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That's basically the fallacy of predatory pricing. It doesn't work. Sure, you can raise prices after killing the competition, but only so far as to not revive t

That's basically the fallacy of predatory pricing. It doesn't work. Sure, you can raise prices after killing the competition, but only so far as to not revive the competition. Your price ends up as the fair market price. Cost of entry is irrelevant here, it's a cost like any other.

vertex-four 8y ago
Sure, except that reviving the competition costs money in its own right many times - it's usually not a Bitcoin miner that can be turned off when it's unprofitable and turned on again with the flick of a switch when it becomes profitable to run. So your price ends up at fair market price... when averaged over many decades, maybe, but likely not for long at any particular point in time. And in the meantime workers get screwed over as industries and skillsets lose economic value.
- zeroname 8y ago
  First of all, where's the evidence of these supposed high-entry monopolies? Seems more like a thought experiment to me. Secondly, you're only looking at the negative consequences for some workers. You're not looking at the benefit to all workers, who pay lower prices as result of cheaper labor from abroad. Suppose workers had been guaranteed their jobs for life because of protectionist policies. This is called mercantilism. Everybody pays more for everyone else's labor and nobody can benefit from comparative advantage. As a result, everyone is poorer. This has been known for centuries and it has been accepted by economists across the political spectrum. Yet politically, protectionism never ceases to lose appeal.
  - kuschku 8y ago
    Have you tried producing and assembling electronics in the west? You don't have shops to buy parts anymore, you don't have assembly lines anymore, you don't have people trained in this anymore. If China decided tomorrow to increase the costs of the electronics they export, you'd have to accept that. Apple tried their best to move even some assembly back to the US, and couldn't even get the simplest custom screws made in the amounts they need. Only a single small company still had the tech to make them, and they couldn't produce enough, fast enough. It's not just a single monopoly, the problem is that entire industries are gone, and it'd take decades to train workers and regain the institutional knowledge. And this is just one example. And your argument has one more flaw: free trade reduces costs of products, and wages. But it won't affect cost of housing (except over a timespan of decades due to cheaper labor and materials, but it still won't solve cost of land). Nor will it affect cost of utilities. In our household, we're now spending 71% of our budget on rent and utilities. Under more protectionist policies, I might pay 20% more for products, but I'd also be making 20% more wages — and as result, I'd be better off (in fact, my disposable income after rent, utilities and food would almost triple)
    - zeroname 8y ago
      > Have you tried producing and assembling electronics in the west? Of course not, U.S. labor is far too expensive to do the kind of menial work required to assemble electronics, unless maybe it's a repair shop for certain products. > You don't have shops to buy parts anymore, you don't have assembly lines anymore, you don't have people trained in this anymore. You don't need "local shops" to purchase parts for assembly lines. Ask Elon Musk if the biggest challenge in building an assembly line is procuring the parts, he will say: No. You have a worldwide integrated economy where you can buy basically anything. The number one challenge is labor cost. In any event, training people for electronics assembly is trivial. If you can take apart an iPhone and put it back together, you're good. > If China decided tomorrow to increase the costs of the electronics they export, you'd have to accept that. "China" doesn't decide the costs of electronics, individual businesses do. But even if China was dumb enough to slap tariffs on their own exports, there are plenty of alternatives. There is no monopoly. In fact, China is doing the exact opposite: They are artificially lowering the value of their currency to stay competitive. You should also really look into how electronics are actually produced, there are numerous countries involved in it, each specialized into particular parts: http://www.worldstopexports.com/electronic-circuit-component-exports-country/ http://www.worldstopexports.com/electronic-circuit-component... > It's not just a single monopoly, the problem is that entire industries are gone, and it'd take decades to train workers and regain the institutional knowledge. Actually, a lot of institutional knowledge remains with the companies that just use labor abroad. However, it also leaks into the domestic industry, that's why you have a lot of companies complaining about "IP theft" from China. The broader point remains: There is no monopoly. There is plenty of competition. Even if for a "relatively" short period of time (decades) there where to exist a monopoly, it could only sustain its higher prices for so long as it stays unprofitable to rebuild that infrastructure. At that point the "monopoly pricing" becomes "fair pricing". > In our household, we're now spending 71% of our budget on rent and utilities. You should probably look into what building regulation (artificial scarcity) does to the price of rent. You can't blame free trade for that. > Under more protectionist policies, I might pay 20% more for products, but I'd also be making 20% more wages — and as result, I'd be better off (in fact, my disposable income after rent, utilities and food would almost triple) First of all, why do you assume that rent and utilities would not rise in tandem with the cost of goods? Why do you believe rent in Silicon Valley is so high? It's the scarcity combined with the high wages of the tech workers. Secondly, you are losing your competitive advantage. You are worse off.
- maxerickson 8y ago
  The electric furnaces that dominate the modern US steel industry sort of are like bitcoin miners that can be turned on and off. They often only run during times when electricity is cheaper. Not entirely of course, but the ratio of labor to productivity is really large, they don't engage a lot of workers to begin with. Look at how much larger the electricity costs are than labor: https://www.steelonthenet.com/cost-eaf.html https://www.steelonthenet.com/cost-eaf.html
kolinko 8y ago
There are more things than price that can prevent competition from reappearing once it became extinguished. If there is a constant threat of the prices being lowered again, it will be pointless to reinvest in restarting competition - the monopolist at any time can lower the prices back down. Also, in some fields the monopolistic position gives network effects to the producer that cannot be replicated by an upstart, making a competition unlikely.

