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> The problem with privatization is it often involves granting monopoly powers to a private company instead of opening up the market to private competition. Pr

by imagist 10y ago

> The problem with privatization is it often involves granting monopoly powers to a private company instead of opening up the market to private competition. Private competition almost always ends in monopoly or trust anyway. Private competition isn't a stable state. When two companies are competing, both are trying their best to put the other out of business. It should be no surprise at all when that eventually happens. Monopoly, on the other hand, is a stable state--it takes extraordinary circumstances, usually government intervention, to overturn a monopoly. Even if a small competitor manages to eat a chunk of a monopoly, the monopoly company can simply buy them out in most cases. Giant corporations can even become unassailable by government, as their wealth allows them to lobby for laws that favor them. The alternative is for corporations to form a sort of truce, where they don't touch each other's slightly different markets, effectively granting each other a monopoly in each other's areas. The clearest example of this is cable companies not laying cable in each other's territory, but there are plenty of other examples--Coke/Pepsi, IBM/Intel. This is also a stable configuration which is more sophisticated than a monopoly. The benefit to corporations is that it reduces their risk--having to overturn competitors means taking the risk of overplaying your hand--but there's no real benefit to consumers. So ultimately, I'm not sure it makes sense to say that monopolies are the problem and not privatization. Privatization ends in monopoly.

saosebastiao 10y ago
This is entirely false, and there are stacks of economic literature spanning a 200 year timeframe and covering every economic ideology that have explored why it isn't like that, and surprise surprise there actually is a consensus. High barriers to entry are the cause of natural monopolies. And not every industry has high barriers to entry. And oligopolies and collusion have never been stable.
- wfo 10y ago
  Ironically in simultaneous parallel to the 200 years of economic literature we have explaining why it isn't like that, we have 200 years of recorded history explaining why it is like that. When scientific theory and facts come into a disagreement, theory walks away defeated. But when economic theory and facts come into a disagreement, the opposite occurs -- the facts must be reinterpreted properly to fit the theory, of course, so economists may continue on as highly educated cheerleaders for wealthy capitalists. Oligopoly and collusion is nothing more than a succinct description of actual economic history.
  - saosebastiao 10y ago
    Economic literature isn't just philosophical or theoretical, it is empirical as well. The only empirically falsifiable theory here is that monopoly is natural for all businesses. The world's oldest profession, prostitution, has never been run by companies the size of Standard Oil. Neither has wheat, sugar, electricity production, coal, iron, or copper. Only revisionist history would take such a limited view of the economic scope of the world. If monopoly were the economic end state of all industries, surely some of these old industries would have been monopolized by now...or at least they would have been before Anti-Trust law was a thing. Note that that has not ever happened. A natural monopoly only exists in the face of high barriers to entry. Those barriers may be natural, or they may be political, but either way they must be high. Some may be high enough to only have a few competitors, but compete they must do. Collusion is mathematically and empirically unstable. In fact, the economic criteria for cartel success is a) how much profits increase, and b) how long they last. There would be no need for `b` as a success criteria if they were stable.
    - fish55 10y ago
      And there is a tendency towards (politically-created) monopoly because only monopolies can concentrate enough wealth to buy elections. Natural or political, the only way to do away with monopolies does not have to do with public/private, but with campaign finance reform.
    - imagist 10y ago
