I have to admit that I derive particular pleasure when economists are outright grumpy in their academic writing. Not all wisdom is tame. The following is an excerpt from an article written by 87-year-old Ronald H. Coase, who, when asked why a market-based allocation mechanism for spectrum licenses he had advocated for—decades later raising treasury revenue in the billions without halting the telecommunications revolution in the slightest—was initially derided as a ‘big joke.’
Having lived through World War I, World War II, the Great Depression, the emergence of communism in Russia and its spread (with the approval and active support of many intellectuals in the West), the triumph of Nazism in Germany (with the support of the great mass of the German people), the adoption of socialism in Britain, the horrors in countless countries all over the world in the post-war period (of which Bosnia is but a recent example), I find it difficult to ignore the role of stupidity in human affairs. Axel Oxentierna, a Chancellor of Sweden in the seventeenth century, said, in a letter to his son: “You do not know, my son, with how little wisdom the world is governed.” And it remains so. As Frank Knight has told us: men are rational, also irrational. I have often wondered why economists, with these absurdities all around them, so easily adopt the view that men act rationally. This may be because they study an economic system in which the discipline of the market ensures that, in a business setting, decisions are more or less rational. The employee of a corporation who buys something for $10 and sells it for $8 is not likely to do so for long. Someone who, in a family setting, does much the same thing, may make his wife and children miserable throughout his life. A politician who wastes his country’s resources on a grand scale may have a successful career.
Comment on Thomas W. Hazlett: assigning property rights to radio spectrum users: why did FCC license auctions take 67 years? by Ronald H. Coase (1998)
