In this post I want to review some of the key points covered in several earlier posts. My goal is to set the stage for an Internet policy proposal based on a synthesis of New Growth Theory (NGT) and Modern Monetary Theory (MMT).
In a previous post I discussed the value of ubiquitous, symmetrical, non-discriminatory, high-speed Internet access. That analysis relied heavily on New Growth Theory (NGT), originally developed by economist Paul Romer and applied to Internet and communication policy in a paper written by law professor Susan Crawford.
Romer observed that “ideas are characterized by increasing returns, since ideas can generate new ideas and new and better ways of doing things, ad infinitum.” Based in large part on this unique attribute of ideas (as contrasted with objects), he identified “the combinatorial explosion of ideas” as a potent source of economic growth throughout history, particularly in the modern era.
Crawford extended these insights to Internet policy, making the case that the Internet is a uniquely powerful platform to facilitate Romer’s “combinatorial explosion of ideas” and the self-generating economic growth it can deliver. As a result, she concluded that:
The key organizing principle for communications law must be to support the emergence of diverse new ideas online because that is where economic growth for society as a whole will come from.
Though empirical research on the economic impacts of broadband is today still in its early stages, there is a growing body of work supporting the basic notion that the availability, speed and reliability of broadband does contribute significantly to economic and job growth, both at the micro and macro levels. For those interested, the ITU recently published an extensive review of research in this area.
Strategic Networks Group (SNG), a company I’ve worked with in the past, has also done a lot of work in this area, including extensive surveys of households and businesses. To get a quick sense of their research findings, I’d recommend a visit to the SNG blog. You can find some short posts and documents that I’d particularly recommend here, here, here, here, here and here.
Threats to an open, competitive Internet
Most recently, Crawford has focused heavily on policy considerations related to anti-competitive industry trends, including what she describes as a “looming cable monopoly.” One implication of her recent work is that this monopolistic trend will weaken the Internet’s ability to facilitate the “combinatorial explosion of ideas” and drive economic growth.
As I put it in a recent post:
[A]s a nation of households, businesses and non-profit public and private organizations, virtually all of whose future ability to thrive is dependent on Internet access that is affordable, reliable, non-discriminatory and high-speed (in both directions), do we want that access to be controlled, metered and priced by an unregulated, vertically-integrated monopolist with “a built-in, giant conflict of interest?”
I’ve also briefly discussed some industry developments with potential to help counter the monopolistic trend, including community-owned fiber networks and the Gig.U project, spearheaded by Blair Levin. I’ll be expanding that discussion in a later post.
The role of MMT
In various posts (see here, here, here and here) I’ve discussed Modern Monetary Theory (MMT) and how it relates to government spending and deficits, job creation, economic growth, inflation and deflation, differences between the U.S. and the European Monetary Union and, most significantly for the purposes of this blog, the potential role of U.S. fiscal policy in maintaining a healthy economy that works for the vast majority of its citizens, not just those at the top of the wealth (and also the political) pyramid.
In one of those posts I began to link MMT to Internet policy, explaining that:
I’m going to focus mainly on the policy implications of MMT’s claim that federal budget spending only becomes problematic “when the budget deficit accelerates and pushes total spending in the economy beyond the real capacity limits.”
If true (and I’m convinced that it is), this claim has very important policy implications…All the more so today, when…we face serious long-term challenges related to providing our citizens with high-quality education, healthcare and employment opportunities, and to addressing climate change and necessary changes in how we generate, distribute and use energy.
As I see it, the ubiquitous availability of high-capacity, symmetrical, non-discriminatory Internet connectivity is a key component of the infrastructure necessary to successfully meet these challenges (and also to improve the functioning of our painfully dysfunctional political system). Unfortunately, the evolution of Internet access and related public policies has fallen far short of what I and many others consider ideal.
As I’ll discuss in a future post, MMT appears to have significant implications for addressing these shortfalls in Internet availability and policy, which, in turn, can help address these broader societal challenges.
In this post I hope to clarify the relevance of MMT to Internet policy, especially when combined with Internet-related insights gleaned from NGT.
Toward that end, it’s helpful to review an excerpt from an MMT-focused post by Dan Kervick, which I discussed earlier. To get a clearer sense of where I’m going with this, you might replace “Department of Schools” with “Internet Investment Fund” when reading the excerpt.
We might typically think of some country’s Department of Schools, for example, as having a certain quantity of money X in its account, and being authorized to spend that sum, so that as it spends, the stock of money it has is depleted. But we could just as easily think of the Department of Schools as…having no money at all, but being authorized to create the sum X by spending it into existence. Money attributed to government accounts, then, can be thought of as a kind of abacus for keeping track of its money injections via spending or money extractions via taxation. These operations are carried out in accordance with pre-selected policy choices, and so some way is needed of keeping track of them. But the money in those government accounts doesn’t represent a stock of wealth possessed by the government.
To clarify the point Kervick was making, I added:
Nor does it represent a stock of wealth that is “lost” to the government after “spending” it on education (e.g., by hiring more teachers and teacher aids, building and repairing schools, upgrading computers and Internet access, etc.). Nor does it create a debt burden that must be borne by current or future generations.
I also cited a “scorecard” metaphor (courtesy of the MMTWiki), for those not familiar with the function of an abacus:
As a currency issuer, a modern money regime spends by crediting bank accounts. This is much like changing numbers on a scoreboard in a game of sports – and a scoreboard does not run out of points. The currency issuer is the scorekeeper. The currency users are the players of the game, and will have to work to obtain the points.
I concluded that post with:
So, if federally-issued currency is the equivalent of points on a scoreboard that can’t run out, the question before us as citizens of a sovereign currency-issuing democratic republic is: how do we want to use that currency to generate real and sustainable value?
It’s here that MMT ties directly into NGT to create a compelling rationale for growth-promoting Internet policies.
The basic logic is:
1. NGT explains how ubiquitous, affordable, open, symmetrical, high-capacity Internet connectivity facilitates strong economic growth by fueling “the combinatorial explosion of ideas.”
2. MMT explains that federal investment to support advanced Internet infrastructure, usage, skill-development and applications that leverage the web’s “idea combining” capabilities, is not only beneficial (as explained by NGT), but also poses no risk to federal government solvency, nor any serious risk of problematic inflation, especially if it is undertaken in today’s low-growth, high-unemployment environment, provides jobs to the unemployed, increases productivity, and drives real economic growth in service of real human needs (as predicted by NGT).
3. Taken together, these two economic perspectives lead to the conclusion that federal investment in Internet infrastructure, skill development and applications would generate strong and self-sustaining economic growth, and help us revitalize key sectors of the economy, including education, healthcare and job creation.
In a follow-up post I’ll discuss some issues and ideas related to the implementation of this kind of Internet policy.