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A monopoly regulates supply to extract more money from the consumer than a competitive market could. What's the good parts?

bumby 7y ago
They can avoid unnecessary redundant infrastructure as an example. Imagine trying to dig for construction when there are 30 potential cable companies running utilities underground.
- istjohn 7y ago
  That's why utilities like electricity and gas are tightly regulated to protect consumers.
  - bumby 7y ago
    I don't disagree but the movement has been to deregulate these exact examples. A customer can literally buy electricity from a provider one thousand miles away at a cheaper rate if they live in a deregulated area.
    - istjohn 7y ago
      But this is only possible because regulators force the local provider to allow the distant provider to use their infrastructure at a fair price.
      - bumby 7y ago
        I don't think that's exactly right. Energy prices are broken down to generation and transmissions costs. The transmission costs remain regulated, but generation can charge a market price. Regulated transmission prevents other providers from creating redundant infrastructure in a deregulated environment. Deregulation is possible not because of regulated infrastructure but in spite of it. I.e. Deregulation could still exist without regulated transmission but it was deemed to be in the public interest to reduce redundant infrastructure. Incidentally, the 'public interest' has been one of the claims of moving to a deregulated market, with the thought that this would provide lower utility costs. However, this hasn't always worked out: https://fuelfix.com/blog/2016/06/08/deregulated-texas-electricity-costs-exceed-national-average/ https://fuelfix.com/blog/2016/06/08/deregulated-texas-electr...
asark 7y ago
Theoretical "perfect" competition eats all money that could go toward R&D, by making profits razor-thin. It's an awful way to exist that no sane person who's thought it through actually wants—assuming it could ever exist stably for any length of time, which, probably not. Going the other direction, monopolies leave the most money available for R&D. Japan famously leveraged the power of a small set of huge players—not monopolies, but very, very far from "perfect competition" markets, certainly—to drive post-WWII R&D, ensuring their continued success by delivering them a captive domestic market while pooling their excess funds with cooperation-encouraging incentives (=more money, from the government) to rapidly improve their tech and productive capabilities, aiming to become an export powerhouse. It worked. This is not meant to be a defense of monopolies, especially those not firmly under the yoke of government to ensure all that excess is captured in some way for something resembling the public good, but the situation is more complex than one might first think, and whether one may prefer a huge number of market participants or a small number could be very much situational.

bumby 7y ago

They can avoid unnecessary redundant infrastructure as an example. Imagine trying to dig for construction when there are 30 potential cable companies running utilities underground.

istjohn 7y ago
That's why utilities like electricity and gas are tightly regulated to protect consumers.
- bumby 7y ago
  I don't disagree but the movement has been to deregulate these exact examples. A customer can literally buy electricity from a provider one thousand miles away at a cheaper rate if they live in a deregulated area.
  - istjohn 7y ago
    But this is only possible because regulators force the local provider to allow the distant provider to use their infrastructure at a fair price.
    - bumby 7y ago
      I don't think that's exactly right. Energy prices are broken down to generation and transmissions costs. The transmission costs remain regulated, but generation can charge a market price. Regulated transmission prevents other providers from creating redundant infrastructure in a deregulated environment. Deregulation is possible not because of regulated infrastructure but in spite of it. I.e. Deregulation could still exist without regulated transmission but it was deemed to be in the public interest to reduce redundant infrastructure. Incidentally, the 'public interest' has been one of the claims of moving to a deregulated market, with the thought that this would provide lower utility costs. However, this hasn't always worked out: https://fuelfix.com/blog/2016/06/08/deregulated-texas-electricity-costs-exceed-national-average/ https://fuelfix.com/blog/2016/06/08/deregulated-texas-electr...

asark 7y ago

Theoretical "perfect" competition eats all money that could go toward R&D, by making profits razor-thin. It's an awful way to exist that no sane person who's thought it through actually wants—assuming it could ever exist stably for any length of time, which, probably not. Going the other direction, monopolies leave the most money available for R&D. Japan famously leveraged the power of a small set of huge players—not monopolies, but very, very far from "perfect competition" markets, certainly—to drive post-WWII R&D, ensuring their continued success by delivering them a captive domestic market while pooling their excess funds with cooperation-encouraging incentives (=more money, from the government) to rapidly improve their tech and productive capabilities, aiming to become an export powerhouse. It worked. This is not meant to be a defense of monopolies, especially those not firmly under the yoke of government to ensure all that excess is captured in some way for something resembling the public good, but the situation is more complex than one might first think, and whether one may prefer a huge number of market participants or a small number could be very much situational.