12 ms·

Milton Friedman always said it’s rare to find monopolies form in a free market, and that by and large monopolies only form with government help. Not sure how t

• analog31 8y ago
  In my view, no business can grow beyond the size of, say, a mom-and-pop grocery store or a family farm without a number of government institutions that we take for granted: The money system, limitation of liability, police, the tort system, and so forth.
  • tengbretson 8y ago
    Our money system is not a government institution.
  • randyrand 8y ago
    The 'government help' being referred to above is specifically help that limits competition between privately held enterprises. I'm not sure how your examples limit competition.
    • analog31 8y ago
      That wasn't clear from your comment, but I was supporting what I thought you were saying. Businesses have to be capable of reaching a size where it makes sense to talk about monopolies, and once you've reached that point, then you're already up to your eyeballs in government involvement.
• viburnum 8y ago
  He was wrong
• stephen_g 8y ago
  I would question if it's ever possible to have "free markets" at all (it's definitely not in the neoclassical sense, which relies on the assumption of everybody having the same, perfect information of all prices). Let alone in actual societies where anything like laws exist. So I think what comes more through in that quote is more Friedman's ideology around Government intervention than any actual practical economics.
• rjplatte 8y ago
  Bailouts != free market. We haven't seen a true free market in our lifetimes.
  • dleslie 8y ago
    Are there no unregulated markets?
    • rjplatte 8y ago
      I can't name one that's legal
• bradgessler 8y ago
  Yes, and governments benefit greatly from monopolies in the form of control. Consider any heavily fragmented market with several small players where control is decentralized. It’s more difficult for governments to coordinate with all these smaller players to get stuff done, like wiretapping or getting data off a server. It’s much easier for a government to sanction monopolies so they can go to a few, more powerful players, to accomplish the goal of control.
• nanny 8y ago
  The author specifically cites large tech companies (Google, Amazon, Facebook) as examples of monopolies that have formed due to lack of state intervention. He also says bad rules have led to monopolies as well (through regulatory capture, lobbying, etc.). So bad things (like monopolies) can happen due to the state or due to lack of the state. Maybe the problem here isn't the state at all.
  • Buldak 8y ago
    Peter Thiel has made similar remarks. He said that IT has been only area to see major progress in recent decades, in contrast to e.g. transportation, because it is relatively unregulated. (Hence Twitter rather than flying cars.) Of course, Thiel also holds the view that monopolies are often a good thing.
    • pdonis 8y ago
      > Thiel also holds the view that monopolies are often a good thing. I spotted this (IMO badly mistaken) view of his when he first came out with it quite a while back: http://blog.peterdonis.com/opinions/monopoly-money.html http://blog.peterdonis.com/opinions/monopoly-money.html
    • losteric 8y ago
      Software is unlike any prior field because it's so... clean. Energy, agriculture, transportation - all built on the unintuitive building blocks of physics, and our approximate understanding of the universe. The clean abstraction layers and separation of concerns in IT is unparalleled, with powerful positive feedback begetting further innovations. Applying advances to other fields also grew economies of scale rapidly, supporting innovation while barriers to entry were low. We're now approaching the end to low-hanging fruit and maturing into the consolidation phase, as further innovation requires greater capital and time commitment.
      • tjr225 8y ago
        just because software exists on layer(s) of abstraction means nothing. It still requires hardware to run on - and still adheres to the laws of physics. I don't take much stock in your clean argument at all.
• peisistratos 8y ago
  If one thinks the important thing is a dominant position in the relations of production, the effect would be reversed - the tendency to monopoly means more power for the monopoly, means it getting government help. Whether or not there is a "free market", whatever that means, would also be affected by the desires of monopolies.
• djrobstep 8y ago
  > large monopolies only form with government help Markets only exist in the first place because of "government help": without government creating and enforcing property law contract law, and numerous other laws, there would be no markets. So, like most of what Milton Friedman said, it's a dumb, wrong, and misleading statement. And of course, monopolies exist quite happily in the libertarian fantasy of version of a free market, because economies of scale and network effects exist.
  • mindcrime 8y ago
    So there was no trade before "government" was invented?
    • djrobstep 8y ago
      Correct. Trade cannot happen without the threat of violent attack against those who would otherwise freely use particular land or possessions, aka rules, aka law enforcement, aka government.
