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Comment by teej | Hacker News Reader

The book Discovering Prices by this year’s Nobel laureate is really fascinating. The very first chapter opens up to explain the boundless political, mathematical, and computational complexity involved with the FCC Broadcast Incentive Auction. I recommend it just for that alone.

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How well do the FCC auctions actually work though? If you pop up a spectrum analyzer just about anywhere, you'll see that the spectrum is vacant and deserted except for broadcast radio and the bustling ISM (free-for-all) bands holding approximately all of the traffic. If you have a really good spectrum analyzer, you might be able to capture brief blips of cellular activity, and if you're near a radar you'll see that of course, but by and large the spectrum looks like a ghost town of empty apartments with absentee owners using them as capital assets while the plebeians cram into the designated slums. The stark contrast between the wildly over-utilized free-for-all bands and the wildly under-utilized auctioned bands really looks like a strong argument against spectrum auctions.

I'm sure you could find an economist to argue that the present state of affairs is natural, good, and maximally value producing (producing ROI for investors, that's what life's about!) but from where I'm standing the FCC auctions look like an idiotic forward propagation of last century's engineering limitations, no matter how sophisticated and lucrative the auctions themselves are.

I doubt that many economists would "argue that the present state of affairs is natural, good, and maximally value producing", they'd say it was a legacy of "last century's engineering limitations" which the bureaucracy adopted, and subsequently ossified around.

I think most economists and business people would agree that real-time auctions similar to what happens with internet ads would be much better.

Yes, that was somewhat unfair of me -- but only somewhat. Economists generally espouse a notion of value that is weighted by wealth (for a company, "purchasing power" might be more appropriate), and it adds a rather severe unstated bias to nearly every claim they make. By this special, biased metric of theirs I'd expect spectrum ownership to be wildly successful as it is effectively one mechanism for extracting rent that supports another mechanism for extracting rent.

Of course, that's unfair again, because rent itself is an economic concept and economics brings us the tools to identify it and, if we so choose, look to minimize, but that's not exactly a route towards getting paid to evangelize a particular opinion. Promoting new opportunities to extract rent is a route towards getting paid to evangelize an opinion, so many economists do it, and that's the source of the animosity you saw in my previous post.

Well the concept of economic rents was created by economists to describe reality, but I think most economists view the majority of rents as being 'bad'. I also think you are overestimating how 'free-market oriented' and self-interested most economists are, and would recommend that you look at a "Survey of Americans and Economists on the Economy".

The current system is really optimized to maximally benefit the FCC; it gives them huge revenues without much cost to administer. Existing mobile carriers are also probably beneficiaries of the current system, but it's hard to blame them for that, as they've structured themselves to conform with the government's system.

Paid (or unpaid!) apologists are much more visible and attention-drawing than their more in-touch peers, so I probably overestimate their prevalence in the overall population of economists, but by the very same yardstick they have an outsized effect on economic discussions. They earn every bit of the ire I throw in their direction, but I could probably do a better job of specifically targeting it.

> Existing mobile carriers are also probably beneficiaries of the current system, but it's hard to blame them for that

Only to the extent that they played no part in making or encouraging the system that we agree is bad.

I am not really sure which apologists you have developed an ire for; I've only ever heard economists say that the auction system is better than the previous, arbitrary licensing system. Do you have any specific examples of these groups of apologists?

I don't especially like rent-seeking, but in this case, it's more like begging than anything else; the government is the one responsible for this mess.

I generally agree, but there is of course a third category of frequency band besides FFA and auctioned, which is various "legacy interests", military and others pretending they need each about a gigahertz worth of prime bandwidth fully alone or the sky will fall.

Here’s another book of his on the topic - Putting Auction Theory to Work

http://www.econ.ucla.edu/riley/271/Milgrom-Putting%20Auction...

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