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> Aren't nearly all markets regulated by Governments thanks to stuff like Laws? In general you are of course right. However in economics we usually use 'regula

• vertex-four 9y ago
  One mechanism of preventing competition: You develop a portfolio of goods. For example, every medical tool a hospital would ever need. Over time, you develop economies of scale. Now you go to your client hospitals and say "hey, I'll give you a 10% discount if you sign this agreement to buy all your tools from us, and none from our competitors". Now you have successfully locked out anyone who can't provide an equivalent entire range of products. Someone comes up with a better/cheaper scalpel? Nope, can't compete, because if they bought the scalpel, the prices of everything else they buy would rise.
  • nickik 9y ago
    There is no lack of ways to limit competition on certain items of course, the possibilities are endless. This is however not the same as limiting competition in a broader sense. What you describe just moves competition to a different level. Instead of competing on individual items you compete on a broader model of how to supply somebody if they need many goods. There are many different models possible (and many that we see in the real world) and these different models compete as much or more then competition for any individual items. Considering competition in your example, why should anybody sign a long run contract with these people if their are better offers for the majority of products or other companies who have a similar model. People are not stupid, they understand the potential of abuse when they sign such a contract and they will only do so if they benefit. If it is better to buy individually or from some company that bundles goods is always a important question for any business. How to make such compromises is what managers go to school for. Business that do such evaluation well will be more successful (as will the company who they selected). > Over time, you develop economies of scale. Basically you assumed away the hardest problem. How will they reach this massive scale for all these products? You basically said 'assume the problem is solved' and then 'see its not actually a problem'. There are tons of games companies play with bundling unbundling and a million other models that are in use in markets today. Not one of these model actually leads to significant centralisation if both parties are free to conduct business by switching to different models. Prices will not be significantly over equilibrium for a long time whatever models companies try to use. Competition is about hole systems of relations superiority over other system of relations. That how we find efficient large scale solutions, this is how Capitalism is able to find ways to improve efficiency even in already optimised system of production. Consider how many different ways there are for franchising, no one model has succeeded yet.
    • vertex-four 9y ago
      > People are not stupid, they understand the potential of abuse when they sign such a contract and they will only do so if they benefit. Actually... usually by the time these contracts come back to bite companies, the entire staff responsible for them has usually been replaced. People are terrible at figuring out what the world will look like even 5, 10 years down the line, and doubly so when they're being pressured to save money by any means possible. If you're going to say that over timescales of 20, 50, 100 years, things eventually work out - sure. In the meantime, we get to sit in a variety of local maximas, like the one I suggested, or significantly more complex ones, and people are the worse off for it.
• rectang 9y ago
  > Specifically the belief that market automatically centralize and that the government is the only way to stop this. Companies manipulating regulators are an emergent behavior of the capitalist system. It is inevitable that as a company grows large it will seek to influence the government. This pure free market of yours is a platonic ideal; once implemented in the real world the market and the regulatory environment are a unified entity on which market forces pull. In a capitalist society, there's no meaningful distinction between monopolies which granted through government regulation and those which come from the market. Historical AT&T is a market failure and a government failure simultaneously. Same with the current telecoms. As for remedies, I'm agnostic. I could potentially be persuaded that less regulation is the appropriate response in each and every case. The second half of your statement, "the government is the only way to stop this", is not an accurate representation of my views, at least. Where we divide is on the first half, "that markets automatically centralize". The two of us look at historical AT&T and from what I can tell you see exclusively government failure, not market failure -- market failure can never happen, by definition only government regulation can fail. Um, doesn't AT&T play a role? I feel like we're in a Marx Brothers movie and you're asking me, "Who are you gonna believe, me or your own eyes?"
  • nickik 9y ago
    > Companies manipulating regulators are an emergent behavior of the capitalist system. True. My point here is that we need to not give power to regulators in the first place. Power that does not exist can not be captured. I don't believe in some free market platonic ideal. I believe in a a system of property rights and a advocate system of law to defend these property rights. This system is not given to use by god but relies on a complex set of institution that nobody fully understands and constantly evolves. What I am trying to do is evolve it in a good direction. Such a system based on the exchange of property rights within a legal system will lead to growth and prosperity because most of the time you have to provide something useful to others in order to get to your own goals. This is not always the case and there is tons of fraud and other problems but its the only way ever discovered for long run growth and prosperity. Markets can produce results that are worse then one would expect, and certainty worse then general equilibrium models predict. However, I don't think there is anyway that in a market system a case like AT&T could still be such a huge issue after 100 years. Also, I think very often it is the case that market produce results that are not as good as people want, they turn to government and get something even worse. I'm not an expert on the AT&T case, so I'm not qualified to talk on it, I take your point that the market failed to produce what we expected. But, I think if you look historically, how many cases can you find where a market produced monopoly for a long period of time significantly hurt consumers. During most of that time the US had Anti-Trust law, so as a bonus question, how many cases can you find where US Anti-Trust law actually fixed the problem. On neither question you will find many examples. If we flip around the question, how many cases can you find where government provided some sort of grant or regulation that guarantied monopoly or oligopoly? There are almost infinite examples of this. Thank you for the thoughtful discussion. If you know the AT&T case well, please provide me with good sources, thank you.