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This statement is fundamentally flawed on two different core aspects. First, the phenomenon you're referring to is "natural monopolies" which is a well underst

by floor2 4y ago

This statement is fundamentally flawed on two different core aspects. First, the phenomenon you're referring to is "natural monopolies" which is a well understood situation which appears in every freshman-level Economics 101 class, but that only applies to certain industries. For instance, utilities are natural monopolies because it's far more efficient to run one set of wires to every house rather than try to have 10 competing companies all run their own power lines. But most products & services don't fall into this category. Second, "free market" is a specific economic term which means markets which are free from governmental intervention in terms of price controls or subsidies, but are also free from monopolies, cartels or other anti-competitive behavior by any participant. Using the government to break up a monopoly or cartel moves the system towards a "free market". Having zero regulation which allows one or two participants to distort the market moves the system away from a "free market".

dbingham 4y ago
> First, the phenomenon you're referring to is "natural monopolies" which is a well understood situation which appears in every freshman-level Economics 101 class, but that only applies to certain industries. For instance, utilities are natural monopolies because it's far more efficient to run one set of wires to every house rather than try to have 10 competing companies all run their own power lines. But most products & services don't fall into this category. I'm not referring to natural monopolies. While I concede many of the cases people would immediately think of in my description of the early internet (Google, Facebook, et al) could readily be classified as natural monopolies, we've seen plenty of consolidation in areas that most economists wouldn't classify as such - Amazon for instance, a bookstore or e-commerce site is not a natural monopoly. And we've seen the same consolidation off the internet everywhere. There are few significant verticals, at this point, that aren't dominated by a handful of giant consolidated players. Independent of how much regulation there is or isn't in that vertical. > Second, "free market" is a specific economic term which means markets which are free from governmental intervention in terms of price controls or subsidies, but are also free from monopolies, cartels or other anti-competitive behavior by any participant. Using the government to break up a monopoly or cartel moves the system towards a "free market". Having zero regulation which allows one or two participants to distort the market moves the system away from a "free market". And this is where economists trip over their own feet and fall face first into the mud of religion. This is a self-referential, recursive definition that allows you to pretend a major consequence of a system is not, in fact, an issue. You realize that you just defined a "free market" to be a market that is free of regulation, but requires regulation to maintain its state as a free market?
- everforward 4y ago
  > Amazon for instance, a bookstore or e-commerce site is not a natural monopoly It is, in a way, because Amazon as an e-commerce site is really a fulfillment company which does tend towards a natural monopoly. It's inefficient to have dozens of companies with warehouses everywhere Amazon does to offer the same delivery guarantees. E-commerce then trends towards a natural monopoly because Amazon has cheaper fulfillment than anyone else. AWS further cements that, by making their hosting costs cheaper than almost anyone else. Without intervention, it's not shocking that whoever owns the natural monopoly on fulfillment would have a monopoly on e-commerce. In much the same way that whoever owns the rail lines would likely also dominate verticals largely defined by transportation costs.
- imtringued 4y ago
  >You realize that you just defined a "free market" to be a market that is free of regulation, but requires regulation to maintain its state as a free market? Did you even read the comment? The only constraint he put on "government regulation" is that price controls and subsidies aren't allowed. That is a tiny subset of government regulation, and not equivalent to all possible government regulation. Honestly, how long will it take people to realize that money and land are the two most distorting monopolies in the capitalist market that enforces the formation of monopolies in all other industries as only monopoly returns in the non monopoly sectors are able to get the "root" monopolists off your back? Companies often die not because of a lack of money but rather because of too much money and the resulting profitability expectations by the financial sector that cannot be met. The solution to those problems is very easy. You implement a land value tax and a resource based tax to allocate both land and resources properly. Once you have that you can introduce negative interest rates based on at least a dozen theories you can pick your favourite one. Allowing negative interest rates defuses artificial profitability expectations and allows people and governments to pay off their debt. The reason why a negative interest rate works is because money is a public institution and liquidity is a degree to how well accepted this public institution is. This means the owner of the money can sell this public service just like the owner of land can sell the convenient public services near his property as a perk. So the lender will always want to get paid interest for the public services the liquidity he holds onto provides and this then forces a profitability expectation on the borrower even of it is completely unreasonable during a recession for example. In both cases the government is providing public services without asking for compensation, no wonder governments keep running out of money and fail to collect enough taxes, they massively subsidize the holders of land and money by not taxing them in proportion to how much they benefit from the government. These indirect subsidies can be sold for a profit which then effectively turns them into direct subsidies. Getting rid of subsidies is a type of regulation that is compatible with free markets. Meanwhile capitalism is inherently incompatible with free markets as it thrives on monopoly rents.
TremendousJudge 4y ago
I don't think your comment has exposed any flaws in GPs point. The first point doesn't refute anything GP said. If Amazon, Google, Meta, etc, are natural monopolies like utilities, then have the state regulate them as such. If they aren't, have them broken up like Standard Oil. You yourself have pointed up that monopolies are bad for the users. Second, even if "free market" is used by (some) economists to mean a specific thing, that doesn't mean that GP, or most people for that matter, use it that way. For many, many people (including elected policy makers), a "free market" is a market without government intervention, and the less intervention, the more free it is. Nobody owns the official definition of the term, redefining it and then calling the argument which used it in a different way "fundamentally flawed" is not correct.
- tick_tock_tick 4y ago
  In what way are any of the those companies a monopoly? Maybe I could see an argument about Apple in the USA but I don't see it for those 3.
  - TremendousJudge 4y ago
    Google owns most people's window to the internet: from the browser and sometimes even the operating system all the way to what sites they get to see, and even the content itself. Amazon handles most online shopping in the US, may have an even larger share in other countries. Meta owns most of the social networking and messaging apps of the world. I'd argue there's plenty of evidence that each is a monopoly in its own category, aggressively eliminating any competition from the market.
imtringued 4y ago
The problem is all the people calling whatever we have a free market. It would be more appropriate to just call it market or capitalist market because there are also social market theories. The free market represents an unattainable utopia. What pissess me off the most is that a lot of capitalists actually like monopolies and externalities and then shout and complain that the government is ruining the "free market".

