case features an industry that desparately wants to slow the arrival of more competitive rivals. And each are in truth, slowly dying industries whose ongoing decay poisions our economy.