4 ms·

"Free market" does not mean a market without any regulatory structure. A market in which monopolies have formed is not free, as monopolies can force conditions

"Free market" does not mean a market without any regulatory structure. A market in which monopolies have formed is not free, as monopolies can force conditions on transactions that would not exist if multiple independent and competing parties were able to participate on the supply side.

Proven 4y ago
WalterBright 4y ago
Monopolies only form in a free market when the government enforces them. Like the trash collection monopoly in your city.
- voisin 4y ago
  > Monopolies only form in a free market when the government enforces them. This is incorrect. There are many industries that lead to natural monopolies in the absence of government breaking them up. Anything with incredibly high fixed entry costs, few substitute opportunities and low variable costs tend toward monopolies (at least regionally).
  - WalterBright 4y ago
    Name one.
    - voisin 4y ago
      The quintessential example is railroads, but also most utility providers (electricity, water, natural gas). Toll Roads / Bridges (often the substitutes are not good alternatives). Telecoms (to a lesser degree and declining thanks to the entry of new substitutes).
      - WalterBright 4y ago
        Except that railroads compete with each other, and with all the other forms of transportation. Telecoms only had a monopoly when the government enforced it (long distance AT&T). Phone companies often had local monopolies because cities would enforce them. People can (and did) build more roads and bridges if someone was charging monopoly rents.
        voisin 4y ago
        Natural monopoly != zero competition. I’d recommend you read this for more info: https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly
        WalterBright 4y ago
        Yeah, I've read it. Didn't find it compelling.
        dredmorbius 4y ago
        https://news.ycombinator.com/item?id=32762714 https://news.ycombinator.com/item?id=32762714
      - dredmorbius 4y ago
        What I've come to find an interesting element of monopolies is that virtually all that I can think of seem to be fundamentally networked entities. That might be physical (railroads, utilities, communications, broadcast) or logical (marketing, wholesale, retail), and might involve edges/links (rail, comms), vertices/nodes (ports, datacentres), or quite often a mix of both. All tend to see some large realm over which there is an increasing return to scale (if there weren't, monopolies wouldn't form), and quite often a single entity may be established over multiple networks or modalities (e.g, Google controlling search, online advertising, and Web browser development). I've been hard pressed to come up with examples of monopolies which aren't describable as networks, though that description may not at first be obvious. Non-government-sanctioned monopolies exist as (illegal) drugs cartels, criminal syndicates, and warlord hierarchies, in which growth and maintenance of the network is typically obtained through direct (and non-legally sanctioned) force of arms, coercion, or intimidation.
  - nyokodo 4y ago
    > There are many industries that lead to natural monopolies Care to provide a list of these industries conducive to natural monopolies that have monopolies broken up by government?
    - voisin 4y ago
      See my response in a sibling thread for a partial list of industries conducive to natural monopolies. Governments have had to step in to regulate each of these industries to varying degrees to rein in their power because of the fact that the industries tended toward monopoly.
      - WalterBright 4y ago
        Please name a company, not an industry.
- welshwelsh 4y ago
  That's not the only way monopolies can form, but it's the easiest one for sure. My counterpoint is that without strong independent institutions preventing them, the companies themselves will enforce the monopoly using private security or police forces. If the government is too weak, the company will buy it. If there is no government, the company will form it's own government. Like company towns- that's the natural end state of an unregulated market. The biggest company in the area can just buy everything and make their own laws.
  - junofan 4y ago
    Any modern examples? It seems cheaper and more effective to capture regulators—that’s what’s been happening in practice.
  - WalterBright 4y ago
    Free markets require a government - to prevent use of private police forces to enforce their business by violating the rights of others.
- dredmorbius 4y ago
  I'd be interested in knowing what definition of "monopoly" you're proposing. Under US regulation: "Monopolization Defined" The antitrust laws prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power. Most Section 2 claims involve the conduct of a firm with a leading market position, although Section 2 of the Sherman Act also bans attempts to monopolize and conspiracies to monopolize. As a first step, courts ask if the firm has "monopoly power" in any market. This requires in-depth study of the products sold by the leading firm, and any alternative products consumers may turn to if the firm attempted to raise prices. Then courts ask if that leading position was gained or maintained through improper conduct—that is, something other than merely having a better product, superior management or historic accident. Here courts evaluate the anticompetitive effects of the conduct and its procompetitive justifications. "Market Power" Courts do not require a literal monopoly before applying rules for single firm conduct; that term is used as shorthand for a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors. That is how that term is used here: a "monopolist" is a firm with significant and durable market power. <https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/monopolization-defined https://www.ftc.gov/tips-advice/competition-guidance/guide-a...>

