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The difference is private companies that accumulate too much waste and useless things can fail and be replaced. Even if that is true, in some areas companies'
by microtonal 2y ago
The difference is private companies that accumulate too much waste and useless things can fail and be replaced.
Even if that is true, in some areas companies' interests strongly misalign with that of citizens. An insurance company earns more by rejecting customer declarations. An ISP earns more by giving customers less bandwidth for a higher price. A toll road company earns more by doing as little maintenance they can get away with, while keeping prices high.
Yes, in a perfect market, customers will flock to competitors that are better for them. However, in many cases a perfect market is not attainable for various reasons. E.g. because the cost of entry is too high (e.g. making a competing ISP would require you to put your own fiber in the ground) or because there are network effects that are nearly impossible to break.
This is why certain markets need strong regulation or government monopolies -- to protect people from pure profit seeking. Health care is a good example. Health care in Western Europe is much better, while less money is spent on health care. This is because health care is strongly regulated and insurance companies cannot f*ck over customers. The objective function of maximizing profits becomes a constrained optimization problem, which generally leads to other ways to increase profits, like pressuring pharmaceutical companies to lower prices of medicines.
- plagiarist 2y agoThe theory of capitalism leading to efficient markets makes a great deal of assumptions that are simply not true in the real world. Even for elastic goods that nobody needs to participate in at all, let alone an inelastic good like healthcare where people will pay pretty much anything for themselves or their family members to continue living.
- conception 2y agoPeople also equate capitalism with free markets and attribute a lot of the success of capitalism mistakenly because of it.
- Jcowell 2y agoI think it’s true , it just that sometimes companies become the market
- ljm 2y agoThe concept of perfect competition describes what capitalism in its purest, most ideal form should be, and everything after that is a description of what happens when humans get involved.
- conception 2y agoThat’s free markets. Capitalism just means private people control the capital, rather than the state. Beyond that and you’re in different forms of capitalism. There’s no requirement of competition.
- lclarkmichalek 2y agoNatural monopolies exist, for sure. Your insurance example is odd though - insurance markets are generally highly competitive. The recent cases where we’ve seen a loss of competition in the market (CA home insurance, for example) have been driven by regulators imposing price controls. The issue with healthcare is that providers have leverage over insurers, not that there is a lack of competition for insurance.
- IX-103 2y agoNo, the problem with insurance is not that providers have leverage over insurers. The problem is that people buying insurance have imperfect information about what that insurance will and won't cover when they buy it. Even after you get insurance trying to find a list of things that are covered if impossible. Even if you call the insurance company, they won't tell you. How is a discerning buyer supposed to choose insurance based on anything but price when that is the only information available? Then there's the entire bureaucracy that is medical billing. You have to know which obscure codes for diagnosis can be used with which, similarly obscure, codes for treatment. None of those codes ever exactly match what is happening to the patient, so you have to choose one that is close enough and hope the insurance agrees. You ever wonder why it takes 6+ months to get a medical bill? That's why. It has to be processed by the medical billing bureaucracy until it bears only the slightest resemblance to reality and then shuttled back and forth between the provider, the insurance filing system, and the insurance underwriter. Only once that is done can they send you a bill. How much cheaper could providers offer service if they didn't have to pay dedicated staff to play some perverse game of telephone with the insurance company?