Below is the complete text of an e-mail that Barron’s Weekly’s Tom Donlan sent to me this morning. Tom’s e-mail is inspired by the discussion going on here at the Cafe, and over at Steve Landsburg’s The Big Questions, on the social benefits (or not) of competition among high-frequency traders for market advantages. (Tom’s e-mail appears here with his kind permission.)
Here’s my contribution to the debate on “socially wasteful” competition:
It’s socially wasteful to spend much time debating whether a particular investment that creates competition is socially wasteful. As with most other allegations of market failure, nobody has sufficient knowledge to be sure of the results until after the new competitive investment re-arranges the marketplace in favor of the incumbents or the new entrant or both.
This is all the more true if the debate leads to a government regulation limiting such investments unless the would-be entrants prove to a commission that their entrance would serve the “public convenience and necessity” and that no incumbents in the process would be harmed. See, for example, the American experience in railroading, trucking, taxicabs, garbage collection, telegraph, telephone, radio, television, cable television, pharmaceuticals and so on, ad nauseam.
Thomas G. Donlan
Editorial Page Editor