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Monopoly and regulation: Microsoft

While I have no objection in principle to a regulated form of capitalism,
we must try to understand that on this aspect too, there are levels of
regulation, and we must strive to specify a democratic and minimal level
of regulation.

Case in Point: Microsoft.

In the 11th May issue of the Business Week, the results of a survey have
been published. In that survey, readers were asked about whether the
government should do nothing about Microsoft, regulate it, or break it up.
The response (out of over 5,000 who responded):

Do nothing:  67%
Regulate:    22%
Break it up: 11%

A simple letter to the editor by one reader summarized this verdict: "If
you let the marketplace decide, it will. We don't need the Justice
Department to decide for us." 

Reverting to the same topic from a highly theoretical perspective, I quote
from Gary Becker's "The Economics of Life", page 309: Talking about George
Stigler the Nobel Prize winner who died a few years ago, Becker states,
"The way to prevent monopolistic practices, he believed, is to encourage
domestic and foreign competition rather than through detailed regulation
of business by the Justice Department." Becker himself won the Nobel prize
in 1992 for his work, on one thread of which I am carrying forward in my
dissertation (family economics).  The key problem that Stigler discovered
was that "instead of a single-minded devotion to improving competition,
regulators responded to pressures to attack or defend 'big' business, to
protect small companies, and to appeals from political constituencies."

Again, one of the critical problems comes at the level of
**implementation** of these regulatory objectives. You do not find such
"perfectly" objective and "welfare-oriented" human beings to man any
government position, anywhere in the world. **All** human beings are
greedy (want more of what they value than less), want their personal gain
more than social gain (that is why we have so few people participating in
politics in India and everyone leaving India for the USA), and are
opportunisitic (will cheat if given the opportunity). I have, in my
extensive experience in government, not seen any saint, so far [there are
of course a few misguided folks who think that their being good can solve
India's problems]. 

I do not feel comfortable giving anyone an absolute power to decide to
regulate me. Therefore if necessary we must incorporate the concept of
"true" referenda based on a random sample of the population, in order to
decide upon the fate of a Microsoft in India. I use the quotes around
"true" since I very seriously distrust any governmentally organized
referendum. If we are to go by such referenda then these must be organized
by fully private parties who have a stake in honest methods, such as the
Gallup in the Western world. 

Given such a fair mechanism, I would much rather have the views of 10,000
randomly selected people as the basis of a decision than trust any other
human, high or low, to decide any public issue himself or herself. Human
beings are so strongly affected by their personal biases, particularly
jealousy of "big" entrepreneurs, that they cannot be trusted, in
isolation, to decide upon the best mode of regulation. 

Today, for example, if the Justice Department in the USA goes against
Microsoft then that would be the most anti-democratic thing to do,
irrespective of its "intentions." 

I would hate to have a Microsoft in India snuffed out by a bunch of
ideological decision-makers. Therefore, I would support:

a) regulation rather than direct control (i.e., complete privatization) 
b) minimal regulation by a completely democratic process 
c) use of well-researched economic criteria to determine if "concentration 
of power" has been achieved, prima facie, in a particular industry. 

As I write this, I must admit that I was very happy to find my views
supported by a vast majority of Americans, given the rather strong views
against Microsoft that Kush holds. These Americans are no jokers.  They
have fought for their freedom from all kinds of governmental intervention
for two hundred years now, and they will not let any bunch of
"well-meaning" Justice Department officials interrupt the process of
market-determined outcomes (remember: the market is the most democratic,
since **each** individual, by his or her buying and selling decision,
determines which industry ought to exist and which ought to close down).

The USA is not yet a country where pure capitalism flourishes, but it
comes closest to it, by any yardstick. People are convinced here, that
government interference is a violation of their fundamental human right to
decide themselves about each cause. If Microsoft is really bad, I can buy
Apple, or I can buy WordPerfect. I don't want to be told by anyone about
what I must buy or not buy. In India this strong arrogance of each
individual has not yet developed enough. We are subservient to the
government and want IAS officers like me to decide for the people. Do you
trust me to decide for you? If not that is a good sign. People need to
trust in themselves, first, and not anyone else, whether elected or

One reader rightly said in the Business Week: If Microsoft was so bad then
why do the government officials in USA not stop buying those products and
switch to others (Corel's Microsoft package, for instance, or to Apple,
for instance)? The truth is that Microsoft has become so big not because
of "monopolistic" behavior but because its competitors were unable to
produce a better package of goods at the right time. The price of these
packages is irrelevant. What does a business care about a few hundred
dollars for software, when its hardware costs run into the thousands of
dollars? What it is looking for is a simple, well supported system that
can run other software and is easy for others to use.

Today there is so much positive anticipation for Windows 98. Where are IBM
and others, why is there nothing being offered by them at all? To use the
absence of a competitive spirit from other competitors to attack Microsoft
(which is at least doing something), is to attack India_policy for its
failings [such as: how will you implement this Manifesto, how realistic is
this, how beautiful a document but of what use, etc.]. At least we are
doing something. No one else in India is willing to assemble a document
like what we are trying to do. So should we say we are a "monopoly" and
shut down our shop?

Anyhow, I do not wish to drag on this issue. I am not defending or
attacking Microsoft. I care the least for Microsoft or Bill Gates. Just
using this as a point to illustrate the importance of democratic methods
of decision making. This democracy can of course be much benefited if our
population is fully literate. So, let us focus on that, too.