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Do you even know what a natural monopoly is? Have you ever seen anywhere in the world where the business of a natural monopoly is actually not a monopoly? Is th

Do you even know what a natural monopoly is? Have you ever seen anywhere in the world where the business of a natural monopoly is actually not a monopoly? Is there anywhere in the world where a can buy a house and can have 5 different companies with 5 different sets of pipes attached to my house in fierce competition with each other offering me water service? I would really like to check out such a place. This is one of the things that is really annoying about economics. Because the result of economics depends on money, even the simplest most obvious things will be disputed. In physics nobody will seriously say that gravity on Earth makes things fly up, but boy in economics there will be an endless supply of serious scholars writing books and articles and earnestly arguing on TV shows that up is down and down is up. Because of course if you convince people that up is down and down is up in economics, you can get really rich. If you can convince the public that there is no such thing as a natural monopoly, there will still be natural monopolies but they won't be treated as such by the government, and then you have a license to print money.

malvosenior 8y ago
Utilities are heavily regulated by the state so you're not really refuting the parent's point. They didn't say that we should get rid of the government and industries it's propping up. They said that you can't have a monopoly without government support and your example reinforces that. For example, if there was no regulation of water utilities, anyone could just put a big tank on their property (bought from anywhere) and hire any number of water supply companies to come fill it. To the best of my knowledge this isn't legal due to numerous laws and regulations.
- empath75 8y ago
  Sure you can. That's what bottled water delivery is. We have that now. I've been to places where the government doesn't or can't regulate water delivery and perhaps not coincidentally, you also can't drink the water.
  - malvosenior 8y ago
    I agree that the situation we have now provides healthy water reliably (normally). The point the OP was trying to make isn't that monopolies always provide a bad result, it's that they exist due to government backing and regulation.
- ghaff 8y ago
  Where water utilities exist, they're typically run or at least regulated by government. Of course, there are many areas where there is no water utility and property owners dig their own wells. It's very common in large areas of the US.
  - malvosenior 8y ago
    Great point. Do you know if you're allowed to just dig a well anywhere? Like if I was in Redwood City and I didn't want to use the monopoly water provider, could I just dig a well if my yard had room for it?
    - ghaff 8y ago
      I assume it is specified by zoning/laws--although it probably varies. In general (unless you already have a well), I would also assume you're better off just getting town water if it's available. Wells are expensive and not necessarily reliable whereas water from the local utility is usually a pretty low cost, at least in my case. Same applies to septic. It's probably also going to be dependent on the town (presumably) whether you have to pay for a hookup if it becomes available.
pitaj 8y ago
Why would the incentive structure of competition suddenly disappear when applied to utilities? Food and housing are equally inelastic and have high barriers of entry, but we see competition there. The water example you gave is an example of the government proactively monopolizing such utilities. It's exactly what I was talking about. Never have I seen evidence of water, power, etc naturally monopolizing and being hostile to consumers. Firms just can't keep out competition without state intervention.
- hristov 8y ago
  Ok then give me an example. In the entire world there are places with weak governments and with laissez faire governments. Is there any place where I can buy a house with five different independent water delivery and sewage removal systems attached to it? If there isn't then you would have to rethink your theories don't you. The fact of the matter is that there is such a thing as a natural monopoly and just a cursory examination of the facts on the ground and the history of the last 150 years or so will prove it.
  - pitaj 8y ago
    > there are places ... with laissez faire governments Not really > Is there any place where I can buy a house with five different independent water delivery and sewage removal systems attached to it? I never claimed that it exists. I claimed it was possible. A thing doesn't need to exist to be possible. > The fact of the matter is that there is such a thing as a natural monopoly Name some, then. Show me the evidence of all these natural monopolies which cropped up on their own, taking advantage of consumers, and resulting in the necessity of making them state utilities.
    - dannyobrien 8y ago
      I’m not sure it directly helps anyone’s argument here, but 5 minute’s searching gave this study of water service in Nigeria, with a mixture of public and private services competing to provide potable water using different strategies. http://file.scirp.org/pdf/JWARP20120700002_74310948.pdf http://file.scirp.org/pdf/JWARP20120700002_74310948.pdf I think two responses to this would be a) that sounds like terrible public and private provision, and b) the competing water providers don’t all use pipes — they use boreholes, tankers, and rainwater collection, so they don’t count. But that’s probably how competition against an apparent natural monopoly would work: what might undermine Comcast, say, isn’t another cable company digging up the road, but a wireless broadband provider, or some technological alternative that circumvent the apparent advantages of the monopolist.
WalterBright 8y ago
The phone company has been characterized many times as a natural monopoly. But it certainly wasn't in its early days. Telephone companies sprouted like weeds and all competed with each other. I don't know what the interconnection between them was like. But I can say that in the days before the internet achieved dominance, the various privately operated networks provided gateways so one could connect to the next. In fact, the term "inter"net came from connecting existing networks together. Lastly, it's not necessary for competing water companies to run parallel sets of water pipes to your home. Your neighborhood may have a communal pipe, and then water companies compete to connect to that pipe. There may be pipes connecting various other pipes. The water companies compete to fill those pipes, or rent access to those pipes to deliver the water to individual subscribers. I.e. a free market water system need not at all look like the current monopoly utility system.
- Nomentatus 8y ago
  Not quite, the usual case was a local monopoly, due to network effect. As with railroads, in fact the large players had to be forced by government to allow interoperation. Facebook is equally reluctant now.
  - merpnderp 8y ago
    The railroads were a great example of a interference in a market. In its early days it paid more to market to DC than to customers and might still today. I’m going from pure memory so correct if I’m wrong, but the only cross continental railroad that didn’t immediately go bust after finish was the only one not being paid by the mile by the government.
    - Nomentatus 8y ago
      Not interference so much as immense corruption and cooperation re the subsidies per mile you refer to.

