IPI Report: NN Makes Economic Sense read both parts

[David Farber <dave () farber net>]

From: Richard Stallman <rms () gnu org>
Date: January 14, 2010 9:47:34 AM EST
To: "Jeffrey A. Williams" <jwkckid1 () ix netcom com>
Cc: seth.johnson () RealMeasures dyndns org, ecommerce () lists essential org, upd-discuss () lists essential org, A2K 
() lists essential org
Subject: Re: [A2k] Re: [Upd-discuss] IPI Report: NN Makes Economic Sense
Reply-To: rms () gnu org

    Very true.  However there has never been, nor will there ever
  be absolute economic efficiency or fairness.  As such a ballance
  must be sought that everyone can live with, a very difficult
  task to achieve and maintain.

These days, we have a lot of economic efficiency in production and
very little fairness.  As a result, lots of production goes into
activities that are harmful in the long term, and most of the world's
people get no benefit from all the production.

Clearly we need increased concern with fairness.
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From: "Faulhaber, Gerald" <faulhabe () wharton upenn edu>
Date: January 14, 2010 11:28:38 AM EST
To: David Farber <dave () farber net>
Subject: RE: [A2k] Re: [Upd-discuss] IPI Report: NN Makes Economic Sense

Interesting points, most of which are wrong

        1 NN doesn't make economic sense in a world of price discrimination, as we point out in our paper.  There is no 
reason for ISPs to discourage entry by application/content providers, and a profit-maximizing price-discriminating ISP 
would certainly encourage small entrepreneurs with a low or zero price, since it results in more content which is more 
attractive to subscription customers.

        2 Much of the world's production actually does go to the poor (or "emerging middle class").  The economic 
revolution in India and China (and East Asia generally) is all about this.  Has yet to happen in Africa and the Middle 
East.

        3 Efficiency (in production and allocation) is all about incentives; if we get the incentives (and the markets) 
right, the private sector unleashes incredible energy.  I think the problems with Africa and the Middle East has much 
more to do with (bad) incentives than with fairness.

        4 Fairness is much studied by economists; lots of books/articles in the 1980s on fairness and efficiency 
tradeoffs.  Ed Zajac and Hal Varian, among many others, have written on the topic.  Amartya Sen is the leading social 
justice theorist, and has just come out with a new book; Sen is always worth reading.  Generally, an excessive focus on 
fairness tends to blunt incentives, so nations don't grow as fast (India pre-1998).  A smaller pie gets divided more 
equally, but it's a smaller pie.  Incentives are what makes the pie grow.  

There are ways to get the best of fairness and efficiency, but generally the policies we pursue are the wrong ones 
(e.g., trade policy).

Professor Emeritus Gerald Faulhaber
Business and Public Policy Dept.
Wharton School, University of Pennsylvania
Philadelphia, PA 19104
Professor Emeritus of Law
University of Pennsylvania





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