Bolstering Economics at the FCC: Will a Separate Office Help?

Bolstering Economics at the FCC: Will a Separate Office Help?

When I was chief economist at the FCC in 2014, the largest fraction of my time was spent on how to improve the standing of economists and use of economics at the FCC. Many of the economists at the FCC, and some others as well, shared my concern that economists and economics was undervalued there.

Current FCC Chairman Ajit Pai has recently proposed creating a Bureau of Economics and Data. I have no small amount of instinctive sympathy for his proposal, having myself been part of the Department of Justice Antitrust Division’s then-new Economic Policy Office, now called the Economic Analysis Group, at the beginning of my career. The Office’s goal was to preserve the ability of economists to make policy calls apart from pressures from the lawyers to evaluate cases on the basis of courtroom success.

EAG has played a major role in promoting economics both at the Division and antitrust law as a whole, and made the Economic Analysis Group one of the most attractive places for top-shelf industrial organization economists to work. The Bureau of Economics at the Federal Trade Commission has played a similar role.

Nevertheless, while Chairman Pai’s interest in forming a similar organization within the FCC is understandable, as is the support his proposal has received (see here and here), I do not believe that a such an office of economics is the right fix for the FCC, and may do more harm than good.

As an initial matter, although the use of economics at the FCC is not perfect, its economists have done extensive, valuable, and successful work. One need only point to spectrum auctions and the thoroughness of the economic analysis of merger reviews to know that.[1]  Justifying organizational change premised on an absence of economics would be a mistake.

A first and less important problem is the name. It is that many at the FCC have viewed economists as a source of a number rather than a resource that can help devise and assess policy positions. The proposed name, “Office of Economics and Data,” reinforces this trivialized view of economics–not to mention jokes throughout the FCC about the “Office of ED.”

More serious is the potential harm to integrating economics into FCC analyses. Creating a separate bureau could worsen this problem with the risk of creating a “Siberia” effect: Putting economists into a single place makes them easier to ignore, now and perhaps in the future when tides change.

The Siberia risk starts at the beginning of the policy process. Matters at the FCC arise in or are sent to the bureaus. Pulling economists out of those bureaus into a separate office will make it harder to get economics involved in matters at the beginning, where they can have the most influence on direction. In addition, some staff economists have expressed concerns that segregating economists into a separate office will inhibit valuable collaborations with technologists and lawyers.

Unlike the Antitrust Division or the FTC, the FCC’s actions are not subject to review by courts specifically on economic grounds. The Administrative Procedure Act says that agency decisions cannot be arbitrary and capricious, but it provides no requirement to give economics much or any weight. Consequently, the FCC is not under the same external legal pressure as antitrust to take economics seriously–especially when the FCC operates on a public interest standard that (correctly in my view) takes other policy goals into account besides economic efficiency.

Moreover, having an OED, or whatever it might be called, does not address an issue of concern to Chairman Pai and other advocates of an economics bureau—getting economists a seat at the table when the FCC makes decisions. As others have observed, one cannot assume that creating a Bureau will ensure that this will happen.

While I was chief economist, I proposed four changes that could address the problems and boost economics at the Commission.

First, the chief economist (and chief technologist) should sign off on significant FCC agenda items, not with veto power, but to have the opportunity to provide an independent assessment of the economic merits of a proposed rule or action. I do not have a lot of faith in this proposal, so I am curious to see what the Chairman Pai will do to ensure that economists play the role that he envisions. But no one should assume that having an economics bureau will solve the problem—and, in light of the Siberia risk, it could well make it worse.

Second, it should be easier for staff economists to publish working papers or articles. Recruiting the best economists requires assuring them that their professional research identity will not disappear once they start working at the FCC. The FCC Office of Plans and Policy was a leading outlet for staff papers in the 1970s and 1980s, but publication had become difficult since, with requirements that papers be vetted for content. I recognize that in a tense political environment, the FCC may not want to lend its brand to research papers taking contrary positions. But with the advent of the Social Science Research Network and other outlets, economists can share their work without any implied FCC imprimatur and disclaiming any representation of FCC views.

While I was at the FCC, I recommended changing the publication guidelines to require only review to ensure that no classified information is disclosed, and that economists (or anyone) not be summarily prohibited from using FCC computers when they have free time. I believe the FCC has taken steps to improve the publication opportunities for staff economists, and I hope this puts the FCC on a better footing compared to the Economic Analysis Group or FTC Bureau of Economics in attracting the best candidates on the job market.

Minimizing the clearance process for publishing will go only so far if the supervisors of staff economists fail to recognize the value of research and, more broadly, independent thinking. This gets to the third and most important change the FCC should make to improve the standing and quality of economic contribution: economists should report to other economists, up to the chief economists in the bureaus. This would accomplish what an OED would achieve while preserving the ability of staff economists to know what is happening in the bureaus and minimizing Siberia risk. Moreover, were the chief economists of the bureaus reported to the chief or deputy chief economist, the FCC would have a virtual “economics office”. Not only could it be cast as within the scope of Chairman Pai’s proposal, but I know from experience having a bureau to supervise could help recruit future chief economists.

Fourth, whenever the FCC decides to use “outside” economists as consultants, it should get recommendations from the chief economists of the relevant bureaus. While staff economists often like working with outside experts, having the General Counsel’s office select them, as happened when I was there, sends a message that staff economists do not matter. This is neither appropriate not good management. At minimum, when a matter affects a bureau, the chief economists in that bureau should be involved in selecting outside experts, either proposing a list (including inside experts if suitable) or making recommendations from a list of candidates from the General Counsel’s office or whenever. None of this will matter if the FCC fails to persuade the public that it takes economics seriously. Consequently, it has to be prepared to die by the sword as much as live by it. Many in the public might understandably think that “economics” is nothing more than cover for an ideological commitment to deregulate. This is not the case. Economic analyses can and have shown in a number of areas that the benefits of a regulation exceed the costs. The data can show that there is market power that regulation could usefully constrain. Only a record over time will confirm, OED or not, that the FCC is fulfilling Chairman Pai’s vision for the role of economics.

[1] I have unfortunately been quoted as saying that the 2015 Open Internet Order was an “economics-free zone”. Whether that is true, the quote has been twisted into a claim that the FCC itself is an economics-free zone. I would never say that, as it is not true. It was an honor and privilege to work with the FCC’s economists.

* Tim Brennan is a professor of Public Policy and Economics and the University of Maryland, Baltimore County. He recently served as Chief Economist at the FCC.

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