      • mindcrime 8y ago
        And your evidence to support this crazy assertion? Also, what's your basis for claiming that "government" is the only way to protect people/possessions from violent attack?
        • djrobstep 8y ago
          If one was not violently prevented from using land or objects, why would one "trade" for their use, when they could freely use them already?
    • danaris 8y ago
      Incorrect. Trade can happen with any two or more people who have different things (and the things need not even be physical). Stable markets, on the other hand, require a stable government of some sort to maintain them. And that's what you really need for the economic side of what we would think of as civilization.
• hyperpallium 8y ago
  Economies of scale create natural monopolies. Though one could argue that IP monopolies (like Microsoft) could only form through government help - in the form of IP enforcement.
• geofft 8y ago
  What does "government help" mean? Did the Microsoft monopoly form with the "government help" of enforcing intellectual property rights?
  • Matticus_Rex 8y ago
    IMO yes -- IP rights are literally government-granted monopolies.
• deleted 8y ago
  [deleted]
• omeid2 8y ago
  It is true that governments can be complicit or implicated in formation of monopolies, but I personally think the more fundamental problem with the idea of free market is the assumption that consumers afford meaningful consideration and choice. I believe that people, generally: don't vote with their money for greater good but rather personal utility, by choice or lack of economical standing (A form of The Tragedy of Commons), poorly understand the long term impact of their choices, people’s choice is swayed by deceitful and psychological trickery of targeted advertisement. I am not sure how free market can address this without outside (generally legal or consumer advocacy) intervention.
  • ethbro 8y ago
    Hmm, based on your interpretation, it seems like a lot of money could be made by offering people ostensibly free services, while quietly collecting and monetizing their data. But who knows if your theories about people choosing convenience are accurate...
  • pdonis 8y ago
    > people, generally: don't vote with their money for greater good but rather personal convenience Not personal convenience, but personal benefit--people want to be better off after buying something than they were before. That in itself is a perfectly reasonable thing to want. There are, generally speaking, two potential problems: (1) people might misjudge whether they will actually be better off (through lack of information or lack of understanding or failure to recognize longer term consequences); (2) people might individually be better off but society as a whole could be net worse off due to externalities (costs not borne by the people making the choices and so not considered by them). It is true that these problems are unavoidable in a free market. However, outside intervention does not, in general, solve them. In fact it almost always makes it worse, because whoever is making the outside intervention has even less at stake in the choices about what to "vote with money" for than the people making those choices. I think the best we can do is to try to give people the best tools we can for making their own choices, not trying to dictate those choices by outside intervention.
    • omeid2 8y ago
• jka 8y ago
  It'd be interesting to investigate how this relates to tech companies' hiring of politicians, and the 'revolving door' effect between industry and government. Perhaps Friedman's theory remains completely true, while in reality the separation between the two players has blurred over time. Cui bono?
• jujulet 8y ago
  That's not really saying anything, especially coming from a free-market crusader and with no reasoning/arguments attached. Also that which stringent free-marketers and ancaps consider a 'free market' probably can't exist at all.
  • 113 8y ago
    It's a no-true-Scotsman as any market with a monopoly just wasn't "free" enough.
• _emacsomancer_ 8y ago
  > Milton Friedman always said it’s rare to find monopolies form in a free market Why would that be true? Once a company becomes big enough, it has resources to squash competition in various ways.