vertex-four 8y ago

Sure, except that reviving the competition costs money in its own right many times - it's usually not a Bitcoin miner that can be turned off when it's unprofitable and turned on again with the flick of a switch when it becomes profitable to run. So your price ends up at fair market price... when averaged over many decades, maybe, but likely not for long at any particular point in time. And in the meantime workers get screwed over as industries and skillsets lose economic value.

zeroname 8y ago
First of all, where's the evidence of these supposed high-entry monopolies? Seems more like a thought experiment to me. Secondly, you're only looking at the negative consequences for some workers. You're not looking at the benefit to all workers, who pay lower prices as result of cheaper labor from abroad. Suppose workers had been guaranteed their jobs for life because of protectionist policies. This is called mercantilism. Everybody pays more for everyone else's labor and nobody can benefit from comparative advantage. As a result, everyone is poorer. This has been known for centuries and it has been accepted by economists across the political spectrum. Yet politically, protectionism never ceases to lose appeal.
- kuschku 8y ago
  Have you tried producing and assembling electronics in the west? You don't have shops to buy parts anymore, you don't have assembly lines anymore, you don't have people trained in this anymore. If China decided tomorrow to increase the costs of the electronics they export, you'd have to accept that. Apple tried their best to move even some assembly back to the US, and couldn't even get the simplest custom screws made in the amounts they need. Only a single small company still had the tech to make them, and they couldn't produce enough, fast enough. It's not just a single monopoly, the problem is that entire industries are gone, and it'd take decades to train workers and regain the institutional knowledge. And this is just one example. And your argument has one more flaw: free trade reduces costs of products, and wages. But it won't affect cost of housing (except over a timespan of decades due to cheaper labor and materials, but it still won't solve cost of land). Nor will it affect cost of utilities. In our household, we're now spending 71% of our budget on rent and utilities. Under more protectionist policies, I might pay 20% more for products, but I'd also be making 20% more wages — and as result, I'd be better off (in fact, my disposable income after rent, utilities and food would almost triple)
  - zeroname 8y ago
    > Have you tried producing and assembling electronics in the west? Of course not, U.S. labor is far too expensive to do the kind of menial work required to assemble electronics, unless maybe it's a repair shop for certain products. > You don't have shops to buy parts anymore, you don't have assembly lines anymore, you don't have people trained in this anymore. You don't need "local shops" to purchase parts for assembly lines. Ask Elon Musk if the biggest challenge in building an assembly line is procuring the parts, he will say: No. You have a worldwide integrated economy where you can buy basically anything. The number one challenge is labor cost. In any event, training people for electronics assembly is trivial. If you can take apart an iPhone and put it back together, you're good. > If China decided tomorrow to increase the costs of the electronics they export, you'd have to accept that. "China" doesn't decide the costs of electronics, individual businesses do. But even if China was dumb enough to slap tariffs on their own exports, there are plenty of alternatives. There is no monopoly. In fact, China is doing the exact opposite: They are artificially lowering the value of their currency to stay competitive. You should also really look into how electronics are actually produced, there are numerous countries involved in it, each specialized into particular parts: http://www.worldstopexports.com/electronic-circuit-component-exports-country/ http://www.worldstopexports.com/electronic-circuit-component... > It's not just a single monopoly, the problem is that entire industries are gone, and it'd take decades to train workers and regain the institutional knowledge. Actually, a lot of institutional knowledge remains with the companies that just use labor abroad. However, it also leaks into the domestic industry, that's why you have a lot of companies complaining about "IP theft" from China. The broader point remains: There is no monopoly. There is plenty of competition. Even if for a "relatively" short period of time (decades) there where to exist a monopoly, it could only sustain its higher prices for so long as it stays unprofitable to rebuild that infrastructure. At that point the "monopoly pricing" becomes "fair pricing". > In our household, we're now spending 71% of our budget on rent and utilities. You should probably look into what building regulation (artificial scarcity) does to the price of rent. You can't blame free trade for that. > Under more protectionist policies, I might pay 20% more for products, but I'd also be making 20% more wages — and as result, I'd be better off (in fact, my disposable income after rent, utilities and food would almost triple) First of all, why do you assume that rent and utilities would not rise in tandem with the cost of goods? Why do you believe rent in Silicon Valley is so high? It's the scarcity combined with the high wages of the tech workers. Secondly, you are losing your competitive advantage. You are worse off.
maxerickson 8y ago
The electric furnaces that dominate the modern US steel industry sort of are like bitcoin miners that can be turned on and off. They often only run during times when electricity is cheaper. Not entirely of course, but the ratio of labor to productivity is really large, they don't engage a lot of workers to begin with. Look at how much larger the electricity costs are than labor: https://www.steelonthenet.com/cost-eaf.html https://www.steelonthenet.com/cost-eaf.html

kolinko 8y ago

There are more things than price that can prevent competition from reappearing once it became extinguished. If there is a constant threat of the prices being lowered again, it will be pointless to reinvest in restarting competition - the monopolist at any time can lower the prices back down. Also, in some fields the monopolistic position gives network effects to the producer that cannot be replicated by an upstart, making a competition unlikely.