The Battle of the Broadbands

Two days ago, the FCC and broadband providers were challenged by President Obama’s petition for net-neutrality, that is, that all traffic on the Internet should be treated equally. For several years, the FCC has been increasing regulatory policies on Web traffic, benefitting Internet service providers (ISPs) by allowing them to charge for the use of “fast lanes” and discriminate against small content producers that cannot afford the pay. However, Obama believes that the Internet should be treated as a public utility, giving equal access to everyone and eliminating the power of ISPs as gatekeepers.

The battle is between two powerful industries: broadband providers on one side, such as Comcast, Time Warner, Verizon and AT&T Inc., and web giants (Google, Facebook, and Amazon) and smaller tech companies (Etsy, Tumblr, Kickstarter) on the other. Upholding Stigler’s argument, the regulation is being sought out by the latter industry. However, whether Obama’s petition will pass or not will require analyzing Olson’s pressure factor. Up until now, only broadband providers have expressed their strong opposition to net neutrality, some even have threatened to challenge it legally if passed. Because the broadband industry is composed of a selective number of providers, they are more likely to organize an exert pressure on opposition. The industry of web giants and smaller businesses, on the other hand, is composed of more actors and hence will have more trouble organizing, some will opt to free ride. For instance, Google, Facebook and Amazon have yet remained silent and showed little support for smaller companies like Etsy and Kickstarter. If they overcome organization problems and determine selective incentives, resulting in more pressure, then victory could tilt towards net-neutrality… Lean back, because the battle has just started.

One Year Later - Hurricane Sandy Destruction

It has now been about one year since Hurricane Sandy hit the East Coast, yet restoration in some beachfront cities is still underway. This article published by News 13 discusses a $40 million restoration project that will begin at the start of November. Although the hurricane stayed off of Florida's coast, the wind and severe weather pushed back on the beaches and caused significant erosion, leaving the waterfront properties very vulnerable and exposed should another round of severe storms come.

The project is being funded partially by the state and the Brevard County Tourism Development Commission, but the Army Corps of Engineers is footing the majority of the cost with $29.6 million. This project is an example of a public good as we discussed at the beginning of the semester because it is both non-excludable and non-rivalrous. Also, this specific project undoubtedly brings up the Free Rider Problem. The individuals who are living on the beachfront will receive the direct benefits of the restored beaches but have not paid at all or if so, only minimally through some sort of state taxation. However, the Tourism Commission and the state believes that the benefits of investing in this restoration project exceed the costs and therefore are going ahead with the project and will begin pumping sand onto the beaches next month.

Concerns about France's Social Security System

“Le Front National” is an economically and socially conservative nationalist party in France. This article (translated into English) posted to their website on September 17^th, 2013 discusses recent recommendations that the Social Security system in France become increasingly more privatized. Currently, France’s “securité sociale” program encompasses a National Health Program and the European governments have made clear that universal access to healthcare is part of the necessary elements to fight poverty. Because the welfare system has been in an unstable financial position, reforms were taken by former president, Nicolas Sarkozy, that have led to a decrease in the amount of repayments and medications provided by the government. To create a more efficient Social Security system that does not solely guarantee the wealthy full refund of their care and does not convert the system into private enterprises, “Le Front National” is recommending a tax be imposed on the banking system which would therefore lead to a more “equitable redistribution of wealth.”

The article points out a market failure in the French Social Security system – that the public good of Social Security is not being allocated efficiently. Jonathan Gruber tells us that one way to correct this failure and reach an allocatively efficient output is through corrective taxation as “Le Front National” is suggesting here; however, Gruber also tells us that the difficulty in measuring the actual costs and benefits of providing this public good can result in further problems including the Free-Rider Problem. Additionally, Mueller warns that as you start initiating state intervention, this intervention will only have to increase and result in a degenerative process. It is important that the current French government consider all of these potential market failures as they determine particular reforms to the system.