Proven 4y ago

WalterBright 4y ago

Monopolies only form in a free market when the government enforces them. Like the trash collection monopoly in your city.

voisin 4y ago
> Monopolies only form in a free market when the government enforces them. This is incorrect. There are many industries that lead to natural monopolies in the absence of government breaking them up. Anything with incredibly high fixed entry costs, few substitute opportunities and low variable costs tend toward monopolies (at least regionally).
- WalterBright 4y ago
  Name one.
  - voisin 4y ago
    The quintessential example is railroads, but also most utility providers (electricity, water, natural gas). Toll Roads / Bridges (often the substitutes are not good alternatives). Telecoms (to a lesser degree and declining thanks to the entry of new substitutes).
    - WalterBright 4y ago
      Except that railroads compete with each other, and with all the other forms of transportation. Telecoms only had a monopoly when the government enforced it (long distance AT&T). Phone companies often had local monopolies because cities would enforce them. People can (and did) build more roads and bridges if someone was charging monopoly rents.
      - voisin 4y ago
        Natural monopoly != zero competition. I’d recommend you read this for more info: https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly
        WalterBright 4y ago
        Yeah, I've read it. Didn't find it compelling.
      - dredmorbius 4y ago
        https://news.ycombinator.com/item?id=32762714 https://news.ycombinator.com/item?id=32762714
    - dredmorbius 4y ago
      What I've come to find an interesting element of monopolies is that virtually all that I can think of seem to be fundamentally networked entities. That might be physical (railroads, utilities, communications, broadcast) or logical (marketing, wholesale, retail), and might involve edges/links (rail, comms), vertices/nodes (ports, datacentres), or quite often a mix of both. All tend to see some large realm over which there is an increasing return to scale (if there weren't, monopolies wouldn't form), and quite often a single entity may be established over multiple networks or modalities (e.g, Google controlling search, online advertising, and Web browser development). I've been hard pressed to come up with examples of monopolies which aren't describable as networks, though that description may not at first be obvious. Non-government-sanctioned monopolies exist as (illegal) drugs cartels, criminal syndicates, and warlord hierarchies, in which growth and maintenance of the network is typically obtained through direct (and non-legally sanctioned) force of arms, coercion, or intimidation.
- nyokodo 4y ago
  > There are many industries that lead to natural monopolies Care to provide a list of these industries conducive to natural monopolies that have monopolies broken up by government?
  - voisin 4y ago
    See my response in a sibling thread for a partial list of industries conducive to natural monopolies. Governments have had to step in to regulate each of these industries to varying degrees to rein in their power because of the fact that the industries tended toward monopoly.
    - WalterBright 4y ago
      Please name a company, not an industry.
welshwelsh 4y ago
That's not the only way monopolies can form, but it's the easiest one for sure. My counterpoint is that without strong independent institutions preventing them, the companies themselves will enforce the monopoly using private security or police forces. If the government is too weak, the company will buy it. If there is no government, the company will form it's own government. Like company towns- that's the natural end state of an unregulated market. The biggest company in the area can just buy everything and make their own laws.
- junofan 4y ago
  Any modern examples? It seems cheaper and more effective to capture regulators—that’s what’s been happening in practice.
- WalterBright 4y ago
  Free markets require a government - to prevent use of private police forces to enforce their business by violating the rights of others.
dredmorbius 4y ago
I'd be interested in knowing what definition of "monopoly" you're proposing. Under US regulation: "Monopolization Defined" The antitrust laws prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power. Most Section 2 claims involve the conduct of a firm with a leading market position, although Section 2 of the Sherman Act also bans attempts to monopolize and conspiracies to monopolize. As a first step, courts ask if the firm has "monopoly power" in any market. This requires in-depth study of the products sold by the leading firm, and any alternative products consumers may turn to if the firm attempted to raise prices. Then courts ask if that leading position was gained or maintained through improper conduct—that is, something other than merely having a better product, superior management or historic accident. Here courts evaluate the anticompetitive effects of the conduct and its procompetitive justifications. "Market Power" Courts do not require a literal monopoly before applying rules for single firm conduct; that term is used as shorthand for a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors. That is how that term is used here: a "monopolist" is a firm with significant and durable market power. <https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/monopolization-defined https://www.ftc.gov/tips-advice/competition-guidance/guide-a...>