Thursday, March 24, 2011

Telecom, Early Republic Style

This was a very interesting post by Matt Yglesias. He writes:

"Here’s another slice of What Hath God Wrought:

The United States Post Office constituted the lifeblood of the communication system, and it was an agency of the federal government. The Constitution explicitly bestowed upon Congress the power “to establish post offices and post roads.” Delivering the mail was by far the largest activity of the federal government. The postal service of the 1820s employed more people than the peacetime armed forces and more than all the rest of the civilian bureaucracy put together. Indeed, the U.S. Post Office was one of the largest and most geographically far-flung organizations in the world at the time. Between 1815 and 1830, the number of post offices grew from three thousand to eight thousand, most of them located in tiny villages and managed by part-time postmasters. This increase came about in response to thousands of petitions to Congress from small communities demanding post offices. Since mail was not delivered to homes and had to be picked up at the post office, it was a matter of concern that the office not be too distant. Authorities in the United States were far more accommodating in providing post offices to rural and remote areas than their counterparts in Western Europe, where the postal systems served only communities large enough to generate a profitable revenue. In 1831, the French visitor Alexis de Tocqueville called the American Post Office a “great link between minds” that penetrated into “the heart of the wilderness”; in 1832, the German political theorist Francis Lieber called it “one of the most effective elements of civilization.”

A reminder that when big government is made to work well, the gains are gigantic. Nowadays it seems to me that publicly owned and operated post offices are basically anachronistic, but this was a crucial public service in geographically expanding and overwhelmingly rural country at a time when letters in the mail represented state of the art communications technology. And the underlying idea of the USPS, that the government should be facilitating the creation of high-quality communication, remains true today. That’s why the question of the AT&T/TMobile merger seems so important. The fact that the Computer & Communications Industry Association (Google, Microsoft, EBay, Yahoo, Facebook) is vehemently opposed to the deal strikes me as a credible indication that letting it go through would be a mistake

People today have a view of the founders that I think would have shocked the founders themselves. We look back and we don't see a very active federal government, and of course there's a reason for that. The founders placed a premium on limited government. That has been the quintessential American tradition. But a lot of people take that tradition and turn it into a case for sterilizing self-government and democracy where it could be the most productive, and it's this tendency that I think would be most shocking to the founders - particularly the Jeffersonians. In a lot of ways, the government was on the cutting edge and the post office is one example. Jefferson also pushed for state-sponsorship of a truly modern post-secondary education institution. Prize funds and bounties were common for industrial innovations. The early republic only looks libertarian today because the Post Office seems so quaint, so we write it off. We don't see it as the major intervention that it was. The Post Office is also a good example because we probably really don't need public mail delivery anymore. It's an example of how these things change over time. Space exploration is the same way. We are past the point where NASA needs to dominate space exploration. At one time NASA did need to do that, but now it's not clear it does. Once we establish colonies on Mars, it's not clear that we'll need any space agency at all (until that time, there are major externalities associated with colonization that I think really require a public agency).

I also think we gravely misread the founders because of our constitutional history. There was a major fight in the early republic over how far the general welfare clause extended. There wasn't substantial disagreement at all over whether the Congress should take on public works projects or internal improvements. There was only a disagreement over the legal niceties. Here, the Jeffersonians argued that the Constitution needed to be revised to include it. This is not a surprising argument and it should not be confused with a lack of enthusiasm on the part of the Jeffersonians. Jefferson, after all, was under the impression not only that the Constitution would be revised frequently but that it would be scrapped and rewritten many times over. Things didn't work out that way, of course. The preponderance of opinion went with a reading of the general welfare clause that took the words "general welfare" to include things like internal improvements. This wasn't some great betrayal of '76. All agreed that was a provision for the general welfare. But it's given an odd impression of creeping interventionism and some sly abandonment of what was fundamentally Jeffersonian. I really don't think it was. If Jefferson knew in advance that our Constitution worked so well and that we wouldn't scrap it and rewrite it on a regular basis, I don't see any great obstacle to him accepting what became the dominant reading of the general welfare clause. What he expected to achieve through regular democratic revision has been achieved through an understanding of the constitution itself as a democratic document giving Congress discretionary authority to provide for the general welfare. Jefferson's primary concern was that this power be held democratically and not tyrannically. His concern with the federalists was their enthrallment to stockjobbers and bankers - that they would wield power undemocratically. His solution was to keep the construction of our understanding of federal power democratic. In other words, Jefferson said what he said about the Constitution with Hamilton and Morris in mind. If he knew Jackson was just around the corner, I think he would have reacted differently. Does this make sense? And if Jefferson won and we had a regularly, democratically revised Constitution perhaps there would have been no need for Jackson.

Either way, the little dance that the Constitution and policy did in the 1810s-1840s or so has given the impression that there were a lot of libertarians running around in the early republic. I simply don't think that was the case.


  1. No, it was not the case. A body of consistent libertarian ethical thought was barely around by the time of Spooner, much less earlier. It takes intelligence to arrive at these conclusions, such as we have in our own age. :)

  2. Ahem.

    United States was largely a rural country in the first place, while it was not nearly as much the case for Western Europe in those years. No?

    So the very question of whether to accomodate urban or rural areas is unusual. United States is a giant territory of which only 5% is human inhabited. Western Europe has been for long a densely populated region. I think we can guess where authorities would bother more taking an initiative in this venture, if they thought it was worth their time.

    That said, what are your thoughts on telecommunications, power distribution, and transportation nationalisation by many countries in the postwar period? Do you feel it was necessary for the government to monopolise what was already handled well by the private sector? Do you feel those areas benefitted from giant inflow of taxpayer funds to expand them? Or do you feel it was an unnecessary wasteful decision, considering they would denationalise them with great pain later anyway?

  3. Interesting that Yglesias fails to note that the Postal Service was major source of censorship in the U.S. well into the 20th century (indeed, people went to prison for using the mail for free speech purposes that the government disliked). Case in point, the U.S. Postal Service banned the use of the mails for the purpose of the spread of abolitionist literature right up to the start of the Civil War.

    In Europe today, where the government has far more control over telecommunications, etc., censorship is also far more significant than it is the U.S. (though censorship is common enough in the U.S.).

    You have to ignore a vast swath of ugly history by the USPS to make it look like some sort of unbesmirched institution.

  4. 1. I imagine questions of civil liberties were not at the front of his mind in a discussion of the economics of public goods in cutting edge industries. You can only talk about so much in a blog post.

    2. I don't know the deal with telecom in Europe in general, but they're actually moving away from public postal services there. An interesting story - in Germany when they privatized the post office, one of the stipulations was that some of the money from the deal would go to support IZA - a very well known German labor economics research institute (I've presented at one of their conferences). People were worried about the effects of privatization on employment, so I suppose the establishment of IZA was supposed to symbolically say "we're going to pay attention to these employment issues and consider them important"... anyway... interesting story.

  5. (1) Looks like a good example of the Bastiat's notion of the "unseen" actually. The point is that when government involves itself in communication it comes with strings attached; it is never some sort of unalloyed good.

    (2) Much of Europe is still in the throes of "national champions" and the like when it comes to telecoms. The claim is that service is better in Europe re: mobile telephony, and that Europeans pay less when it comes broadband (though there are counter-statistics regarding this), but all that government involvement comes with the greater role of the state as gatekeeper of information, etc.

  6. BTW, civil liberties would be at the front of my mind when someone told me that hey, in the 19th century, the U.S. had a near monopoly on the primary national communication network.


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