Ronald Coase, the ‘father’ of the spectrum auction, dies at 102




Ronald Coase

Ronald Coase

The New York Times reports that Ronald Coase has died at the age of 102. Though you may never have heard of the Nobel Memorial Prize winning economist, his theories in the mid 20th century have a significant impact on your everyday life — assuming you’re using a cellular phone.

In 1959, the FCC doled out wireless spectrum in a significantly different way than it does today. Companies licensed the radio waves for specific uses, more or less permanently, for small fees. Enter Coase, who had already written extensively and influentially on economic concepts like “transaction costs.” Coase argued that the FCC should treat spectrum like property — auctioning it off to the highest bidder and allowing that bidder to use it however they chose — or even sell or trade it, much like land.

It was a big departure from the thinking at the time. His ideas were encapsulated in a paper titled “The Federal Communications Commission” and he testified to the FCC about his proposals. As Professor Thomas Hazlett of George Mason University recounts, the testimony was not warmly received: “Coase’s suggestion … was initially savaged by all the experts in the industry and indeed he went to the Federal Communications Commission to testify and the first question was ‘Tell us, Professor Coase, is this all a big joke?'”

It wasn’t, and in the 90s the spectrum auction became an important way not only to dole out radio waves to large companies, but also a significant revenue source for the US government. “The United States has actually generated over 50 billion dollars in revenues this way since 1994,” says Hazlett. Arguably, placing fewer restrictions on how the companies that purchased spectrum meant they were freer to develop wireless innovations like LTE.

Coase was was the oldest living Nobel laureate, and the University of Chicago says his “enduring legacy” in economic theory will live on in its Coase-Sandor Institute for Law and Economics.


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