** Federal Restaurant Commission
Topics: Regulation
07 Feb 1995
From: "DG Ervan Darnell"
Let me tell a tale of an agency which fortunately does not exist: The FRC,
the Federal Restaurant Commission. It all started when some FOV's (friends
of Variety) realized that restaurants tend to be built at the busiest
intersections and these are very valuable resources, so valuable that we
could not possibly let the free market simply buy and sell property lots at
important street corners. It might do the wrong thing. Besides that, these
lots are right next to public roads built with public money, so it only
makes sense that corner lots should be declared public property and managed
for the public benefit.
The first step after declaring these lots to be public property is to budget
a few $M to fund the FRC so it can make up regulations for these lots. The
FRC wants to run all of the lots and sell only low fat bran muffins because
that would be good for the public, but pressure from commercial interests is
too great and the FRC relents to the extent of *allowing* commericial
establishments to use 75% of the street corners so long as those
establishments are only serving the sort of food the public "needs". Just
to make sure they comply, the land is not sold of course, but rented on a
short term lease that can be jerked at every 5 year interval. McDonald's
gets ramped up selling Big Macs and french fries and is not doing too bad,
but the FRC gets pressure Morons In The Public Interest to stop this evil
practice. So, next lease renewal, McDonald's is told that it is not serving
the public interest with this fatty food. McDonald's protests that it is
serving the public interest because that is the food people wnat to buy.
The FRC assures them they are wrong and people must be told what to eat.
So, McDonald's relents to stay in business, loses some profits, and some
people eat french fries at home instead of eating out as they would rather.
Now, the FOV's are not happy because the purpose of was to serve the public
interest and McDonald's is still making a profit. Now, we all know that
someone making a profit is not serving the public interest because they are
only catering to the common tastes and not giving people the kind of food
they really should have to properly appreciate the culinery diversity of
America. So, on the remaining 25% of corners, the FRC starts arguing about
what should be built. The congressional black caucus uses their bloc of
votes to get an Ethiopian Water Buffalo burger stand, the FOV's use their
lobby power to get a combo crawdad head, nutria liver (1), and soup of
jellyfish tentacle restaurant, meanwhile the Republicans are wise to the
game and quietly pushing for a Filet Mignon restaurant with decor that is
sure to be offensive to the poor.
The problem is that nobody is willing to spend the money because they have
the sneaking suspicion these ventures will cause them to lose money. Well,
that's easy to fix, since these are public service restaurants which help
everyone generally by raising the appreciation for fine food, the FRC will
simply waive the cost of the lease. The steak restaurant is laughing all
the way to the bank with its subsidy. Some other low rent types set up
shacks to set around and drink beer all day (hey, the rent's free, why not?)
and occasionally flip an Ethiopian Water Buffalo burger. Now, the FOV's are
not particularly amused. The variety is there but people just don't see to
be patronizing it. Well, no matter, it's obviously a market failure that
these shacks are using this very special FRC real estate poorly. All that's
needed is a little federal money to spruce these places up. So, up go
taxes. Now, the places are clean, but strange thing is people still don't
like the food.
Meanwhile, a Two Pesos tried to open up along the main road, but not on the
corner completely, instead completely outside of the lots that were public
property. The FRC panicked and asked congress for new regulatory powers to
control this cabal. "What if these people sell food without being part of
the master plan? They might not serve the public interest! They might
simply try to make a profit by pandering to common tastes." They got the
regulatory authority. Nonetheless, the hunger for Mexican food was so
great, the FRC finally relented and granted Two Pesos a monopoly to sell
food so long as they kept the fat content to 0.5%, never served an alcoholic
beverage, and agreed to carry the same food line that was available in the
FRC protected special market on the corners. The monopoly was of course to
prevent competition from driving up the cost of food in the Mexican
restaurant market. Just think of the needless duplication of kitchen utensils!
A strange thing happened though. These Two Pesos started fudging on the
Mexican part. They had some Mexican restaurants selling sea food, some were
selling all kinds of chicken instead, some even had soul food in the fifth
ward, some were going really upscale and asking people to join the "club"
and pay a premium to even have a chance of being seated at the Two Pesos
Mexican Restaurant and Premium Cabal Tables. Now, Two Pesos was loving
every minute of this, they had a government protected monopoly and they were
able to quitely diversify and grab other markets. Consumers even liked it
because it was better than the directly regulated FRC restaurants.
Now, a new crop of Republicans comes along with an unexpected libertarian rh
factor in their blood stream and says this is just f*cking ridiculous, "we
are going to cut off the cash subsidy to the FRC managed restaurants and
make them get along with just their free rent subsidy". The FOV's go
nuclear. They cannot believe it. 'But if you cut off the subsidy, people
will not be able to get nutria livers!'. The response is that people can
still buy them at Two Pesos. 'What, buy them? What about the poor? What
about the people who would have to walk a block further to visit a Two
Pesos?' The economists foolishly respond that the net loss of demands unmet
is greater than the value of the food provided. This produces only blank
stares. The FOV's complain that variety will be lost because Two Pesos only
sells nutria livers with salsa instead of cajun sauce. That consumers just
don't want the sort of variety does not matter, they should be expanding
their gustatory horizons.
---------------------------------------------------------
With that little introduction, I'll return the details at hand. First, I'll
address the question of broadcast utility in general, then remark on the
particular criterion of "variety", even though I think it is bogus but still
amusing to see PBS funding fail even by its own standards. Finally, the
useless quibbles follow.
Vincent E. Kargatis wrote:
> Ervan wrote:
>> [selling bandwidth maximizes utility]
>Explain. It is not apparent that society is served by this particular
>exchange. In fact, experience shows that the fairly unique public affairs
>show will disappear and some variation of a common commercial broadcast
>enterprise will appear. Variety decreases.
