6 ms·

Also why anti-monopoly laws need to be reevaluated, and improved to ensure nothing counts as a market with fewer than 10 practical competitors at any given mome

by emn13 7y ago

Also why anti-monopoly laws need to be reevaluated, and improved to ensure nothing counts as a market with fewer than 10 practical competitors at any given moment, and probably more like 100 for real competition (or some similar set of thresholds to ensure flexibility). We've sacrificed meaningful constant progress at the altar of relatively speaking small economies of scale. That's a win... for the first few years; and a loss for the hundreds thereafter. There's nothing necessarily wrong with a segment where there's essentially one one or two providers; some things may be natural monopolies. But if so - those suppliers are essentially governments of their fiefdoms, and deserve similar restrictions, including most particularly, no incentive-distorting profit motive.

cglace 7y ago
Should the government prop up 10 competitors in every industry? Is there a geographical threshold? If there is one plumber in a small town should the government prop up more or punish the one guy who wants to serve that market? Does market size matter? What if I discovered a super niche market that no one serves should we assume this market needs 10-100 competitors? Off the top of my head I have 100s of other questions and problems with your idea. I think picking a constant number to apply throughout the entire economy is going to be fraught with edge cases.
- TheOtherHobbes 7y ago
  The government doesn't need to "prop up" competitors. It just needs to prevent mergers and takeovers that limit the number of market players to an unworkably small number. Yes, market size matters and the problem only really applies to companies who provide strategic infrastructure and services and are large enough to dictate terms to government, to customers, and to competitors, in ways that distort and limit their market freedoms. None of this is mysterious or hard to understand, and it's been the foundation of antitrust legislation since Standard Oil.
  - ksdale 7y ago
    That's easier said than done. Often times, refusing to allow a merger will mean that one of the competitors will just go out of business, and avoiding that will require propping up a competitor.
    - Swenrekcah 7y ago
      Then go out of business they must.
      - greedo 7y ago
        The result of that is a merger on the cheap. The surviving companies get to acquire talent, patents, trade secrets at a far cheaper rate. This would essentially kill off any company's chance of merging if it wasn't relatively healthy.
      - ksdale 7y ago
        Right, I was just responding to the parent's assertion that preventing a monopoly doesn't require propping up competitors. Sometimes it does require that, and we should be conscious of the trade off we'd make in that situation.
  - PaulHoule 7y ago
    In the 1960s you had several passenger airline companies based in the U.S. such as Boeing, Lockheed, and McDonald Douglas. Europeans got seriously spooked because they were afraid that if Italian Airlines flew Italian planes and such, fragmented markets would prevent any European company from being a viable player in the long term. So they collaborated on the Concorde, and then the Airbus A300, consolidating the European aerospace industry quite successfully. It costs a lot of money to train a pilot to fly a new aircraft, and on top of that you have mechanics, ground handlers, air traffic controllers and many other skilled people whose operations revolve it. Thus there is some public and industry benefit to consolidation, but at the moment the competitive landscape looks very different for widebody (B787, A350) airliners where new technology is making it to to the public as opposed to narrowbody (B737, A320) airliners where the youngest design is 35 years old. (Some of that parallels the lack of competition in the U.S. airline market which is dominated by narrowbody airliners as opposed to international flights on which you are likely to ride on a widebody. If you're going to compress people in all three axes to get them in a 737, why bother thanking them for flying with you?)
- ncallaway 7y ago
  > Should the government prop up 10 competitors in every industry? This questions seems answered by the comment it's replying to. The previous poster said: > There's nothing necessarily wrong with a segment where there's essentially one one or two providers; some things may be natural monopolies. So, that seems like an answer to your question: no. There are some segments where it doesn't make sense.
- deleted 7y ago
  [deleted]
magduf 7y ago
You can't have 100 aerospace companies doing big projects; the economy just isn't that large. For very mature industries, I believe studies have found that the optimal number of competitors is usually 3 large companies. For immature industries with a lot of change and innovation, that number is generally higher, but as the industry matures, players either die off or merge. A good example of this is the American auto industry.
- tonyedgecombe 7y ago
  I've seen four mentioned several times and the fourth doesn't even need to be that big, a small scrappy competitor can have a big impact.
  - babesh 7y ago
    One specific example of antitrust that wasn't handled properly was the Bombardier C Series and Boeing petitioning it for dumping. It resulted in one fewer competitor in the market because it forced Bombardier to sell the plane to Airbus. I think that there will/can be competitors that spring out from the lower end. The trick is to prevent the oligopolists/monopolists from squashing them through manipulation of the legal system or other underhanded tactics. https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Boeing https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Bo...
    - redis_mlc 7y ago
      > One specific example of antitrust that wasn't handled properly was the Bombardier Bombardier is a foreign company that is heavily subsidized by the Quebec Pension Fund. They probably were dumping. I don't see how anti-trust applies here. The CSeries is a fascinating story with so many twists and turns - almost unbelievable if it was a fiction novel! The CSeries probably did not have a viable marketing and support story against Boeing. If you want to get wound up, then the Boeing/Embraer Civil lashup is truly anti-competitive.
      - babesh 7y ago
throwaway5752 7y ago
Bell/AT&T had an effective telephone monopoly during the time of Bell Labs. They invented the transistor, MOSFETs, Unix, C, lasers, information theory, photovoltaic cells, Shor's algorithm, CCDs (basis for CMOS)... It's not in the sweet spot of this forum, but aerospace research is incredibly capital intensive and difficult. There are economies of scale of combined R&D departments. Those labs don't last forever, but I hope my example of Bell Labs shows how productive and important they can be. You would not achieve that with Boeing divided into 10 parts. This doesn't even go into just how impractical that is for commercial aerospace. The overhead for flying multiple types of aircraft is huge. Simulators are very expensive to produce. Pilots need large numbers of hours on different planes. It would be a maintenance nightmare since parts are tested more than anything outside of medicine and similarly stringent supply chains. The market won't support 10 commercial aircraft companies.
- magduf 7y ago
  The problem with this argument is that Boeing hasn't produced any innovation lately that I can see, while their much smaller competitor, SpaceX, is the one that came up with reusable rockets that can land themselves. Things were really different back in the days of Bell Labs when those inventions were made (another example is Xerox and PARC). Companies like those invested heavily in R&D; long-term stability and profitability was more important than next-quarter returns. This just isn't the case in America any more.
- travisporter 7y ago
  As a counterexample, what is your take on the current outcroppings of LEO launch providers? Surely they are also quite capital intensive.
  - throwaway5752 7y ago
    You mean SpaceX? I don't think large R&D orgs have a monopoly on innovation. And they aren't guaranteed to produce good results. In context, though, the US put people on the moon 50 years ago at the cost in present dollars of $.5T. Easily that much or more has probably been invested in the defense side of rocket development. I think SpaceX was applying 50 years of incremental improvements to a technology that was relatively stagnant ("it just works" conservative approach/lower government funding/general risk aversion profile). This is not to slight them at all, just putting it in perspective. But look at the payloads. Right now it's satellites/cargo. They still haven't done a manned mission. Commercial aircraft fly thousands of miles per day and carry hundreds of people. They do this while being repaired by different teams around the world. It's not as glamorous, but incremental updates in adhesives, radar, rivets, and other safety and repairability are big deals and R&D into safety and reliability shouldn't be discounted. That's on top of the satellite division and Phantom Works (sustained and controlled hypersonic scramjet, wings that change shape). I am not a rocket scientist, so take it all with a grain of salt.

