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As with all things, this advantage will wither. I heard Milton Friedman once say something along the lines "There has never once been a natural [not the result
by ruleabidinguser 9y ago
As with all things, this advantage will wither. I heard Milton Friedman once say something along the lines "There has never once been a natural [not the result of government action] monopoly that stayed a monopoly for very long." People just need patience and faith in the free market.
- maverick_iceman 9y agoAlso, I don't see why a monopoly is inherently bad. If consumers actually benefit from it then what's the rationale in breaking it up? Moreover, sectors like social networking naturally favor monopolies; it's no good if your friends are scattered around 10 different sites. The current understanding of US antitrust laws is similar. The Justice Department pursues antitrust actions only if the end consumer is being hurt.
- xapata 9y agoMonopolies maximize profit by setting a price greater than the market clearing price, causing a lot of unmet demand.
- wbl 9y agoExcept that price must be below what competitors will offer.
- chasing 9y agoNo. This is the problem with monopolies. They use other advantages to win markets without competing on price, features, or innovation. It's harmful to consumers.
- xapata 9y agoA monopoly by definition has no competitors.
- wbl 9y agoYes it does! It has all the competitors that could and would be started if prices rose.
- xapata 9y agoYou're counting hypothetical competitors? So how do you propose measuring how many competitors there are in a particular market? With that definition, there are an infinite number even if I can currently purchase from only one vendor.
- mars4rp 9y agoit is government action that keeps Facebook monopoly!!! Facebook, Inc. v. Power Ventures, Inc. https://en.wikipedia.org/wiki/Facebook,_Inc._v._Power_Ventures,_Inc https://en.wikipedia.org/wiki/Facebook,_Inc._v._Power_Ventur....
- Chaebixi 9y agoFYI, HN seems to be mangling the link by excluding the final period from the link href. en.wikipedia.org/wiki/Facebook,_Inc._v._Power_Ventures,_Inc.
- loceng 9y agoIs there really a free market? Electric vehicles were squashed for a long time because oil wanted it to be that way.
- adventured 9y agoThe smart phone is what made electric vehicles practical. That solved the chicken or the egg problem as it pertained to batteries cost & battery manufacturing scale. There was no scenario under which the electric car was going to take off until lithium batteries were radically cheaper and available at truly massive scale. Mass market consumers do not want to drive EVs that get 50 or 80 mpg equivalent and cost $50,000. Tesla came along only when it was finally becoming possible to do a nice EV thanks to falling lithium battery prices, at a low enough price point that well off consumers could afford them. The rest is history.
- mrep 9y ago> Electric vehicles were squashed for a long time because oil wanted it to be that way. Could you explain a little more? I have not heard any credible evidence to support this theory.
- RobertoG 9y ago"But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again. " John Maynard Keynes
- Analemma_ 9y agoYou are correct, but when somebody quotes Milton Friedman and says things like "have faith in the free market", you're probably not going to change their mind with a quote from Keynes.
- RodericDay 9y agoThe point is not to change their minds, it's to change the mind of anyone who may happen to read both quotes.
- ruleabidinguser 9y agoWhys that? Is that an offensive thing to say? You seem to think I'm incapable of changing my mind, why? You don't know me, and you think you do. Unbecoming behavior. EDIT: And downvotes, too? I've been insulted, and I don't take kindly too it, yet I deserve to be downvoted? Thats ridiculous.
- quaunaut 9y ago"People just need to have patience" for how many generations? Standard Oil was a monopoly for over 20 years. There are countless monopolies that have gone on that long or longer, only to be broken up by government eventually. I love the free market, but between regulatory capture, legal costs, and aggressive pricing structures, monopolies can be absolutely unbeatable within the career lifetime of any person.
- ruleabidinguser 9y agoYea, its certainly still al ong time, but I wonder why anyone feels the need to try and beat a monmopoly when they are at their best? I don't think the wider consequences of eagerly busting monopolies will be positive.
- chillacy 9y agoGovernment intervention definitely creates monopolies, like in the case of telecom companies or pharmaceuticals. But it seems many aspects of capitalism lend themselves to winner take all mechanics, resulting in large companies (airliners and telecoms and entertainment companies) constantly merging and reducing competition. So without the FTC, we might have even more monopolies. Without these laws, Microsoft would be the only PC company (MS bailed apple out to keep some "competition" around) and Intel would be the only manufacturer of CPUs (likewise for Intel and AMD).
- ruleabidinguser 9y agoWho can say what would have happenned long term? My assumption is that a true monopoly is not sustainable, but I could be wrong. I don't think the evidence is there that microsoft would remain king for long.
- azernik 9y agoWell yeah. This is the "natural" monopoly that Friedman referred to (and dismissed). From the Mother of All Wikis: "Natural monopolies arise where the largest supplier in an industry, often the first supplier in a market, has an overwhelming cost advantage over other actual or potential competitors; this tends to be the case in industries where fixed costs predominate, creating economies of scale that are large in relation to the size of the market, as is the case in water and electricity services. The fixed cost of constructing a competing transmission network is so high, and the marginal cost of transmission for the incumbent so low, that it effectively bars potential competitors from the monopolist's market, acting as an early insurmountable barrier to entry into the market place." There's a good argument to be made here they all software sub-markets are natural monopolies.
