Cato TechKnowledge: The Feds Want To Write Your Software

[Wayne Crews]

  The Feds Want To Write Your Software

Issue #15
August 6, 2001

by D. T. Armentano

In Ayn Rand's famous 1957 novel, Atlas Shrugged, unconstrained 
politicians end up destroying the U.S. economy by regulating (among 
other things) invention and product innovation. In that vision, new 
products that would revolutionize an industry-and put less efficient 
competitors out of business-have to be controlled and even suppressed 
by government so that no company has an "unfair" advantage and 
everyone has an equal chance to compete. Critics savaged Rand's 
thesis arguing that she had portrayed regulators as political 
lunatics. The critics opined smugly that this sort of innovation 
regulation could never happen here.

Well, tell that to Microsoft. For almost a decade, Microsoft has 
battled federal and state antitrust authorities over its right to 
freely innovate in the marketplace by integrating its Web browser, 
Internet Explorer, with its proprietary Windows operating system. 
Microsoft claimed that consumers wanted integrated functionality 
because it was easier and cheaper to use, while the feds maintained 
that competitors (such as Netscape) were put at a competitive 
disadvantage by integration and could be injured by it. After a 
contentious trial and a recent appellate court decision, the basic 
antitrust issues are still unresolved.

The current innovation controversy is over Microsoft's soon-to-be 
introduced operating system, Windows XP, which has features that will 
steer consumers to Microsoft's own proprietary products and allegedly 
injure rivals such as America Online and Eastman Kodak, among others. 
The Senate Judiciary Committee has already scheduled hearings in 
September to consider, as committee member Charles Schumer (D-N.Y.) 
recently put it, whether the design of Windows XP could cause "great 
harm to consumers, as well as competing companies."

Never mind that no one (including the government's expert witnesses 
at the antitrust trial) produced a shred of evidence that any of 
Microsoft's previous innovations injured consumers. And never mind 
that the antitrust laws are not intended to protect competitors from 
consumer-friendly innovation, and that to do so would betray any 
alleged consumer-protection mission. Never even mind that no law in 
the U.S. mandates that a firm must structure its innovation to make 
competitive life easier for its rivals. Put aside all of that and 
consider the following: Do you really want the likes of Sen. Schumer 
and Senate Judiciary Committee chairman Herb Kohl (D-Wis.) writing 
your future computer software?

There are several reasons why the answer to that question must be an 
emphatic "no." The first is that the new Microsoft XP operating 
system is Microsoft's property; Microsoft invented it, owns it, and 
has a moral as well as legal right to it. That right allows Microsoft 
to determine what the software will do and who will use (license) it 
and on what terms. Any government regulation of a company's right to 
use its own property in a peaceful manner-and trade with consumers is 
entirely peaceful-is an illegitimate taking and a violation of the 
company's property rights.

Second, political control over product innovation is monstrously 
inefficient, as Ayn Rand illustrated in her novel. Sen. Schumer is 
concerned about AOL and Kodak only because those firms (and jobs and 
votes) are in his political district demanding "protection" from 
Microsoft's newest innovation. The implication is that any time 
competitors feel threatened by a rival's innovation, the politicians 
will hold hearings and threaten to regulate the offending innovator. 
Under those terms, future productivity and growth in the U.S. economy 
will be held hostage to pandering politicians and politically 
connected corporations seeking shelter from the process of creative 
destruction-to advance an absurd politically correct notion of 
competition.

Microsoft's representatives have already been invited to appear 
before the Judiciary Committee hearings in the fall. As Ayn Rand 
would say, the government needs Microsoft's expertise and cooperation 
to help lend credibility to the regulation of Windows XP, a "sanction 
of the victim" so to speak. To assert its rights, Microsoft should 
boycott the hearings and deny the feds any legitimate sanction. Let's 
get the true nature of the "hearings" out in the open. Innovation 
regulation is a counterproductive and immoral high-tech intrusion. 
Those about to be targeted need not cooperate.

D. T. Armentano (ArmentaD at irene.net) is professor emeritus in 
economics at the University of Hartford (Connecticut) and an adjunct 
scholar at the Cato Institute. He is the author of Antitrust and 
Monopoly (Independent Institute, 1998) and Antitrust: The Case for 
Repeal (Mises Institute, 1999). To subscribe, or to see a list of all 
previous TechKnowledge articles, visit 
http://www.cato.org/tech/tk-index.html

(Additional Cato analyses of the Microsoft case include Robert Levy, 
"Microsoft Redux: Anatomy of a Baseless Lawsuit," September 30, 1999,

http://www.cato.org/pubs/pas/pa352.pdf ;

and Robert Levy and Alan Reynolds, "Microsoft's Appealing Case," 
November 9, 2000,

http://www.cato.org/pubs/pas/pa385.pdf.

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