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Source link: http://archive.mises.org/16651/geeks-need-to-know-economics/

Geeks Need to Know Economics

April 27, 2011 by

I am a geek. But I often find that when a tech author is reporting on certain events, he lacks a proper understanding of economic theory.

FULL ARTICLE by Justin T.P. Quinn

{ 11 comments }

Havvy April 27, 2011 at 8:12 am

Almost made me shed a tear. Brilliant overview of the cellular phone service industry.

JFF April 27, 2011 at 8:51 am

A good analysis, but two glaring omissions:

1. Due to FCC licensing regulations and The Telecommunications Industry Act provisions, the barriers to entry into the wireless telecommunications market are obscenely prohibitive for small competitors. Despite their boasting about how competitive they are, the reality is that only Sprint/Nextel, T-Mobile, Verizon, and AT&T have both the grandfathered licenses in place as well as the political and capital clout to navigate the hostile regulatory environment.

2. The merger of T-Mobile and AT&T does not mean that AT&T will enjoy a ready-made larger network per se. AT&T and T-Mobile broadcast at different frequencies so their handheld units aren’t directly compatible. We have yet to see what AT&T is planning on doing with T-Mobile’s network.

SCARABEETLE April 27, 2011 at 10:58 am

Good comment. I was going to post the point about the FCC as a barrier to entry. We need to get these companies AWAY from having undue influence via political connections and federal entities to be able to profess a free market. Hopefully we’ll keep moving in that direction!

Shay April 28, 2011 at 3:42 am

We need to get these companies AWAY from having undue influence via political connections and federal entities to be able to profess a free market.

Do that by eliminating the entities which they are influencing, rather than trying to keep the companies from influencing them. There is no justification for that concentrated power in the first place.

Maggie Gilmore April 27, 2011 at 11:54 am

Awesome article! I too am a geek and I’m generally disappointed at how uneducated most of the tech sites and magazines are when it comes to economics, even on some of the technology issues that are directly intertwined with the subject.

And as a T-Mobile user I can’t say I was thrilled with the news of the merge but if my quality of service goes down I’m more than happy to jump ship and try out a competitor.

BrophyWorld April 27, 2011 at 8:57 pm

I’ve also been disappointed by the unwillingness of many techies to believe that econ is important and should be understood. For example, popular TechCrunch columnist Vivek Wadhwa advocated the creation of Start-Up Chile because he believes that government is the best way to start companies:
http://brophyworld.com/vivek-wadhwa-talk-sponsored-by-start-up-chile/

Steve Blank, a popular Stanford professor and startup incubator advocate also believes that econ is not important, so I asked Nobel Prize winner Vernon Smith to comment on Start-Up Chile:
http://brophyworld.com/nobel-economist-pans-start-up-chile-concept/

Startups have become a fetish that has inspired the creation of numerous technology business incubators, and many unpromising ideas get funded> I wrote about a few:
http://brophyworld.com/technology-business-incubators/

Scott Adams, the creator of Dilbert, understands econ. I wish more techies would follow his lead.

boniek April 27, 2011 at 6:38 pm

More articles like these! Maybe I’m alone in this but I love gadgets and gizmos and reading “mainstream” in these topics sometimes makes me cringe with despair. Articles like these are nice break from all this political and banking stuff.

David April 27, 2011 at 9:28 pm

There are several statements here which are at best misleading, at worst inaccurate.

In spite of AT&T’s self-serving propaganda, in most markets, your choice is between AT&T and Verizon, plus possibly Sprint and/or T-Mobile. And in fact the wireless industry seems to be consolidating rather than the opposite. Smaller carriers like Alltel and now T-Mobile are being gobbled up by the bigger players (and there have been rumors recently of Verizon trying to acquire Sprint).
Verizon itself is the product of the merger between Bell Atlantic, NYNEX, Cellular One, and GTE. AT&T is the end result of SBC’s acquisitions of PacBell, Ameritech, and (the “old”) AT&T.

The Verizon iPhone sales have been underwhelming (at least thus far), based on everything I’ve read. And Verizon’s data service doesn’t seem to be any faster than AT&T’s — if anything, people I’ve talked to seem to have had the opposite experience.

And the negative perceptions of AT&T are somewhat misleading.
What is now AT&T wireless used to be Cingular. Cingular (which was jointly owned by SBC and BellSouth) acquired the wireless business of the “old” AT&T; the near-universal perception was that this was done to get access to AT&T’s subscriber base. (SBC subsequently acquired both the remainder of AT&T and BellSouth, at which point SBC rebranded itself as “AT&T” and Cingular became “AT&T wireless”.)
Cingular had always used GSM (like the rest of the world), but “AT&T wireless” as it was at the time was still using CDMA. Not wanting to maintain two infrastructures, Cingular “encouraged” former AT&T subscribers to move to GSM plans. Many consumers felt they were “slammed” into switching plans, and this I believe accounts for a large portion of the dissatisfaction with Cingular/AT&T. Ironically, many subscribers, at least in my area, nevertheless chose to remain with Cingular/AT&T — probably at least in part because Verizon’s plans are on average more expensive (around here it’s $20/month more).

In markets where it was available, T-Mobile provided a lower cost alternative to the “bigs” (but T-Mobile has consistently maintained high customer service ratings). T-Mobile USA’s acquisition is a loss for consumers.

I am getting less “conservative” and more libertarian with age … but there seems to be a tendency on the part of both conservatives and libertarians to defend corporate America no matter what it does — in spite of the fact that (as another mises.org post today testifies) big corporations are frequently interested in being anti-competetive. I am bothered by these knee-jerk reactions.
And I do understand that Sprint’s actions may be anti-competitive. My problem is that the article seems to take for granted that Sprint’s tactics are anti-competitive and AT&T’s are not.

Markus April 28, 2011 at 11:07 pm

David, I couldnt say it better. In addition, I see little difference between an oligopoly, duopoly and a monopoly.

Nevertheless, this article was a breath of fresh air in tech journalism which generally thinks government is the “panacea” for all the problems in the world. That, despite the fact that the tech industry’s success is directly attributed to the “free market” (not our libertarian Freed Market, but rather one less regulated than comparative market sectors. My theory is also that it is much tougher to monopolize technology through IP than in other industries such as health, automobile, etc. The Open Source movement is the free market’s call at ridding the tech marketplace of IP rules that bolster monopolies such as Redmond.

Economics Homework Help - Online Economics Homework Help - Online Economics Assignment Help May 2, 2011 at 2:08 am

Informative one

Vanmind May 2, 2011 at 11:01 pm

Geeks need to know economics. So who doesn’t?

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