President’s Day Event Holds Lesson Why Net Neutrality Rule Repealed

by Mike Wendy on February 21, 2018

Monday was President’s Day at the Mount Vernon estate here in Alexandria. And that meant ole’ George Washington’s property – which is a popular tourist and history attraction – was opened up to the masses free of charge. Instead of the $20 ticket for adults (and $12 for kids), it was on the house, so to speak.

Mount Vernon’s “free” President’s Day event brought throngs of people to the historic venue, making the experience less than educational or enjoyable.

I was reminded of an important economics lesson from my attendance at the annual event.

The admission fee – that is, the market / pricing signal which helps “allocate” the valued resource – was missing. Consequently, “free” made the otherwise languid and accessible landmark less than ideal to learn from and enjoy. Over 20,000 people flooded the grounds, more than quadrupling average daily attendance, making walkways crowded, exhibits rushed if viewable at all, and the line for the mansion (the main attraction) longer than most popular Disneyworld rides during peak season.

It reminded me why Obama’s Open Internet / Net Neutrality law is so bad.

Without the regular admission price, Disneyworld-sized lines resulted to get into George Washington’s estate.

Among other things, the 2015 law (which has thankfully been repealed) promoted the same type of “free” distortion on the Internet. By banning two-sided markets for ISPs, the Open Internet Order effectively subsidized companies like YouTube and Netflix (and their heaviest users), as those streaming services chewed up more than 50% of all downstream traffic during peak Internet usage hours. When consumers and suppliers don’t have to pay for a resource, man does it fly off the shelf. Congestion and other distortions result. Further, by eliminating this important pricing signal, it inhibited (or certainly did not promote) investment in infrastructure, which, ostensibly, was the goal of the law in the first place.

“Free” is fine, but it has its costs, many times undermining the very resource being accessed or used. Pricing signals can alleviate this by helping to allocate scarce resources to where they’re most valued, reducing waste and other ill-effects on the resource / underlying system.

The pricing mechanism makes Mount Vernon a better, more enjoyable learning experience when it’s in effect. It can do the same for the Internet, too.

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