by floor2 4y ago

dbingham 4y ago

> First, the phenomenon you're referring to is "natural monopolies" which is a well understood situation which appears in every freshman-level Economics 101 class, but that only applies to certain industries. For instance, utilities are natural monopolies because it's far more efficient to run one set of wires to every house rather than try to have 10 competing companies all run their own power lines. But most products & services don't fall into this category. I'm not referring to natural monopolies. While I concede many of the cases people would immediately think of in my description of the early internet (Google, Facebook, et al) could readily be classified as natural monopolies, we've seen plenty of consolidation in areas that most economists wouldn't classify as such - Amazon for instance, a bookstore or e-commerce site is not a natural monopoly. And we've seen the same consolidation off the internet everywhere. There are few significant verticals, at this point, that aren't dominated by a handful of giant consolidated players. Independent of how much regulation there is or isn't in that vertical. > Second, "free market" is a specific economic term which means markets which are free from governmental intervention in terms of price controls or subsidies, but are also free from monopolies, cartels or other anti-competitive behavior by any participant. Using the government to break up a monopoly or cartel moves the system towards a "free market". Having zero regulation which allows one or two participants to distort the market moves the system away from a "free market". And this is where economists trip over their own feet and fall face first into the mud of religion. This is a self-referential, recursive definition that allows you to pretend a major consequence of a system is not, in fact, an issue. You realize that you just defined a "free market" to be a market that is free of regulation, but requires regulation to maintain its state as a free market?

everforward 4y ago
> Amazon for instance, a bookstore or e-commerce site is not a natural monopoly It is, in a way, because Amazon as an e-commerce site is really a fulfillment company which does tend towards a natural monopoly. It's inefficient to have dozens of companies with warehouses everywhere Amazon does to offer the same delivery guarantees. E-commerce then trends towards a natural monopoly because Amazon has cheaper fulfillment than anyone else. AWS further cements that, by making their hosting costs cheaper than almost anyone else. Without intervention, it's not shocking that whoever owns the natural monopoly on fulfillment would have a monopoly on e-commerce. In much the same way that whoever owns the rail lines would likely also dominate verticals largely defined by transportation costs.
imtringued 4y ago
>You realize that you just defined a "free market" to be a market that is free of regulation, but requires regulation to maintain its state as a free market? Did you even read the comment? The only constraint he put on "government regulation" is that price controls and subsidies aren't allowed. That is a tiny subset of government regulation, and not equivalent to all possible government regulation. Honestly, how long will it take people to realize that money and land are the two most distorting monopolies in the capitalist market that enforces the formation of monopolies in all other industries as only monopoly returns in the non monopoly sectors are able to get the "root" monopolists off your back? Companies often die not because of a lack of money but rather because of too much money and the resulting profitability expectations by the financial sector that cannot be met. The solution to those problems is very easy. You implement a land value tax and a resource based tax to allocate both land and resources properly. Once you have that you can introduce negative interest rates based on at least a dozen theories you can pick your favourite one. Allowing negative interest rates defuses artificial profitability expectations and allows people and governments to pay off their debt. The reason why a negative interest rate works is because money is a public institution and liquidity is a degree to how well accepted this public institution is. This means the owner of the money can sell this public service just like the owner of land can sell the convenient public services near his property as a perk. So the lender will always want to get paid interest for the public services the liquidity he holds onto provides and this then forces a profitability expectation on the borrower even of it is completely unreasonable during a recession for example. In both cases the government is providing public services without asking for compensation, no wonder governments keep running out of money and fail to collect enough taxes, they massively subsidize the holders of land and money by not taxing them in proportion to how much they benefit from the government. These indirect subsidies can be sold for a profit which then effectively turns them into direct subsidies. Getting rid of subsidies is a type of regulation that is compatible with free markets. Meanwhile capitalism is inherently incompatible with free markets as it thrives on monopoly rents.

TremendousJudge 4y ago

I don't think your comment has exposed any flaws in GPs point. The first point doesn't refute anything GP said. If Amazon, Google, Meta, etc, are natural monopolies like utilities, then have the state regulate them as such. If they aren't, have them broken up like Standard Oil. You yourself have pointed up that monopolies are bad for the users. Second, even if "free market" is used by (some) economists to mean a specific thing, that doesn't mean that GP, or most people for that matter, use it that way. For many, many people (including elected policy makers), a "free market" is a market without government intervention, and the less intervention, the more free it is. Nobody owns the official definition of the term, redefining it and then calling the argument which used it in a different way "fundamentally flawed" is not correct.

tick_tock_tick 4y ago
In what way are any of the those companies a monopoly? Maybe I could see an argument about Apple in the USA but I don't see it for those 3.
- TremendousJudge 4y ago
  Google owns most people's window to the internet: from the browser and sometimes even the operating system all the way to what sites they get to see, and even the content itself. Amazon handles most online shopping in the US, may have an even larger share in other countries. Meta owns most of the social networking and messaging apps of the world. I'd argue there's plenty of evidence that each is a monopoly in its own category, aggressively eliminating any competition from the market.

imtringued 4y ago

The problem is all the people calling whatever we have a free market. It would be more appropriate to just call it market or capitalist market because there are also social market theories. The free market represents an unattainable utopia. What pissess me off the most is that a lot of capitalists actually like monopolies and externalities and then shout and complain that the government is ruining the "free market".