4 ms·

I think one problem is that most people confuse private ownership with "the market". Just because a utility company is owned and operated by a private entity do

I think one problem is that most people confuse private ownership with "the market". Just because a utility company is owned and operated by a private entity does not mean it is influenced by market forces. Utilities fall under a natural or technological monopoly. Due to space constraints it is not desirable or efficient to have multiple companies run pipes, cables, or other infrastructure alongside each other to compete. There are no competitive forces; there is no market. Publicly run institutions or privately run+ publicly regulated institutions better serve the needs of the people in these conditions.

forgetfreeman 2y ago
I think a related thing that many people get confused by is the idea that market forces even exist. It's very rare these days to find industry segments where participants actively compete on quality or price. The whole idea is a holdover from how business was done 40 years ago.
- _DeadFred_ 2y ago
  And with today's investors just buying funds/picking some 'group' on the 401k website, they aren't investing in a company, counting on receiving dividends from the company for the rest of their lives, and therefore forcing the company to be healthy. Instead they are counting on the stock going up short term, something totally different than buying and holding for dividends. And they just keep putting money into the generic pools of XYZ stock fund, again not a specific stock that they then hold accountable for anything. In fact they can't even punish a specific company by selling it's stock, only an entire ETF or 401 fund that the company is buried in. And then there's dark pools. Trading isn't even done on the market anymore.
  - maest 2y ago
    > And then there's dark pools. This is such a non-sequitor, it undermines your entire post.
- dgoldstein0 2y ago
  market forces do exist. But it varies highly from industry to industry and product category to category. Food: - restaurants definitely compete with each other, mostly in each local area - and within that, different slices of the restaurant business more directly compete, e.g. fast food is more competing with each other than fine dining. - BUT: we have a huge problem with a lack of competition in the supply chain driving prices up for everyone, at least in the US. - Groceries are similarly impacted by supply chain monopolies Smartphones: high end smartphones are a oligopoly: - Apple vs Samsung vs HTC and several other tech companies producing phones; Apple definitely commands quite a bit of a premium, as do some of the nicer Android phones. But on the whole, the companies really are fighting to one-up each other with better features, battery life, etc. - quality is improving, even if the price is over-charging vs the ideal competitive market. Low end phones are even more fiercely competitive Other electronic categories seem to show decent market dynamics; headphones, earbuds, usb peripherals, keyboards, etc. all seem very commoditized; there certainly are brands that try to command a bit of a premium based on reputation / marketing, but the cheap options are often good enough and definitely have a very competitive market. Big electronics like GPUs and gaming consoles though I think it's easier to start considering market distortions due to more monopoly power. Of course there are no shortage of monopolistic practices out there, e.g. for utilities, collusion on rent, online retail (Amazon), textbook prices, medical care & pharmaceuticals, and even more mundane things like frozen potatoes and chicken. --- The thing that bothers me most with the simplistic view that "the market will do it better" is that the whole premise of market forces giving the most efficient price assumes that (a) a commodity is being traded by (b) a large number of buyers and sellers, none of whom have any significant share of the market. Many markets either (a) aren't trading a commodity (e.g. iPhones and Android phones aren't interchangeable so Apple can command a premium price) or (b) have consolidated buying or selling to the point that they don't have the large number of independent buyers or sellers necessary to have the price be set by market dynamics rather than the monopolist or monopsonist. And the people promoting "let the market fix it" either are too dumb to realize that, or more likely are letting their rich friends make a quick buck or want to score political points by promoting smaller government.
- animal_spirits 2y ago
  Market forces do exist. I'm not sure why you think they do not. You are plain incorrect to claim that it is the exception for industries to compete on quality and price, at least in the U.S.
  - forgetfreeman 2y ago
    How certain are you of your position? There are 3 major mobile telecoms in the country. Their service plans and coverage are roughly comparable. There are a handful of parent corporations that own fast food franchises in the country. Their product offerings and price points are roughly the same and all opportunistically raised prices after supply side disruptions from the pandemic were largely resolved. Most consumer appliances (regardless of brand) are assembled from parts made in the same factory. Similar features, similar life expectancy, similar price. Same with packaged food brands, clothing, furniture, building materials, this list is basically endless, and a product of a few decades of unchecked corporate mergers and acquisitions and the steady march of private equity into just about every market niche in existence.
darreninthenet 2y ago
Depends how you do it... in the UK we have the underlying infrastructure government owned and we choose who to buy our electricity and gas from.
- philjohn 2y ago
  For electric and gas that works as it's all just accounting. Energy company A buys futures for has and electricity and it all gets provided via the grid. For trains it's much harder - yes, there are two providers on the WCML, but they're not equal (one runs faster trains) and as such there's zero real competition.
  - darreninthenet 2y ago
    Is the slower train cheaper? If so, isn't that a competitive market choice?
    - anticensor 2y ago
      The slow train has more stations to stop at, hence there is not a real choice for rural people.
  - AnthonyMouse 2y ago
    These things are a choice though. The natural monopoly isn't the trains, it's the tracks. And it's not maintenance of the tracks, it's ownership of them. So you have the government own the tracks, contract with a private company to maintain them. Then anyone can use the tracks, like anyone can use the roads. Private companies offer train service to the public. All they need is rolling stock and they can start selling tickets. You then get a market that looks like airlines, i.e. entering the market is a moderate investment (millions; buy rolling stock/planes) rather than needing billions to build the network itself. More popular routes get more suppliers, which turns into more frequent service. There is plenty of competition because rolling stock is mobile and can easily be reassigned according to customer demand.
  - lukegb 2y ago
Empact 2y ago
Services subject to natural monopolies are good candidates for being run cooperatively, by / on behalf of the market participants, so that there is not the incentive to extract rents via market power. Government-run may be practical from e.g. a fundraising perspective, but these services could be run wholly privately as co-ops.
- AnthonyMouse 2y ago
  In theory having the government run it should have the same effect. In practice what happens is that voters don't separately elect the utility's board and then the mayor gets elected on the basis of some school or tax issues and allows the government-run utility to become wasteful or corrupt. What could be interesting is to have the local government found a co-op, i.e. they issue a bond to do the build-out and then hand the network to a co-op in exchange for a contract to pay the debt, essentially giving the co-op the backing of the government's credit rating for the initial build-out. Then the co-op board gets separately elected by its customers so they're directly accountable to the customers for any shenanigans.
  - BehindBlueEyes 2y ago
    Easier said than done these days. We had a coop managing out drinking water with local government support. Being a coop excluded them from grants and eventually the board burnt out and gave up. Local government now operates the thing - you'd think they'd be accountable to voters but they can only get grant money with strings attached. They can repair a few pipes only if they install chlorination that no one wants and will add more maintenance costs because of pressure from health and safety - the provider must guarantee water is safe at the end point so boiling water, which everyone does here, is no longer acceptable apparently. There isn't a big enough population that increasing the cost of water would make a difference. All that to say, voters here do care about utilities, and the coop solution worked for about 25 years iirc but it can't work in today's "one solution fits all" regulatory context anymore, at least where i live. Things are far from that simple in practice.

