Economics isn't called the dismal science for nothing and few of its proponents do much to lift the subject above its general reputation.
An exception should - at least momentarily - be made in the case of Gavyn Davies, the former chairman of the BBC. He may not have been terribly good at handling Greg Dyke and even less adroit at dealing with bullying politicians, but when he talks about the economics of broadcasting, Davies the international economist starts to make sense.
His economic defence of the BBC and its Royal Charter at the Said Business School last week isn't exactly going to make headlines around the world or set the blood rushing to the head. But in a world awash with silly ideas from people, who really should know better, the Davies view deserves some attention and thought. It's all the more useful because the former BBC chairman has few remaining vested interests in the matter.
His case is a relatively simple one and luckily we don't need a first-class economics degree to get our minds around it. The ideas involved are as old as the hills; Davies argues that, left to its own devices, the free market will produce nothing like the BBC and its range, or above all, quantity of programmes. The old 'market failure' argument, he believes, is alive and well and is still the primary reason why the BBC should have such special treatment in the form of the licence fee.
This doesn't mean that the Corporation should only produce those programmes that are missing from the free market. 'Since practically everything is produced to some degree by the free market, such a rule would soon leave the BBC producing absolutely nothing at all,' Davies argues.
The aim is to produce the 'social optimum' of what Davies calls, for the sake of convenience, 'Reithian' services. The role of the BBC is to fill that gap between what the market would provide and the optimum.
Despite changes in technology, broadcasting remains a 'public good', in that once the programmes and transmitters have been paid for, the cost of an extra viewer is effectively zero. This, the former chairman believes, applies just as much to satellite as to terrestrial television. It also implies, Davies argues, that subscription or charging at point of use is not the most efficient way.
The Davies lecture in welfare economics concludes that broadcasting tends to lead to monopolies in a free market; it creates interpersonal relations important to society, but not fully reflected in market transactions; and because people can't know in advance what unusual programmes they might like, yet again the free market approach is not the ideal one. …