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To: Gerald R. Lampton who wrote (20075)	6/17/1998 2:42:00 AM
From: Gerald R. Lampton	Read Replies (2) \| Respond to of 24154

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.

To: Gerald R. Lampton who wrote (20075)	6/17/1998 3:33:00 AM
From: Charles Hughes	Read Replies (1) \| Respond to of 24154

>>>I agree with you that DOJ's theory is inconsistent with trying to break up the Microsoft monopoly; indeed, as I said before, I think the DOJ complaint alleges facts which, if true, would tend to prove that Microsoft is a natural monopoly.<<< Gerry, you have mentioned this 'natural monopoly' concept before. Would you elucidate why you think the naturalness of a monopoly has anything to do with being more lenient (or the reverse) toward it. For instance, the natural human organizational method may well be the one man dictatorship reinforced by a priesthood. After all, H. Sapiens may have been on this planet for hundreds of thousands of years, and such a system would explain the apparent lack of progress until the last few thousand years, the last few millenia having been something of a fluke. The 'naturalness' of rule by force, acting through our herd instincts, can hardly be debated, but I would think we should do everything possible to preserve our democracy in the face of our baser nature. Thus so with diverse competition and an active multivendor marketplace. Have I read you correctly? And need the DOJ be constrained by this concept of 'natural monopoly'? Chaz