Government Regulation Vs. Innovation

Government is a necessary evil, and as such, should be limited to the absolute necessities. Government is necessary because people are prone to wrong, because we are fallen. Many people believe that government is the preferable entity for enacting standards and change, protection and prevention, due to its scale and a false assumption of its responsibility and prerogative.

Perhaps most egregious and insidious of the government’s accepted roles today is regulation. This is applicable both for Federal and State government. Each has responsibilities, which do not constitutionally overlap, and each oversteps its bounds. I will speak of the government as a conglomerate encompassing both the Federal and State leve though, because the problem is the same as is the solution.

Innovation is what occurs where there is little no protection of the status quo. I’m not a strict libertarian, I do not believe, for instance, that researchers ought to be allowed to do as Bretons are considering, creating transgenic creatures part human and part animal through embryonic and DNA manipulation even for the sake of research. And I believe that government has a moral responsibility to prevent this and throw the weight of justice behind it’s policy in the matter. Similarly I believe that the government has the responsibility and the right to protect the innocent, punish the wrongdoer, provide for the common defense, wield the sword against evil, protect the currency and protect commerce.

Government is not well suited to decide and define technology and professional standards. Consider the stifling climate of radio communication, where technology is old and innovation is very limited and drastic in impact. Consider the ending of all analog TV signal broadcasts coming very soon. Given a free and open playing field there may be wildly divergent technologies out there in use, but they would value backwards compatibility as companies would need to ease the upgrade process for their consumers. Instead we get the “punctuated equilibrium” theory of social technology change, which doesn’t work for us any better than it did for the evolutionary theory.

If you fear the ability of money-grubbing, profiteering pirates in the free business world to regulate themselves, develop standards and foster innovation in a natural, progressive manner, you’ve not been watching the technology scene for the last 20 years. As needs appeared, grew, and changed (eg. the internet, flash, java, html, css, ISO, IEEE, IETF, etc) standards bodies supported and funded by the industries have grown and taken over the managing of standards. They maintain equilibrium and allow technology to grow in a measured, gradual and stepwise manner which supports and encourages innovation while maintaining and stable environment for the end user.

In the power and energy and general utilities arena, local governments have the responsibility to decide their involvement in providing services to the citizenry. By giving money to companies for research the government breaks up the innovation-finding, problem-fixing nature of the free market, and any time the natural form of the free market is broken, it loses its efficiency and limits its ability to develop those innovations and fix those problems. If the government didn’t take that money it gave back in the first place, the companies would have immeasurably more resources at their disposal, and it wouldn’t be prone to the common issues of the government giving money back such as cronism, and political contracting and favors.

There is a question I’d ask of anybody regarding this issue. If Thomas Edison were alive today which entity would be the greatest enemy of his innovation: Government or Business?

Government regulation prevents, hampers, impedes, restricts, all in the name of protecting. Business expands, develops, creates, grows, all in the name of profit. Which is worse? Who is protected? Who benefits?

Those protected by government regulation are those who have the most money to buy political influence, businesses. Instead of competing and changing and innovating, they buy off politicians and gain their legislative protection. If it were not acceptable for government to regulate there would be less reason for politicians to be bought off. Think back to early telephone days, you don’t have to be too old to recall when it was illegal for answering machines to be connected to phone lines. It was once illegal to have anything besides the clunky early telephones provided for you by the phone company connected to the phone lines, and they convinced the government this was the case. Eventually the preponderance of evidence that third party systems were so incredibly superior to the bloated, marginally functional systems provided by “Ma Bell” that the government did act in the favor of the consumer and allow alternate systems on the networks. One can only wonder where we’d be at today in telephone technology if the government hadn’t seen fit to regulate the telephone industry to the point where Bell Telephone was the monopoly controller.

In the arguments over Net Neutrality, I feel for the plebes. I don’t want my traffic throttled any more than it already is by the ISP. But is it the government’s responsibility to control this? And if we allow the government to say who can access the internet and at what speed, where is our moral authority when the government wants to say who can’t access the internet?

Perhaps I am more libertarian than I like to think myself to be.

Unfortunately I do not have a hard and fast rule on what should and shouldn’t be regulated. Should local governments be allowed to sign exclusivity agreements with cable companies? The people benefit because the company has a big incentive to build infrastructure to get their service. And the people lose because where competition is stifled, prices go up and innovation (extra and new services and features) go down. Ever wonder why you pay $50/month for cable and only $15/month for DSL? Cable runs on exclusive contracts with metropolitan areas and they can charge whatever they want. DSL runs over telephone wires, which have now been regulated to allow all services and carriers. AT&T owns most of the wires, but they have to lease the wires to any comer, and they still have to service the wire and cannot limit the functionality of the wire in any way. A rare example of good regulation.

Perhaps the best regulation is that which forces the acceptance of free enterprise. Laws which prohibit exclusive service provider agreements with municipalities and mandate phased buyouts of existing contracts. But what are the hidden perils of this regulation? I do not know.

Perhaps a better model will emerge, in a newly deregulated environment. A separation of the infrastructure and the service. AT&T, for instance, will provide only the wire, and will be controlled by a consortium of the service providers, who vote on infrastructure upgrades and changes, and together, based on their respective interest in the infrastructure, finance the changes. This is admittedly a pie-in-the-sky vision at the moment, but it may be workable, and it is an option to government regulation. The industry is already familiar with consortium and groups and it wouldn’t be too much of a leap, just a huge change from what is now.

But the issue is regulation, and regulation is generally bad for those involved. It stifles innovation and protects those who would benefit more from being unprotected.

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