Who's Making Money

I’m back. CPAC week came and went. Then another week came and went after the horrible cold I got at CPAC. But now I’m healthy again and it’s time to start catching up. Though there’s no way I’m going to post on every tidbit I’ve run across in the last two weeks, I can try to hit the highlights.

And let’s start with the fact that the Internet Kill Switch is back under a new name. Susan Collins and Joe Lieberman have reintroduced the bill under a new name. They think if they put freedom in the name that we’ll ignore the problems inherent in giving the President emergency powers to wage economic war on America. The Internet Kill Switch is a broken idea. We don’t let the President close supermarkets nationwide if one butcher in one city has an e. coli outbreak. We can’t apply the same overreaction online.

Also while I’ve been out of it, House Republicans have been busy. As I understand it, we’ve not only grilled the administration on the “Stimulus” spending on communications, but we’ve also passed an amendment to the continuing resolution in order to defund Net Neutrality. I love it. Our Energy and Commerce leadership in the House has so much going on, including Obamacare, but they seem to relish the opportunity to strike back so much and so hard at the administration’s illegal overreaching. From the cheap seats, Greg Walden, Fred Upton, and others are doing a great job.

Fun fact: when the House debated Net Neutrality defunding, the Democrats very strangely started making arguments that government should leave the Internet alone. Anna Eshoo said “I would not fool around with an open, accessible Internet.” Hey, for once we agree.

By the way, fun fact: Net Neutrality is so terrible for innovation and customer service that ISPs turned down ARRA money to try to stay away from it. Yes, they turned down free money from the government because regulation is just that costly.

Further, the Net Neutrality coalition continues to crumble. Collin Petersen, Democrat of Minnesota, flipped sides by voting for defunding NN after voting for NN last Congress. Perhaps he noticed the total wipeout in 2010 of PCCC candidates pledged to support Net Neutrality. Every single Democrat who signed the PCCC Net Neutrality pledge went on to lose in November.

Meanwhile, Julius Genachowski and the FCC still don’t get the message. He thinks he’s entitled to debate the Congress instead of taking orders. Greg Walden announced plans to pressure him on transparency, which should help teach him who’s boss, you’d think.

Though we have to give Genachowski credit on one thing: He admits the Netflix/Level 3/Comcast issue is not a violation of Net Neutrality.

Michael Copps, pet commissioner of neo-Marxists everywhere, deserves no credit though. He’s now pushing for more speech controls in the name of “disclosure.” It’s about control and gathering power in Washington.

The FCC still needs lots of oversight, though, as conflicts of interest continue to crop up, this time with an FCC official having PBS as an employer.

I have more to write on in the coming days on Google and Copyright, especially the Combating Online Infringement and Counterfeits Act (COICA) which threatens to continue the criminalization of copyright law in America and expands government online in the name of protecting a few big companies. Watch this space.

Matt Yglesias of the Center for
American Progress Action Fund
ponders the logical endpoint of Milton Friedman’s famous
declaration that “the social responsibility of business is to
increase its profit.”

This implies that a business executive has not only the right as
a citizen of a democratic country but amoral obligation to dedicate
his energy and that of the firm he manages toward erecting
regulatory barriers to competition and to begging for bailouts and
subsidies. The Friedman view is that an entrepreneur who’s obsessed
with creating great products is not just in some loose sense a
sucker compared to the one who’s more focused on creating a
politically entrenched monopoly, but that he’s also guilty of some
kind of ethical failing.

Yglesias suggests that, in the end, Friedman’s notion that
profit is the goal is effectively a “social responsibility to
rent-seek.” I'm not so sure, for a couple of reasons. 

The first—one espoused by any number of free-market business
owners—is that most folks who subscribe to a basically Friedmanite
view of the world also believe that the short- and medium-term
profits earned through rent-seeking tend to come at the expense of
a firm’s long-term profits and sustainability. Perhaps a firm
initially makes some money by lobbying for taxes and regulations
that push smaller firms out of the market. But in the long run,
those profits are the products of market distortions, and thus not
healthy for the firm, which becomes increasingly reliant on
favoritism and intervention rather than price signals over time.
That sort of rent-seeking behavior also encourages a competitive
regulatory environment, in which other firms and interested parties
(bureaucrats, special interest groups, politicians, etc.) will soon
seek to use similar tactics against your firm. Eventually those
parties will be successful. The underlying idea behind this view is
that it’s bad business to work toward making rent-seeking a greater
part of the regulatory environment.

The second thing to note is that Yglesias is at least partially
right in that many businesses
do end up accepting and embracing the notion that
rent-seeking is simply part of their business. But if you think
this is a problem, then the most effective response is to look for
ways to make rent-seeking behavior more difficult. And since one of
the basic premises when it comes to rent-seeking is that rules and
regulations will almost always be gamed in favor of one party or
another, and that more rules leads to more gaming, you don’t
accomplish this through regulation. Instead, you make rent-seeking
harder by making government smaller, and simpler, and less
powerful, and therefore 1) harder to manipulate and 2) less
enticing, thanks to the limits on its influence, to those looking
to exploit its rules. The less advantageous it is to game the
government, the fewer businesses will attempt to do it.

In 2005, Reason
hosted a debate over the meaning of corporate social
responsibility between Milton Friedman, Whole Foods' John Mackey,
and Cypress Semiconductor's T.J. Rodgers.

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