I had cellular modems in mind not more TV stations. It seems that, in the
current regulatory environment, TV and FM stations have generally expanded
to the point where further stations are not profitable because of declining
audience share. The explanation to my contention is simply that if a TV
station is earning only $10M/year that's all the information it is
broadcasting is worth, i.e. for $11M people would gladly stop watching it
because they are not getting that much value out of it. Now, someone else
has a desperate need to expand cellular modem service. This provider can
make $100M/year by selling this service to people who save travel time
(time=money), save gas, service their customers faster, etc. In effect, the
people who really want the bandwidth have transferred $11M to the people who
used to be watching it then used the other $89M for operations and profit.
Everybody is now better off, strictly win-win. That this effect is
sometimes indirect makes it no less real. Selling bandwidth to the highest
bidder strictly maximizes utility.
Variety per se as a goal is irrelevant. If you want variety, let's get rid
of short wave and have "Ervan plays obscure Rush all day" at 15MHz. That
would be variety. The problem is that it would be useless variety, in the
utilitarian sense (the philosophy part is easy: Bandwidth is property. Get
off my proerty before I shoot). Of course, if one wants to be elitist and
say people should watch this no matter how much they don't want to, well,
then, you have PBS at best and Pravda at worst.
---------------
Even by your standard of variety, the FCC has had the effect of lowering
variety by strangling cable. See the Reason article I previously mentioned
for a good explanation of this. Still, cable does better than broadcast by
virtue of being less regulated. And it has also strangled it by:
>> [Abolishing the public airwaves doctrine and letting PBS scramble would
>> produce better programming because the full value could be captured.]
>
>"Worse" relative to a "cable PBS" for example, but not relative to a
>standard commercial station.
Yes, exactly. If it were possible to scramble, the market would be like
cable where more variety and higher quality is offered. Again, even by the
bogus standard of variety, "public airwaves" has destroyed variety because
the money to produce it cannot be garnered.
>3 choices:
>1) a commercial, publicly broadcast PBS,[...]
>2) the present PBS,[...]
>3) a "cable" PBS, with superior programming to (2), [...]
>(3) already exists in various cable channels. [...]
>AND it's available to the public, a priority that matters [for some]
So, there is no problem to solve. PBS government funding exists for
nothing. All of the non-poor can afford it, as for the poor, just give that
funding back to the them to subscribe to whatever they want (the PBS subsidy
would more than cover this). Or, more simply, lower their taxes by an
amount equal to what would be their cable subsidy and let them maximize
their own utility with it. If PBS is worth what it costs, the poor will use
their subsidy to put themselves back in the position they were and have no
less money than now. Of course, the truth of the matter is that PBS caters
to the rich who are happy to tax the poor to subsidize their entertainment.
The poor are watching football on NBC, variety on PBS be damned.
>> [The FCC quest for variety has destroyed variety by making it uneconomic
>> to produce.]
>
>This is bull. In what way is (different) programming more available to
>everyone in either (1) or (3)?
There is a lot of variety on cable, Nashville, Black, Discovery Channel,
CNN, C-SPAN, MTV, Nick, etc. I think that proves (3) a big win by your
variety standard. Are you telling me PBS has more variety than cable? Does
it have more variety that people actually watch? If one considers variety
to equal (extent of unique thing) times (number of people watching it), PBS
is a dead loser on the variety front. Letting stations scramble would let
them capture their audience and sell the diversity that cable does (it would
also avoid common carrier and monopoly carrier problems).
Let me sharpen this particular point. Advertising, essentially the only
legal revenue source under FCC regulations, leads to success being defined
as audience share, no matter how much viewers like the show, just so long as
they watch it. Billing for watching, on the other hand, lets shows succeed
with more limited audience share, but an audience that really likes the
show. This increases utility, and incidently, variety.
I remember when PBS showed the "Civil War". It was a big deal because they
momentarily had a show that was not dead last in the ratings for its time
slot. No one could believe it. The "public" end of the radio dial is even
worse. In the Houston market, every such station except one (KUHF/NPR) is
below, way below, the lowest ranked commercial station in audience share.
Variety for residents of Alpha Centauri maybe, earth no.
-------------------------
>Actually, I'm not defending the FCC here at all. They are evil. I am
>defending the usefulness of publicly owned stations,
Understood. The problem is that they go together. "public" stations (a
misnomer at that) necessarily need government regulation to protect them.
Since that protection keeps the price artificially low, the market cannot
pick the winner, the government must decide based on content. That's a
prescription for censorship no matter how you slice it. It has spilled over
into commericial broadcast as well as cable and is threatening to invade the
internet. It was an evil precedent indeed.
>About UHF: what's the deal? There are UHF stations. Is no further
>bandwidth being sold or something? What is the FCC's agenda for UHF?
For now, they are still trying to develop it according to their plan.
>[don't need handouts for market supportable goods, but some things are not
> such] This is
>obvious in the extreme by even a cursory glance at the arts and the
>institutions involved.
later:
> enhancement of cultural variety, support of otherwise unfunded arts,
> increasing cultural development in general, etc. [are benefits]
Not obvious to this farmer. Would you care to put some numbers to this
argument or at least give a more thorough explanation? I've already
addressed why "variety" is a non-goal. Point 2 is an observation of effect
and not a benefit as a far as I can tell. Why is point 3 valuable and why
does art subsidy achieve it? Just what the heck is "cultural devolopment"
anyway?
> [ KTRU (Rice student radio) would not survive. ]
Yes, you would have to give up the subsidy that funds your jazz show and I
never would have even had a chance to get "Ragnar's Hour" on the air.
That's the way it goes. The buggy whip manufacturers are out of business.
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(1) Nutria are large rodents, and basically pests, in Louisiana jazz territory.
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