Here is a link to the entire Greenspan statement:
interactive.wsj.com
And, yes, it definitely contains some very pointed criticisms of the network effects literature.
That markets, on occasion, can be shown to be behaving in a manner presumed inferior to some presubscribed optimum is not a difficult task. For example, suboptimal product or operational standards are seen by some to persist because, once in place, they are difficult to dislodge. Often cited is the word processor keyboard whose key placement still reflects the manual typewriter's need to prevent its keys from sticking, rather than convenience to the typist. A more recent example pointed to by some is the universal adoption of VHS-based VCR technology. The more general proposition is that the success of competing technologies depends more on the relative size of their initial adoptions than on the inherent superiority of one over the other (what economists term "path dependence"). I should point out, however, that these examples, and the more general proposition, are not without challenges.
To demonstrate that a particular antitrust remedy will improve the functioning of a market is also often fraught with difficulties. For implicit in any remedy is a forecast of how markets, products, and companies will develop.
Forecasting how technology, in particular, will evolve has been especially daunting. The problem is that the various synergies of existing technologies that account for much of our innovation have been exceptionally difficult to discern in advance. For example, according to Charles Townes, a Nobel Prize winner for his work on the laser, the attorneys for Bell Labs initially refused, in the 1960s, to patent the laser because they believed it had no applications in the field of telecommunications. Only in the 1980s, after extensive improvements in fiber optics technology, did the laser's importance for telecommunications become apparent. |