forgetfreeman 2y ago

I think a related thing that many people get confused by is the idea that market forces even exist. It's very rare these days to find industry segments where participants actively compete on quality or price. The whole idea is a holdover from how business was done 40 years ago.

_DeadFred_ 2y ago
And with today's investors just buying funds/picking some 'group' on the 401k website, they aren't investing in a company, counting on receiving dividends from the company for the rest of their lives, and therefore forcing the company to be healthy. Instead they are counting on the stock going up short term, something totally different than buying and holding for dividends. And they just keep putting money into the generic pools of XYZ stock fund, again not a specific stock that they then hold accountable for anything. In fact they can't even punish a specific company by selling it's stock, only an entire ETF or 401 fund that the company is buried in. And then there's dark pools. Trading isn't even done on the market anymore.
- maest 2y ago
  > And then there's dark pools. This is such a non-sequitor, it undermines your entire post.
dgoldstein0 2y ago
market forces do exist. But it varies highly from industry to industry and product category to category. Food: - restaurants definitely compete with each other, mostly in each local area - and within that, different slices of the restaurant business more directly compete, e.g. fast food is more competing with each other than fine dining. - BUT: we have a huge problem with a lack of competition in the supply chain driving prices up for everyone, at least in the US. - Groceries are similarly impacted by supply chain monopolies Smartphones: high end smartphones are a oligopoly: - Apple vs Samsung vs HTC and several other tech companies producing phones; Apple definitely commands quite a bit of a premium, as do some of the nicer Android phones. But on the whole, the companies really are fighting to one-up each other with better features, battery life, etc. - quality is improving, even if the price is over-charging vs the ideal competitive market. Low end phones are even more fiercely competitive Other electronic categories seem to show decent market dynamics; headphones, earbuds, usb peripherals, keyboards, etc. all seem very commoditized; there certainly are brands that try to command a bit of a premium based on reputation / marketing, but the cheap options are often good enough and definitely have a very competitive market. Big electronics like GPUs and gaming consoles though I think it's easier to start considering market distortions due to more monopoly power. Of course there are no shortage of monopolistic practices out there, e.g. for utilities, collusion on rent, online retail (Amazon), textbook prices, medical care & pharmaceuticals, and even more mundane things like frozen potatoes and chicken. --- The thing that bothers me most with the simplistic view that "the market will do it better" is that the whole premise of market forces giving the most efficient price assumes that (a) a commodity is being traded by (b) a large number of buyers and sellers, none of whom have any significant share of the market. Many markets either (a) aren't trading a commodity (e.g. iPhones and Android phones aren't interchangeable so Apple can command a premium price) or (b) have consolidated buying or selling to the point that they don't have the large number of independent buyers or sellers necessary to have the price be set by market dynamics rather than the monopolist or monopsonist. And the people promoting "let the market fix it" either are too dumb to realize that, or more likely are letting their rich friends make a quick buck or want to score political points by promoting smaller government.
animal_spirits 2y ago
Market forces do exist. I'm not sure why you think they do not. You are plain incorrect to claim that it is the exception for industries to compete on quality and price, at least in the U.S.
- forgetfreeman 2y ago
  How certain are you of your position? There are 3 major mobile telecoms in the country. Their service plans and coverage are roughly comparable. There are a handful of parent corporations that own fast food franchises in the country. Their product offerings and price points are roughly the same and all opportunistically raised prices after supply side disruptions from the pandemic were largely resolved. Most consumer appliances (regardless of brand) are assembled from parts made in the same factory. Similar features, similar life expectancy, similar price. Same with packaged food brands, clothing, furniture, building materials, this list is basically endless, and a product of a few decades of unchecked corporate mergers and acquisitions and the steady march of private equity into just about every market niche in existence.

