In 1959, Ronald Coase published his landmark paper on the Federal Communications Commission (FCC) that would forever change the study of property rights. The primary focus of Coase’s article was to critique the FCC’s then-current approach to allocating spectrum, in which the FCC designated frequencies exclusively for particular uses (e.g., AM radio, television broadcasting, radio astronomy), divided those bands into individual licenses, and then conducted hearings to determine to whom the Commission should assign operating licenses created within those bands. These restrictions were thought necessary to prevent the chaos that occurs when multiple people attempt to use the same frequency simultaneously as well as to limit the interference that particular uses impose on adjacent frequencies.
Coase’s article on the FCC soon took on “iconic significance for law and economics scholars.” When pressed to expand on his vision of how market transactions could address externalities without direct regulation, Coase responded with The Problem of Social Cost, which laid out what would become known as the Coase Theorem. This work is often described as the most-cited article of all time in both law and economics, served as one of the justifications for awarding Coase the Nobel Prize, and has become “the starting point of most modern discussions of the economics of property rights.”
Coase’s impact on spectrum policy was equally dramatic. Coase’s impact on spectrum policy was equally dramatic. The FCC conducted its first spectrum auction in 1994,11 and, with only a few designated exceptions, current law now requires that the FCC allocate all future licenses via auction. But the FCC has yet to fully embrace the second half of Coase’s vision, which calls for replacing use restrictions with property rights.
I believe that the incomplete reception of Coase’s ideas provides some fundamental insights into new forms of property arising in an increasingly high-tech world. In particular, this incomplete reception suggests that the complex interdependencies that Coase downplayed may play a more important role than he initially thought. This Article explores these key differences and their implications for property theory.