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The Lynching of Microsoft

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Reading Judge Thomas Penfield Jackson’s findings of fact in the Microsoft case, you can’t help but conclude that the software company wouldn’t be in trouble if it didn’t make life so easy for consumers.

That, of course, is at odds with the judge’s explicit conclusion that Bill Gates has stifled innovation and harmed consumers. But his findings belie his conclusion. From Judge Jackson’s own words we see that a company less interested in serving consumers would have never been the object of an antitrust suit.

Before anyone sneers that Bill Gates cares about money not consumers, remember that in the marketplace, fortunes are made by satisfying consumers long-term. That’s what Gates has done-and done so well that he is despised by his competitors, who lobby the government to smash the company that has done so much to bring the incredible information revolution to our desktops.

The root of Microsoft’s “offenses” is the widespread use of Windows. Windows is indeed on a lot of personal computers. And because it is, there’s a large, eager audience for software that runs on Windows/Intel computers. This is known as the “network effect”: the more users of Windows, the more valuable and popular it becomes. But none of this could have happened if Windows did not satisfy consumers. They made Microsoft “powerful.” No one was forced to buy its products.

According to the government, that very success is a barrier to competitors. Windows gives Microsoft advantages others don’t have. Launching a new operating system is difficult because consumers demand a large software library but such a library requires a large number users. Microsoft is also in a position to use its operating system to push its own applications. By bundling and later integrating its Web browser, Internet Explorer, with Windows, Microsoft saw to it that everyone who buys a Windows PC gets the browser at no expense or effort. That caused a hardship to Netscape, which has lost market share to Internet Explorer.

Let’s concede that the popularity and widespread use of Windows is a barrier of sorts to Microsoft’s competitors. It is not a barrier of the kind the government routinely erects. Government barriers, such as occupational licensing, regulations, and import quotas, consist of the threat of physical force against anyone who attempts to breach them.

In Microsoft’s case, the barrier consists of favorable judgments made by consumers, who are satisfied with the evolving Windows operating system and the growing library of software. And because of that satisfaction, they will not lightly jump to a new, unproven system for which there is little software. As the judge said, “Consumers have by and large shown little inclination to abandon Windows, with its reliable developer support, in favor of an operating system whose future in the PC realm is unclear.”

So it is true that Microsoft has advantages others don’t have. So what? Those advantages come from its service to computer users. If the government interferes with Microsoft, it will harm the very consumers it claims to be helping.

Microsoft’s adversaries will respond that its customers are captives, enabling the company to ignore their welfare. Considering that Windows is constantly updated and the excellent browser is free, Microsoft has a funny way of ignoring its customers. But let’s suppose it one day gets complacent. That is the day consumers will start looking at competitors. Actually, they are already being wooed from several quarters. Rival operating systems-Linux and BeOS-are available and gaining ground. The World Wide Web also threatens Microsoft’s position. Why are investors smiling on these alternatives if Microsoft has such a lock on the PC desktop?

The biggest mistake Judge Jackson makes is in how he sees the marketplace. Contrary to the judge’s findings, it is an ever-churning, dynamic process in which the present is a mere snapshot disconnected from past and future. No business is safe, unless the government protects it. Consumers are best served not by government edicts but by freedom and respect for property, their own and that of entrepreneurs. The dead hand of bureaucracy, which now threatens Microsoft and its customers, may thrill the hearts of antitrust lawyers and marketplace losers, but in the end it will make us all poorer and less free.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.