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The pretense of knowledge

by Patrick Ross
Special to AFF's Brainwash
June 27, 2006

We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based -- a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.

When F.A. Hayek spoke these words more than thirty years ago in accepting the Nobel Prize for Economics, he was referring to the market as a communications system, a reflection of the increasing role of information as a driver of the economy. But these words also speak to the global communications system we call the Internet or cyberspace. While the individual elements of the Internet are designed by man, its growth and evolution has been almost organic, not unlike the development of the market Hayek described. Hayek devoted his career to championing markets over government planning, and his 1974 speech in Stockholm was no exception. His words ring true today as we hear of plans to impose limitations on this modern communications system, this market if you will, by the government in the form of network neutrality regulations.

Hayek told his audience in that speech that economists, in guiding policymakers, had "made a mess of things." The best way to avoid making a mess of things is to know with certainty what the future holds and act accordingly. But as Hayek explained, economics and public policy are not exact in the same way as the physical sciences, and thus the potential harm of conducting an experiment and having it turn out badly can be grave indeed.

Advocates of prophylactic net neutrality legislation believe with certainty that a terrible future awaits us, a future of blocked web sites, degraded service and fast lanes bought up by the rich and powerful to the exclusion of the small but hopeful. Years of opportunity for the Internet service providers to bring us this reality has failed to occur. Strong evidence that the market Hayek so favored applies economic disincentives against such behavior is ignored. After all, the value of a broadband platform is enhanced by more traffic, and the platform provider has every incentive to make available as much traffic to its customers as technically possible.

Yet while net neutrality legislation proponents are quick to tell us what might come in absence of their regulation, they are less forthcoming in telling us what will come if their regulations come to be. They say they are preserving the status quo; if that is the case, then it would seem we don't need new regulations. In fact, one has to assume that once regulations are imposed, the behavior of those regulated will be different than it is now, and the flow of capital to and from those regulated entities will differ as well. The status quo will be the status quo no longer.

The consequences of net neutrality regulation will be negative. There is plenty of evidence that restrictions on network providers regarding the use of their property and their ability to strike deals with others in the market will reduce the amount of capital available to them, and will reduce their capital investment. In turn, this will mean consumers will see slower upgrades of networks -- if they see upgrades at all -- and will be less likely to see new entrants join this high fixed-cost market. Furthermore, there will be a whole class of potential consumers completely shut out of the broadband experience because net neutrality regulation will forbid the tiering, affinity discounts or bundled packaging that would bring them online.

But perhaps this is not the ultimate scenario. As Hayek notes, the future is difficult to see. But the present is clear, and the present tells us that serious harms are not being committed by network providers, and if any are attempted the transgressor will have to answer both to the market and to existing competition law. This prompts the question as to why we need to approve regulations of uncertain impact to address a nonexistent problem.

Lets return once more to Hayek:

To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the over-confident because their experiments may after all produce some new insights. But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims.

Hayek's speech, appropriately, was called "The Pretense of Knowledge." When net neutrality proponents tell us what harms will come in the future, and then tell us what steps need to be taken to proactively prevent those harms, there is a pretense of knowledge being demonstrated in those arguments. Perhaps we should remember Hayek's words, that in the effort to prevent possible future harms we might be responsible for creating future harms of an even greater magnitude.

Patrick Ross is a Senior Fellow and Vice President for Communications and External Affairs at The Progress & Freedom Foundation. This article was published June 25, 2006 in Brainwash, the online journal of The America's Future Foundation.



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