  • TangoTrotFox 8y ago
    He was mostly talking of for-pay goods and services. The current trend of offering "free" services, that are anything but, is severely distorting the market. It's exploiting a current gap in consumer knowledge where people are massively undervaluing the literal value of their private information. But in a normal pay-to-play business, the argument is self evident. Either the monopolizer is malicious or benevolent. If they're benevolent then a monopoly doesn't matter. If they're malicious then that means that they're exploiting their market positioning to artificially inflate the prices of their goods/services. When a company has unreasonably high prices this enables competitors to come in and gain marketshare easily by offering lower prices. And you're definitely right that the company can do things like try to buy out the smaller company, perhaps put pressure on their suppliers, etc. But this is a never ending game since for instance the smaller competitor could then even begin to develop their own supply chain, etc. And a small company getting bought out for some fat paycheck before they even really hit their stride is hardly discouraging to other would-be competitors! So long as the pie and the end of the tunnel is large enough, there will be an incentive to compete against the monopoly. There is also the innovation issue. Coercive monopolies do not often innovate. Their focus is on profit whereas innovation tends to be focused on competition. This lack of innovation once again offers a big gap in the market for competitors. The aerospace industry vs SpaceX are the best example here. Boeing/Lockheed had a partially government enforced coercive monopoly in a field with greater barriers to entry than practically any 'material' industry. Yet a guy with 'nothing' but a few hundred million and the understanding that something worth on the order of let's say $20 million of material costs should not cost $500 million to build and launch, was able to enter the field and rapidly rise to dominance by working on nothing but innovation and non-monopolistic prices. Boeing/Lockheed by contrast were still so stuck in the past with their MBA style executive leadership that now, many years after the 'threat' of SpaceX has become self evident, that they've still been unable to effectively react. So to avoid retro-fitting the past to fit a narrative, I expect in the future we'll be able to spin an exact tale of the telecoms industry. Once again another [heavily government enabled] monopoly that's completely failed to innovate and charges unreasonably high prices. Something like the proposed SpaceX constellation of LEO satellites for the purpose of low-cost high-stability internet stands to leave them completely taking over that industry. Of course the failure of Google fiber is an argument to the contrary, but that gets into an entirely different tangent and I think there were many reasons for that failure that lay squarely with Google.
• api 8y ago
  I think one factor he didn't comprehend was lock-in via de-facto standards controlled by single corporations. Take AWS or Microsoft Windows as examples. Businesses that build a lot of infrastructure around those products are stuck with no choice but to continue to use them or ditch many years and sometimes tens or even hundreds of millions of dollars in sunk cost. Computing seems to facilitate this particular kind of monopoly more easily than physical systems.
• abootstrapper 8y ago
  I wonder how many and which free markets Milton Friedman evaluated in order to draw this conclusion?
  • conanbatt 8y ago
    Many, as he wrote about it, and it's one topic where he changed his mind after studying it. It is absolutely sure that monopolies are most pervasive through the state.
• Joeri 8y ago
  That may have been true once, but I don’t think it is true today. Scale effects and negotiation power means large companies are able to reach structurally lower costs per unit than small ones, which creates an incentive to grow big. This also makes them slow to respond to change, so normally upstarts push them aside. But in the modern VC-backed ecosystem competitors are bought out without having a say in it. The upstart becomes part of the big player. Even if companies thread that needle and grow big, shareholders love mergers (for reasons I still don’t understand), so over time you get fewer and fewer big players. The regulatory capture is just icing on the cake, but I think you would get market concentration anyway, unless the government took a stronger stance against mergers and acquisitions.
• Gibbon1 8y ago
  > Milton Friedman Advocated murdering people to get rid of unions.
  • dang 8y ago
    Could you please stop posting unsubstantive comments to Hacker News, and particularly not ideological battle comments? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
    • Gibbon1 8y ago
      Sorry Friedmans approval of Augusto Pinochet is well documented.
      • dragonwriter 8y ago
        There's a difference between unsubstantive and unsubstantiated.
• fergie 8y ago
  Has Friedman has actually said that? If so it runs counter to the economic consensus. Corporate lobbyists tend to cite an academic case for deregulation that has not been made. As the article rightly points out Adam Smith is frequently trotted out as an advocate of deregulated free markets, when in fact he was very clear that a free market must be regulated.
• agumonkey 8y ago
  There's a ~debate between Rand and Donahue where she claims the same frenetically. He makes the point that any large company can buy off competition [1]. I don't know where the theory for free market being the most perfect game came from but I can't stand it. [1] funnily, reminds me of MS
  • randyrand 8y ago
    Personally, my affinity for the free market came when I studied economics in undergrad.
• ionised 8y ago
  Another example of Milton Friedman being a hack.
• RRRA 8y ago
  Government can derail things as much as they can fix things. That's why we should have better anti monopoly laws to keep the market free, as in equal chances given equal efforts & quality.
• bighi 8y ago
  While it's true that some monopolies are formed because of the government, MANY more would be formed without it.