      > The world's oldest profession, prostitution, has never been run by companies the size of Standard Oil. This is because of government intervention (it's illegal for Christ's sake). > Neither has wheat, sugar, electricity production, coal, iron, or copper. Wheat has been regulated forever. Sugar--are you not aware of the corn lobby? Electricity production: this is pretty well monopolized regionally. Coal: not yet. Iron: USS wasn't a good enough a monopoly for you? > A natural monopoly only exists in the face of high barriers to entry. Those barriers may be natural, or they may be political, but either way they must be high. Some may be high enough to only have a few competitors, but compete they must do. Collusion is mathematically and empirically unstable. In fact, the economic criteria for cartel success is a) how much profits increase, and b) how long they last. There would be no need for `b` as a success criteria if they were stable. What makes you think that a large company will not create high barriers to entry in their field? When a company reaches a size where they can lobby the government successfully the field ceases to be an even playing field.
- imagist 10y ago
  > This is entirely false, and there are stacks of economic literature spanning a 200 year timeframe and covering every economic ideology that have explored why it isn't like that, and surprise surprise there actually is a consensus. "It is difficult to get a man to understand something, when his salary depends upon his not understanding it." -- Upton Sinclair
  - saosebastiao 10y ago
    > "It is difficult to get a man to understand something, when his salary depends upon his not understanding it." -- Upton Sinclair Ah, so you're in the "reject science" camp. Gotcha.
    - imagist 10y ago
      To clarify for anyone who might be confused like saosebastiao about what I'm saying: the consensus saosebastiao is claiming exists is exactly what you would expect from economists who are trying to make money for themselves. It's additionally worth noting that a) there is not a consensus, and b) consensus is not part of the scientific method.
      - saosebastiao 10y ago
        There is a consensus, and in social sciences like economics, consensus absolutely matters because universal truths do not exist. And no, the incentives of academic economists are not aligned with industry like is claimed. If that were true, the majority of academic economists would not be Keynesian welfare-state supporting democrats like they currently are in the US.
08-15 10y ago
> Private competition almost always ends in monopoly or trust [truce? oligopoly?] anyway. Doesn't seem so to me. As far as I can tell, all real life monopolies or oligopolies only exist because of intervention by the police state. The canonical examples that come to mind would be Microsoft (only possible because of copyright, a monopoly granted by the police state) and Standard Oil (only possible because of mining concessions, a near monopoly granted by the police state). Here in Germany, Deutsche Bahn (the rail operator) had a practical monopoly on long distance travel, all thanks to a special law granted by the police state. Said law has been repealed by the EU a few years ago (2009 or so), and the competition from long distance buses is fierce now. Can you name any monopoly that ever existed and wasn't created by the police state effectively granting it? (For this argument, it doesn't matter if these police state granted monopolies are a good thing in some sense. I don't think so, but the point is really that competition works unless it is artificially restricted.) > other examples--Coke/Pepsi, IBM/Intel. How does Coke/Pepsi even come close? I see quite a number of caffeinated sugary soft drinks on the market (all equally disgusting). IBM/Intel? Well, IBM had something resembling a monopoly in the mainframe era. I wasn't around back then, but most computers were probably sold to the police state. Intel has had a near monopoly on desktop computers for the past 25 years or so, but only because Microsoft DOS/Windows wouldn't run on anything else, so this is actually an extension of the Microsoft monopoly mentioned above. I'm not sure about the cable companies. Theoretically, is anyone allowed to run a cable from A to B? If no, you can only ever have one cable provider in a given region, again, thanks to artificial rules made by the police state. I'm genuinely curious about any examples of monopolies that developed in a free market.
- imagist 10y ago
  > Here in Germany, Deutsche Bahn (the rail operator) had a practical monopoly on long distance travel, all thanks to a special law granted by the police state. Said law has been repealed by the EU a few years ago (2009 or so), and the competition from long distance buses is fierce now. Competition within the rail industry? I doubt it. I'd be extraordinarily surprised if any other rail operator arises in Germany--the only way I can see this happening is if a larger rail operator from another country enters Germany. This is a pretty strong example of a monopoly. > I see quite a number of caffeinated sugary soft drinks on the market (all equally disgusting). Look at who bottles them. The vast majority are bottled by either Coca Cola or Pepsi. There's been a surge of attempts at "craft" sodas lately, but most have had little success or been bought by one of the giants. > I'm genuinely curious about any examples of monopolies that developed in a free market. See above.

