4.3 Technological Change, Endowment, and Appropriation

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How property rights institutions come into being, and how and why they change, is a critical issue for social theory and public policy. It has been a topic in institutional economics at least since Karl Marx identified the enclosures of the common fields as a milestone in the transition from feudalism to capitalism. In the three-stage model just defined, the prime mover is endowment-a change in demand conditions that creates a quantum jump in the value of a specific resource. Particularly interesting is endowment that occurs as a result of technological development. [6 ]

The commercial development of a technological system can progressively bid up the value of certain components or inputs critical to the expansion of the system. Sometimes the affected resource is a natural substance, as when the development of a mass market for internal combustion engines transformed crude oil deposits from worthless goo into a prized commodity. More pertinent to our story, the commercialization of technologies may also create resources internal to the system-unnatural resources, as it were-that may need to be shared. Name and number spaces are examples of such resources. So are radio communication channels, satellite parking spaces in outer space, or airport gate slots. Demand for resources of this sort can intensify along with growth in the markets organized around the technical system of which they are a part.

Under certain conditions, technology-induced endowment can trigger major conflicts over appropriation activity. The change in the status of the radio frequency spectrum caused by the commercialization of broadcasting in the early 1920s is a good historical example of this phenomenon. The rapid diffusion of broadcast technology after the end of World War I suddenly endowed certain parts of the electromagnetic spectrum with great economic and political value. The airwaves could be used to deliver music and commentary to thousands of people. In the United States, the response was a monumental political and legal struggle over the control of the spectrum (Hazlett 1990; Minasian 1970). Hundreds of broadcasters occupied frequencies with little coordination by the U.S. government. Aside from the problem of coping with the land rush created by the sudden opening of an unoccupied frontier, the federal government also was faced with the problem of defining, allocating, and assigning rights to a new resource, the behavior of which was not well understood. While informal rights of precedence and coordination did develop among some private claimants, the nature and scope of property rights in the spectrum were unclear, and there were many conflicts. There was also significant ideological and normative opposition in some quarters to the notion of private ownership of the spectrum.

The encounter with this problem in the mid-1920s produced a new institutional regime for the regulation of communications in the United States. The airwaves were nationalized, and a new federal agency was created to assign highly regulated rights to operate and program broadcast stations for a limited time. A form of merit assignment (to use the terminology developed in chapter 2) governed the assignment of broadcasting licenses. In this property regime, resources were distributed according to a 'public interest' standard (Krasnow, Longley, and Terry 1982).

Assignment of spectrum licenses was explicitly linked to a set of regulatory obligations that gave a federal agency significant influence over the content of broadcasts, ownership of stations, and the geographic distribution of stations. Broadcasters were viewed as 'public trustees,' and the perceived scarcity of radio channels and the political problem posed by assigning them exclusively to privileged users became the regime's defining feature. [7 ]

The early history of broadcasting provides a vivid instance of how technological endowment can lead to significant and rapid institutional change. When an unowned resource space created by the commercialization of a new technical system increases in value, competition for access to it will intensify. As appropriation activity develops, the need to ration, own portions of, trade, or regulate the resource space to resolve conflicting claims and uses will also develop. In short, the need for institutional arrangements will become urgent, especially when the resource space created requires sharing or coordination to be used effectively. Precisely because the technical system is new, however, the resource space it creates may not fit readily into existing ownership models. In such a transition, there is likely to be rampant uncertainty about the gains or losses that might be caused by alternative property rights specifications. If conflicts develop, legal precedents are likely to be either absent or of debatable applicability. If endowment occurs quickly, the sudden rise in the financial stakes associated with possession of the resource, coupled with the creation of tremendous opportunities for first-mover advantages, can create a land rush that upsets institutional equilibriums. It is possible, even likely, that the social groups involved in the contracting for property rights will not be familiar with each other, further increasing the difficulty of finding a solution. Thus, when certain conditions are met, technological endowment can be a catalyst of significant institutional change.

[6 ]The new institutional economics does not afford any special attention to the role of technology in institutional change. In contrast, Rutherford (1994) notes that the older institutionalist literature 'contains many suggestive ideas on . . . the unintended impact on institutions of intentionally introduced alterations to the technical and material means through which individuals make their living' (180). See Bush (1987) for an overview.

[7 ]'Because of the scarcity of radio frequencies, the Government is permitted to put restraints on licensees in favor of others whose views should be expressed on this unique medium.' U.S. Supreme Court, Red Lion Broadcasting v. FCC, 395 U.S. 367 (1969). See also B. Schmidt, Jr., Freedom of the Press vs. Public Access (New York: Praeger, 1976) for a characterization of broadcasters as 'public trustees' because of their privileged use of scarce spectrum rights.

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Ruling the Root(c) Internet Governance and the Taming of Cyberspace
Ruling the Root: Internet Governance and the Taming of Cyberspace
ISBN: 0262134128
EAN: 2147483647
Year: 2006
Pages: 110

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