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Theory vs. Practice

by: Paul deSa

October 6, 2010


"Well, it may be all right in practice, but it will never work in theory." -- Warren Buffett on how the academic community regards his investment approach.

The Phoenix Center apparently thinks their latest paper is so good they named it three times. "Jobs, Jobs, Jobs" is a frothy mix of algebra and math jargon ("a 2 × 1 speed of convergence parameter vector, C is a matrix that defines the contemporaneous structural relationship among employment and investment expenditures, and et = [e1,t e2,t]' is a vector of mutually orthogonal structural shocks to these variables") apparently proving that investment creates jobs (or, "we have a one-way causal relationship, in a Granger causality sense, flowing from changes in capital expenditures to jobs"). So far, so obvious.

Less well supported is the headline of the accompanying (mercifully equation-free) press release "FCC's Regulatory Agenda May Have Serious Adverse Impacts on New Job Creation.” Perhaps there is a typo, as for all the evidence in the paper, an equally appropriate title would be "FCC's Regulatory Agenda May Not Have Serious Adverse Impacts on New Job Creation." In fact, maybe we could just compromise and agree on an alternative bipartisan title: "23 Pages of Theory Actually Says Nothing at All About the Practical Effect of FCC's Agenda on New Job Creation."

Indeed, rather than just asserting that "regulatory proposals under consideration at the FCC could have significant adverse affects on employment" our friends at the Phoenix Center might be well advised to descend from theory-world to look at the actual, concrete actions taken by this Commission over the last few months. FCC decisions in the Harbinger transaction and the Verizon-Frontier merger are already catalyzing billions of dollars in private investment and creating thousands of jobs. The FCC unleashed new spectrum for Super Wi-Fi technology that could enable entire new industries and grow America’s economy. And FCC actions on tower siting and pole attachments cut costs and red tape, making it easier for companies like AT&T and Verizon to invest in new infrastructure.

While it would no doubt be fun to wander over to the Phoenix Center to sip lattes while using "the estimates from the vector error correction model [to] conduct a variety of simulations to measure the effect on jobs from a change in capital expenditures," this Commission would rather do the hard work of implementing real-world policies that help incumbents and innovators create real jobs and investments to strengthen our nation's broadband economy today and for the future.

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