by emn13 7y ago

cglace 7y ago

Should the government prop up 10 competitors in every industry? Is there a geographical threshold? If there is one plumber in a small town should the government prop up more or punish the one guy who wants to serve that market? Does market size matter? What if I discovered a super niche market that no one serves should we assume this market needs 10-100 competitors? Off the top of my head I have 100s of other questions and problems with your idea. I think picking a constant number to apply throughout the entire economy is going to be fraught with edge cases.

TheOtherHobbes 7y ago
The government doesn't need to "prop up" competitors. It just needs to prevent mergers and takeovers that limit the number of market players to an unworkably small number. Yes, market size matters and the problem only really applies to companies who provide strategic infrastructure and services and are large enough to dictate terms to government, to customers, and to competitors, in ways that distort and limit their market freedoms. None of this is mysterious or hard to understand, and it's been the foundation of antitrust legislation since Standard Oil.
- ksdale 7y ago
  That's easier said than done. Often times, refusing to allow a merger will mean that one of the competitors will just go out of business, and avoiding that will require propping up a competitor.
  - Swenrekcah 7y ago
    Then go out of business they must.
    - greedo 7y ago
      The result of that is a merger on the cheap. The surviving companies get to acquire talent, patents, trade secrets at a far cheaper rate. This would essentially kill off any company's chance of merging if it wasn't relatively healthy.
    - ksdale 7y ago
      Right, I was just responding to the parent's assertion that preventing a monopoly doesn't require propping up competitors. Sometimes it does require that, and we should be conscious of the trade off we'd make in that situation.
- PaulHoule 7y ago
  In the 1960s you had several passenger airline companies based in the U.S. such as Boeing, Lockheed, and McDonald Douglas. Europeans got seriously spooked because they were afraid that if Italian Airlines flew Italian planes and such, fragmented markets would prevent any European company from being a viable player in the long term. So they collaborated on the Concorde, and then the Airbus A300, consolidating the European aerospace industry quite successfully. It costs a lot of money to train a pilot to fly a new aircraft, and on top of that you have mechanics, ground handlers, air traffic controllers and many other skilled people whose operations revolve it. Thus there is some public and industry benefit to consolidation, but at the moment the competitive landscape looks very different for widebody (B787, A350) airliners where new technology is making it to to the public as opposed to narrowbody (B737, A320) airliners where the youngest design is 35 years old. (Some of that parallels the lack of competition in the U.S. airline market which is dominated by narrowbody airliners as opposed to international flights on which you are likely to ride on a widebody. If you're going to compress people in all three axes to get them in a 737, why bother thanking them for flying with you?)
ncallaway 7y ago
> Should the government prop up 10 competitors in every industry? This questions seems answered by the comment it's replying to. The previous poster said: > There's nothing necessarily wrong with a segment where there's essentially one one or two providers; some things may be natural monopolies. So, that seems like an answer to your question: no. There are some segments where it doesn't make sense.
deleted 7y ago
[deleted]