- rottyguy 9y agoKeynes: "the market can stay irrational longer than you can stay solvent" which I think speaks to the frustrations of the current line of entrepreneurs.
- deleted 9y ago[deleted]
- perseusprime11 9y agoIsn't Patience the problem? It will give enough time for these monopolies to rack up money and establish dominance and driveaway several upstarts.
- gumby 9y agoFriedman simply made that assertion. I basically believe it, but like so many things in Economics it's true in theory yet of limited value in practice. First of all, on human timescales (i.e. lifetimes) monopolies can be very long lived. The Standard Oil Trust was very destructive for decades, and though it might have collapsed due to natural causes, that destruction could have lasted for decades more. Which leads to the second problem: those long periods of stagnation are multiply destructive: not only do the victims pay a premium (which they could have spent on other goods), the monopoly's existence retards innovation. The final irony in the case of Standard Oil is that is was worth more to John D Rockefeller after being broken up than it was when integrated. The government did everyone a service by breaking it up.
- iopq 9y agohttps://en.wikipedia.org/wiki/Standard_Oil https://en.wikipedia.org/wiki/Standard_Oil "In 1904, Standard controlled 91 percent of production and 85 percent of final sales. Most of its output was kerosene, of which 55 percent was exported around the world. After 1900 it did not try to force competitors out of business by underpricing them... Due to competition from other firms, their market share had gradually eroded to 70 percent by 1906 which was the year when the antitrust case was filed against Standard, and down to 64 percent by 1911 when Standard was ordered broken up" sounds like if you stop trying to compete other companies will
- ruleabidinguser 9y agoI never get the impression that people who think government intervention is good have done much research on the topic.
- ABCLAW 9y agoThis will be a relatively quick and dirty skim over history, but I hope it does something to dispel this belief. The comment you're replying to ignores a number of salient factors. It assumes that natural market activity resulted in Standard Oil's declining market share. It certainly was a relevant factor, but the overarching history of Standard Oil will hopefully lead you to recognize that it did not act alone. The Sherman Antitrust Act was passed in 1890 but it was a toothless tiger until Roosevelt assumed the office of president in 1901. Prior to then, the main case involving the act was successful in using it against labor unions. Following 1901, litigation broke up a number of companies. This is important. Investigation at the time indicated that Standard Oil employed predatory pricing up until 1900. Following 1900, they resorted to a shell-game to obfuscate what was going on. Amongst the first wave of anti-trust litigation targets were J.P. Morgan's holdings. He was cornering the railroad and steel industries successfully, the biggest coup being the formation of US Steel in 1901. The other crown jewel in the strategy was oil, namely Standard Oil, which operated synergistically with J.P. Morgan's holdings in rail and steel. During this time, we had characters like Elbert H. Gary, CEO of US Steel, who held cross-industry dinners aimed at setting uniform pricing for steel and providing management across businesses with consolidated positions against labour organization. While it had been growing at a steady clip beforehand, Standard Oil's value began to skyrocket as of 1901 with no real change in its core business practices. The SCOTUS' exposition of the issue does a great job showing how Oil's monopoly was mediated in large part through Rail (the case also indicates that practices wrt pipelines were analogous to rail): "the bill alleged that the combination and its members obtained large preferential rates and rebates in many and devious ways over their competitors from various railroad companies, and that by means of the advantage thus obtained many, if not virtually all, competitors were forced either to become members of the combination or were driven out of business" Can't transport oil if you don't have rail cars. Can't build rail cars or rail if you can't make steel, and you can't run your trains or your steel plants without oil. In 1902, the Roosevelt directed the AG to commence litigation to break-up of the J.P. Morgan headed railroad trust - Northern Securities Company. This matter was such a high priority that the case was resolved and reported through all levels of appeal in 1904. As a side note, this is mind-bendingly fast for competition litigation, even today. With the threat of anti-trust litigation preventing outright predatory pricing and "competitive" rail back on the table steel and oil began to lose their moats. But "competitive" rail wasn't very competitive, and continued a legacy of providing obfuscated sweetheart deals to Standard. They got broken up 7 years later as a result. By the time steel's litigation hit in 1920, it had proper competition and did not get broken up.
- cowardlydragon 9y agoSo one monopoly begets another one in a short time.
- ookdatnog 9y agoI like the free market and I think letting the free market do its thing is a good default solution to a wide range of problems. I don't have faith that the free market will solve any problem well if we just wait long enough though. Nor do I believe that it's wise to just sit around and refuse to fight injustice because the problem might solve itself out in 50 years. In this specific case, I think the network effect of social networks (ie it only makes sense to use a given social network if the people you want to communicate with use it as well) is so strong that the unregulated free market is not a good model to solve that problem.
- Spooky23 9y agoThat's about as qualified a statement as you can get, that is no doubt true in the alternate universe where no government exists.