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They got the title wrong. Record profits due to decades of poor monopsony governmental policies. We are living with the end results of the allowance of company

They got the title wrong. Record profits due to decades of poor monopsony governmental policies. We are living with the end results of the allowance of company merger after company merger. Capitalism only works when there is considerable competition, and the ability to independently set prices. Only utilities work best with less competition, and require a ton of regulation and huge scrutiny. We should be treating any company that increasingly consumes companies as utilities and limit their ability to arbitrarily raise prices. I was taught that profitability tends towards zero over time and this is simply something I have not experienced in my lifetime. Something is greatly broken in the modern age when we allow policy to favor incumbents so heavily. There should be company after company sprouting up to take advantage of these profits, and I’m not entirely sure that is happening, despite hearing accounts of record numbers of business started in the last 5 years.

ProllyInfamous 3y ago
>Capitalism only works when there is considerable competition, and the ability to independently set prices. "You can have it in any color you like, as long as it's black." —Ford on Model T?
s1artibartfast 3y ago
My fundamental question is why new competitors cant compete on price with monopolies if monopolies have such bloated profit margins. In response to your regulation proposal, California has one of the most regulated utility energy markets in the country, and prices nearly double the national average. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...
- milesvp 3y ago
  Yeah, I wonder about the high utility prices in california too. I don’t have good answers other than we absolutely need to treat utilities with very high standards. My suspicion is that part of the problem is a common allowance of “cost plus” accounting. You should absolutely never do this, because all the pressures both positive and negative disappear, and the end result seems to be prices that rise faster than inflation. As for the can’t compete problem, is there really is a lot of value in working at scale. Some of the earliest antitrust work in the US allowed the railroads to continue to grow in power because they were considered essential and scale was quoted as being a being the reason to let them grow. I think we need a regressive tax against business size (however we define that). Bigger companies should simply be taxed increasingly disproportionate to their size. I think that would encourage smaller companies to make it easier to compete.
  - s1artibartfast 3y ago
    I agree state mandated cost plus accounting is central to the problem in California. California sets a 10% maximum profit, so of course the power will be as expensive to produce as possible. ANY action that reduces costs also reduces profit. >Bigger companies should simply be taxed increasingly disproportionate to their size. I think that would encourage smaller companies to make it easier to compete. If smaller companies cant compete on price, why would you want them. IF I understand correctly, you suggest adding a deadweight loss on large companies to raise the cost of goods to the point where competitors can enter. This leaves the consumers paying more for goods, not less. Isn't the purpose of competition to lower the price to consumers?
    - milesvp 3y ago
      I’m not convinced this would drive up prices. In the way you’re painting, yes, if you implemented this suddenly and the large companies were suddenly left holding a big tax burden they’re going to have a new profit maximizing price point for their goods, which will be higher. But I guess the question is then, how much do companies actually get to set prices? I’ve seen distortions in my local rental market due to the consolidation of management companies and the use of software to both raise prices and increase vacancies to keep prices high. They have essentially taken a consumer surplus and turned it into a corporate surplus. You will see this kind of behavior anywhere monopsonies are allowed to form. So assuming that a big behemoth company is just naturally going to find a profit maximizing price for goods that is lower than prices when there is significantly more competition is not a given. Generally the main goal of a monopolist is to drive competition out of business, then raise prices significantly. Just because this is really hard to do, doesn’t change the basic strategy.
      - s1artibartfast 3y ago
        I may not have been clear. I thought the proposal was specifically to apply taxes to drive up prices from the monopoly. Otherwise, I dont understand how it helps the competition at all. If monopoly co. can make widgets for $0.80 and sell them for $1.00, but competition can only hope to make them for $1.10, then you would need to tax the monopoly $0.30, for the the competition to even have a shot. this is all in the context of small companies that cant compete against monopolies due to economies of scale. Of course, the story is different if the small company can compete on manufacturing cost, but are prevented from doing so due to lawyers, legislation, and lucrative buyouts.

ProllyInfamous 3y ago

>Capitalism only works when there is considerable competition, and the ability to independently set prices. "You can have it in any color you like, as long as it's black." —Ford on Model T?

s1artibartfast 3y ago

My fundamental question is why new competitors cant compete on price with monopolies if monopolies have such bloated profit margins. In response to your regulation proposal, California has one of the most regulated utility energy markets in the country, and prices nearly double the national average. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

milesvp 3y ago
Yeah, I wonder about the high utility prices in california too. I don’t have good answers other than we absolutely need to treat utilities with very high standards. My suspicion is that part of the problem is a common allowance of “cost plus” accounting. You should absolutely never do this, because all the pressures both positive and negative disappear, and the end result seems to be prices that rise faster than inflation. As for the can’t compete problem, is there really is a lot of value in working at scale. Some of the earliest antitrust work in the US allowed the railroads to continue to grow in power because they were considered essential and scale was quoted as being a being the reason to let them grow. I think we need a regressive tax against business size (however we define that). Bigger companies should simply be taxed increasingly disproportionate to their size. I think that would encourage smaller companies to make it easier to compete.
- s1artibartfast 3y ago
  I agree state mandated cost plus accounting is central to the problem in California. California sets a 10% maximum profit, so of course the power will be as expensive to produce as possible. ANY action that reduces costs also reduces profit. >Bigger companies should simply be taxed increasingly disproportionate to their size. I think that would encourage smaller companies to make it easier to compete. If smaller companies cant compete on price, why would you want them. IF I understand correctly, you suggest adding a deadweight loss on large companies to raise the cost of goods to the point where competitors can enter. This leaves the consumers paying more for goods, not less. Isn't the purpose of competition to lower the price to consumers?
  - milesvp 3y ago
    I’m not convinced this would drive up prices. In the way you’re painting, yes, if you implemented this suddenly and the large companies were suddenly left holding a big tax burden they’re going to have a new profit maximizing price point for their goods, which will be higher. But I guess the question is then, how much do companies actually get to set prices? I’ve seen distortions in my local rental market due to the consolidation of management companies and the use of software to both raise prices and increase vacancies to keep prices high. They have essentially taken a consumer surplus and turned it into a corporate surplus. You will see this kind of behavior anywhere monopsonies are allowed to form. So assuming that a big behemoth company is just naturally going to find a profit maximizing price for goods that is lower than prices when there is significantly more competition is not a given. Generally the main goal of a monopolist is to drive competition out of business, then raise prices significantly. Just because this is really hard to do, doesn’t change the basic strategy.
    - s1artibartfast 3y ago
      I may not have been clear. I thought the proposal was specifically to apply taxes to drive up prices from the monopoly. Otherwise, I dont understand how it helps the competition at all. If monopoly co. can make widgets for $0.80 and sell them for $1.00, but competition can only hope to make them for $1.10, then you would need to tax the monopoly $0.30, for the the competition to even have a shot. this is all in the context of small companies that cant compete against monopolies due to economies of scale. Of course, the story is different if the small company can compete on manufacturing cost, but are prevented from doing so due to lawyers, legislation, and lucrative buyouts.