malvosenior 8y ago

Utilities are heavily regulated by the state so you're not really refuting the parent's point. They didn't say that we should get rid of the government and industries it's propping up. They said that you can't have a monopoly without government support and your example reinforces that. For example, if there was no regulation of water utilities, anyone could just put a big tank on their property (bought from anywhere) and hire any number of water supply companies to come fill it. To the best of my knowledge this isn't legal due to numerous laws and regulations.

empath75 8y ago
Sure you can. That's what bottled water delivery is. We have that now. I've been to places where the government doesn't or can't regulate water delivery and perhaps not coincidentally, you also can't drink the water.
- malvosenior 8y ago
  I agree that the situation we have now provides healthy water reliably (normally). The point the OP was trying to make isn't that monopolies always provide a bad result, it's that they exist due to government backing and regulation.
ghaff 8y ago
Where water utilities exist, they're typically run or at least regulated by government. Of course, there are many areas where there is no water utility and property owners dig their own wells. It's very common in large areas of the US.
- malvosenior 8y ago
  Great point. Do you know if you're allowed to just dig a well anywhere? Like if I was in Redwood City and I didn't want to use the monopoly water provider, could I just dig a well if my yard had room for it?
  - ghaff 8y ago
    I assume it is specified by zoning/laws--although it probably varies. In general (unless you already have a well), I would also assume you're better off just getting town water if it's available. Wells are expensive and not necessarily reliable whereas water from the local utility is usually a pretty low cost, at least in my case. Same applies to septic. It's probably also going to be dependent on the town (presumably) whether you have to pay for a hookup if it becomes available.

pitaj 8y ago

Why would the incentive structure of competition suddenly disappear when applied to utilities? Food and housing are equally inelastic and have high barriers of entry, but we see competition there. The water example you gave is an example of the government proactively monopolizing such utilities. It's exactly what I was talking about. Never have I seen evidence of water, power, etc naturally monopolizing and being hostile to consumers. Firms just can't keep out competition without state intervention.

hristov 8y ago
Ok then give me an example. In the entire world there are places with weak governments and with laissez faire governments. Is there any place where I can buy a house with five different independent water delivery and sewage removal systems attached to it? If there isn't then you would have to rethink your theories don't you. The fact of the matter is that there is such a thing as a natural monopoly and just a cursory examination of the facts on the ground and the history of the last 150 years or so will prove it.
- pitaj 8y ago
  > there are places ... with laissez faire governments Not really > Is there any place where I can buy a house with five different independent water delivery and sewage removal systems attached to it? I never claimed that it exists. I claimed it was possible. A thing doesn't need to exist to be possible. > The fact of the matter is that there is such a thing as a natural monopoly Name some, then. Show me the evidence of all these natural monopolies which cropped up on their own, taking advantage of consumers, and resulting in the necessity of making them state utilities.
  - dannyobrien 8y ago
    I’m not sure it directly helps anyone’s argument here, but 5 minute’s searching gave this study of water service in Nigeria, with a mixture of public and private services competing to provide potable water using different strategies. http://file.scirp.org/pdf/JWARP20120700002_74310948.pdf http://file.scirp.org/pdf/JWARP20120700002_74310948.pdf I think two responses to this would be a) that sounds like terrible public and private provision, and b) the competing water providers don’t all use pipes — they use boreholes, tankers, and rainwater collection, so they don’t count. But that’s probably how competition against an apparent natural monopoly would work: what might undermine Comcast, say, isn’t another cable company digging up the road, but a wireless broadband provider, or some technological alternative that circumvent the apparent advantages of the monopolist.

WalterBright 8y ago

The phone company has been characterized many times as a natural monopoly. But it certainly wasn't in its early days. Telephone companies sprouted like weeds and all competed with each other. I don't know what the interconnection between them was like. But I can say that in the days before the internet achieved dominance, the various privately operated networks provided gateways so one could connect to the next. In fact, the term "inter"net came from connecting existing networks together. Lastly, it's not necessary for competing water companies to run parallel sets of water pipes to your home. Your neighborhood may have a communal pipe, and then water companies compete to connect to that pipe. There may be pipes connecting various other pipes. The water companies compete to fill those pipes, or rent access to those pipes to deliver the water to individual subscribers. I.e. a free market water system need not at all look like the current monopoly utility system.

Nomentatus 8y ago
Not quite, the usual case was a local monopoly, due to network effect. As with railroads, in fact the large players had to be forced by government to allow interoperation. Facebook is equally reluctant now.
- merpnderp 8y ago
  The railroads were a great example of a interference in a market. In its early days it paid more to market to DC than to customers and might still today. I’m going from pure memory so correct if I’m wrong, but the only cross continental railroad that didn’t immediately go bust after finish was the only one not being paid by the mile by the government.
  - Nomentatus 8y ago
    Not interference so much as immense corruption and cooperation re the subsidies per mile you refer to.