magduf 7y ago

You can't have 100 aerospace companies doing big projects; the economy just isn't that large. For very mature industries, I believe studies have found that the optimal number of competitors is usually 3 large companies. For immature industries with a lot of change and innovation, that number is generally higher, but as the industry matures, players either die off or merge. A good example of this is the American auto industry.

tonyedgecombe 7y ago
I've seen four mentioned several times and the fourth doesn't even need to be that big, a small scrappy competitor can have a big impact.
- babesh 7y ago
  One specific example of antitrust that wasn't handled properly was the Bombardier C Series and Boeing petitioning it for dumping. It resulted in one fewer competitor in the market because it forced Bombardier to sell the plane to Airbus. I think that there will/can be competitors that spring out from the lower end. The trick is to prevent the oligopolists/monopolists from squashing them through manipulation of the legal system or other underhanded tactics. https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Boeing https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Bo...
  - redis_mlc 7y ago
    > One specific example of antitrust that wasn't handled properly was the Bombardier Bombardier is a foreign company that is heavily subsidized by the Quebec Pension Fund. They probably were dumping. I don't see how anti-trust applies here. The CSeries is a fascinating story with so many twists and turns - almost unbelievable if it was a fiction novel! The CSeries probably did not have a viable marketing and support story against Boeing. If you want to get wound up, then the Boeing/Embraer Civil lashup is truly anti-competitive.
    - babesh 7y ago

throwaway5752 7y ago

Bell/AT&T had an effective telephone monopoly during the time of Bell Labs. They invented the transistor, MOSFETs, Unix, C, lasers, information theory, photovoltaic cells, Shor's algorithm, CCDs (basis for CMOS)... It's not in the sweet spot of this forum, but aerospace research is incredibly capital intensive and difficult. There are economies of scale of combined R&D departments. Those labs don't last forever, but I hope my example of Bell Labs shows how productive and important they can be. You would not achieve that with Boeing divided into 10 parts. This doesn't even go into just how impractical that is for commercial aerospace. The overhead for flying multiple types of aircraft is huge. Simulators are very expensive to produce. Pilots need large numbers of hours on different planes. It would be a maintenance nightmare since parts are tested more than anything outside of medicine and similarly stringent supply chains. The market won't support 10 commercial aircraft companies.

magduf 7y ago
The problem with this argument is that Boeing hasn't produced any innovation lately that I can see, while their much smaller competitor, SpaceX, is the one that came up with reusable rockets that can land themselves. Things were really different back in the days of Bell Labs when those inventions were made (another example is Xerox and PARC). Companies like those invested heavily in R&D; long-term stability and profitability was more important than next-quarter returns. This just isn't the case in America any more.
travisporter 7y ago
As a counterexample, what is your take on the current outcroppings of LEO launch providers? Surely they are also quite capital intensive.
- throwaway5752 7y ago
  You mean SpaceX? I don't think large R&D orgs have a monopoly on innovation. And they aren't guaranteed to produce good results. In context, though, the US put people on the moon 50 years ago at the cost in present dollars of $.5T. Easily that much or more has probably been invested in the defense side of rocket development. I think SpaceX was applying 50 years of incremental improvements to a technology that was relatively stagnant ("it just works" conservative approach/lower government funding/general risk aversion profile). This is not to slight them at all, just putting it in perspective. But look at the payloads. Right now it's satellites/cargo. They still haven't done a manned mission. Commercial aircraft fly thousands of miles per day and carry hundreds of people. They do this while being repaired by different teams around the world. It's not as glamorous, but incremental updates in adhesives, radar, rivets, and other safety and repairability are big deals and R&D into safety and reliability shouldn't be discounted. That's on top of the satellite division and Phantom Works (sustained and controlled hypersonic scramjet, wings that change shape). I am not a rocket scientist, so take it all with a grain of salt.