by imagist 10y ago

saosebastiao 10y ago

This is entirely false, and there are stacks of economic literature spanning a 200 year timeframe and covering every economic ideology that have explored why it isn't like that, and surprise surprise there actually is a consensus. High barriers to entry are the cause of natural monopolies. And not every industry has high barriers to entry. And oligopolies and collusion have never been stable.

wfo 10y ago
Ironically in simultaneous parallel to the 200 years of economic literature we have explaining why it isn't like that, we have 200 years of recorded history explaining why it is like that. When scientific theory and facts come into a disagreement, theory walks away defeated. But when economic theory and facts come into a disagreement, the opposite occurs -- the facts must be reinterpreted properly to fit the theory, of course, so economists may continue on as highly educated cheerleaders for wealthy capitalists. Oligopoly and collusion is nothing more than a succinct description of actual economic history.
- saosebastiao 10y ago
  Economic literature isn't just philosophical or theoretical, it is empirical as well. The only empirically falsifiable theory here is that monopoly is natural for all businesses. The world's oldest profession, prostitution, has never been run by companies the size of Standard Oil. Neither has wheat, sugar, electricity production, coal, iron, or copper. Only revisionist history would take such a limited view of the economic scope of the world. If monopoly were the economic end state of all industries, surely some of these old industries would have been monopolized by now...or at least they would have been before Anti-Trust law was a thing. Note that that has not ever happened. A natural monopoly only exists in the face of high barriers to entry. Those barriers may be natural, or they may be political, but either way they must be high. Some may be high enough to only have a few competitors, but compete they must do. Collusion is mathematically and empirically unstable. In fact, the economic criteria for cartel success is a) how much profits increase, and b) how long they last. There would be no need for `b` as a success criteria if they were stable.
  - fish55 10y ago
    And there is a tendency towards (politically-created) monopoly because only monopolies can concentrate enough wealth to buy elections. Natural or political, the only way to do away with monopolies does not have to do with public/private, but with campaign finance reform.
  - imagist 10y ago
    > The world's oldest profession, prostitution, has never been run by companies the size of Standard Oil. This is because of government intervention (it's illegal for Christ's sake). > Neither has wheat, sugar, electricity production, coal, iron, or copper. Wheat has been regulated forever. Sugar--are you not aware of the corn lobby? Electricity production: this is pretty well monopolized regionally. Coal: not yet. Iron: USS wasn't a good enough a monopoly for you? > A natural monopoly only exists in the face of high barriers to entry. Those barriers may be natural, or they may be political, but either way they must be high. Some may be high enough to only have a few competitors, but compete they must do. Collusion is mathematically and empirically unstable. In fact, the economic criteria for cartel success is a) how much profits increase, and b) how long they last. There would be no need for `b` as a success criteria if they were stable. What makes you think that a large company will not create high barriers to entry in their field? When a company reaches a size where they can lobby the government successfully the field ceases to be an even playing field.
imagist 10y ago
> This is entirely false, and there are stacks of economic literature spanning a 200 year timeframe and covering every economic ideology that have explored why it isn't like that, and surprise surprise there actually is a consensus. "It is difficult to get a man to understand something, when his salary depends upon his not understanding it." -- Upton Sinclair
- saosebastiao 10y ago
  > "It is difficult to get a man to understand something, when his salary depends upon his not understanding it." -- Upton Sinclair Ah, so you're in the "reject science" camp. Gotcha.
  - imagist 10y ago
    To clarify for anyone who might be confused like saosebastiao about what I'm saying: the consensus saosebastiao is claiming exists is exactly what you would expect from economists who are trying to make money for themselves. It's additionally worth noting that a) there is not a consensus, and b) consensus is not part of the scientific method.
    - saosebastiao 10y ago
      There is a consensus, and in social sciences like economics, consensus absolutely matters because universal truths do not exist. And no, the incentives of academic economists are not aligned with industry like is claimed. If that were true, the majority of academic economists would not be Keynesian welfare-state supporting democrats like they currently are in the US.

08-15 10y ago

> Private competition almost always ends in monopoly or trust [truce? oligopoly?] anyway. Doesn't seem so to me. As far as I can tell, all real life monopolies or oligopolies only exist because of intervention by the police state. The canonical examples that come to mind would be Microsoft (only possible because of copyright, a monopoly granted by the police state) and Standard Oil (only possible because of mining concessions, a near monopoly granted by the police state). Here in Germany, Deutsche Bahn (the rail operator) had a practical monopoly on long distance travel, all thanks to a special law granted by the police state. Said law has been repealed by the EU a few years ago (2009 or so), and the competition from long distance buses is fierce now. Can you name any monopoly that ever existed and wasn't created by the police state effectively granting it? (For this argument, it doesn't matter if these police state granted monopolies are a good thing in some sense. I don't think so, but the point is really that competition works unless it is artificially restricted.) > other examples--Coke/Pepsi, IBM/Intel. How does Coke/Pepsi even come close? I see quite a number of caffeinated sugary soft drinks on the market (all equally disgusting). IBM/Intel? Well, IBM had something resembling a monopoly in the mainframe era. I wasn't around back then, but most computers were probably sold to the police state. Intel has had a near monopoly on desktop computers for the past 25 years or so, but only because Microsoft DOS/Windows wouldn't run on anything else, so this is actually an extension of the Microsoft monopoly mentioned above. I'm not sure about the cable companies. Theoretically, is anyone allowed to run a cable from A to B? If no, you can only ever have one cable provider in a given region, again, thanks to artificial rules made by the police state. I'm genuinely curious about any examples of monopolies that developed in a free market.

imagist 10y ago
> Here in Germany, Deutsche Bahn (the rail operator) had a practical monopoly on long distance travel, all thanks to a special law granted by the police state. Said law has been repealed by the EU a few years ago (2009 or so), and the competition from long distance buses is fierce now. Competition within the rail industry? I doubt it. I'd be extraordinarily surprised if any other rail operator arises in Germany--the only way I can see this happening is if a larger rail operator from another country enters Germany. This is a pretty strong example of a monopoly. > I see quite a number of caffeinated sugary soft drinks on the market (all equally disgusting). Look at who bottles them. The vast majority are bottled by either Coca Cola or Pepsi. There's been a surge of attempts at "craft" sodas lately, but most have had little success or been bought by one of the giants. > I'm genuinely curious about any examples of monopolies that developed in a free market. See above.