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Friday, August 26, 2005

VZ MCI Merger and Karl Popper
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The Public Interest Institute - a mainstay for policy research with a limited government bent in Iowa - has published a study by Richard Wagner on the Verizon MCI deal. It is not every day that I come across a policy paper on mergers with references that extend from Copernicus to John Maynard Keynes to Karl Popper, but this paper does.

When it comes to the merger, Wagner is for it. To my mind, his approach to dynamic change in the market is well explained and the following passage is essential.

That habitual pattern of thought contained several particularly important and confining features. One was that telephones are instruments by which people speak to one another over wire-based connections. Another is that telephones and televisions are distinctly different instruments used for divergent activities, and with computers being yet a third distinct instrument. If this old fashioned pattern of thought is applied to the Verizon-MCI merger, it is possible to think that the primary difference between the pre-1984 situation and the current situation is that the national monopoly has been replaced by four regional monopolies.

To reach this conclusion, however, is to ignore all of the technological and commercial innovations that have taken place that have changed the characters of telephones, televisions, and computers, and of the enterprises that deliver those services. Competition has generated massive technological change, and those changes in turn have generated similarly massive changes in the organization of commercial enterprises. This relationship between changing technology and subsequent changes in the commercial landscape is simple to see and easy to understand.

posted by @ 4:46 PM | Think Tanks

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