darreninthenet 2y ago

Depends how you do it... in the UK we have the underlying infrastructure government owned and we choose who to buy our electricity and gas from.

philjohn 2y ago
For electric and gas that works as it's all just accounting. Energy company A buys futures for has and electricity and it all gets provided via the grid. For trains it's much harder - yes, there are two providers on the WCML, but they're not equal (one runs faster trains) and as such there's zero real competition.
- darreninthenet 2y ago
  Is the slower train cheaper? If so, isn't that a competitive market choice?
  - anticensor 2y ago
    The slow train has more stations to stop at, hence there is not a real choice for rural people.
- AnthonyMouse 2y ago
  These things are a choice though. The natural monopoly isn't the trains, it's the tracks. And it's not maintenance of the tracks, it's ownership of them. So you have the government own the tracks, contract with a private company to maintain them. Then anyone can use the tracks, like anyone can use the roads. Private companies offer train service to the public. All they need is rolling stock and they can start selling tickets. You then get a market that looks like airlines, i.e. entering the market is a moderate investment (millions; buy rolling stock/planes) rather than needing billions to build the network itself. More popular routes get more suppliers, which turns into more frequent service. There is plenty of competition because rolling stock is mobile and can easily be reassigned according to customer demand.
- lukegb 2y ago

Empact 2y ago

Services subject to natural monopolies are good candidates for being run cooperatively, by / on behalf of the market participants, so that there is not the incentive to extract rents via market power. Government-run may be practical from e.g. a fundraising perspective, but these services could be run wholly privately as co-ops.

AnthonyMouse 2y ago
In theory having the government run it should have the same effect. In practice what happens is that voters don't separately elect the utility's board and then the mayor gets elected on the basis of some school or tax issues and allows the government-run utility to become wasteful or corrupt. What could be interesting is to have the local government found a co-op, i.e. they issue a bond to do the build-out and then hand the network to a co-op in exchange for a contract to pay the debt, essentially giving the co-op the backing of the government's credit rating for the initial build-out. Then the co-op board gets separately elected by its customers so they're directly accountable to the customers for any shenanigans.
- BehindBlueEyes 2y ago
  Easier said than done these days. We had a coop managing out drinking water with local government support. Being a coop excluded them from grants and eventually the board burnt out and gave up. Local government now operates the thing - you'd think they'd be accountable to voters but they can only get grant money with strings attached. They can repair a few pipes only if they install chlorination that no one wants and will add more maintenance costs because of pressure from health and safety - the provider must guarantee water is safe at the end point so boiling water, which everyone does here, is no longer acceptable apparently. There isn't a big enough population that increasing the cost of water would make a difference. All that to say, voters here do care about utilities, and the coop solution worked for about 25 years iirc but it can't work in today's "one solution fits all" regulatory context anymore, at least where i live. Things are far from that simple in practice.