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Is it really basic economics that free market leads to monopolies? I thought this is not something where there is a strong consensus about ; free market advocat

Is it really basic economics that free market leads to monopolies? I thought this is not something where there is a strong consensus about ; free market advocates will actually argue that this is regulation that leads to monopolies.

hliyan 9mo ago
Yes, there's an entire body of work, starting with Ayn Rand, that vehemently argues that government interference in the economy is what leads to monopolies.
- throwaway132448 9mo ago
  There are entire bodies of work that argue against the heliocentric nature of the solar system - that doesn't make them credible or relevant.
  - Eddy_Viscosity2 9mo ago
    and that the earth is flat.
  - oneeyedpigeon 9mo ago
    The person you're replying to was using an example to show how there isn't consensus, they weren't saying they agree with Ayn Rand. In fact, given their tone, if I had to make I guess, I'd say they disagree with her take.
    - throwaway132448 9mo ago
      I think we've been far too generous in the last decade with whose opinion is relevant to whether there is a meaningful "consensus" on a matter or not. Hence why I say that Ayn Rand is to economics as geocentrists are to astronomy - they're simply not relevant to a definition of consensus that has any value to me.
      - oneeyedpigeon 9mo ago
        My opinion of Ayn Rand is no more flattering than yours, but I accept that she has quite a few powerful 'followers'. I wouldn't be surprised if quite a few of the current administration were big Ayn Rand fans. Their opinions may be absurd but, sadly, they are also relevant.
throwaway132448 9mo ago
I didn't say that free markets lead to monopolies: I qualified that with the need for economies of scale. Those may not exist - but look at most of the markets you interact with in your daily life and try and find the ones that don't. I'm not aware of how regulation of competitive markets would lead to monopoly. Are you referring to "regulation" in the form of state-endorsed/controlled monopolies? Those usually exist in situations where barriers to entry and economies of scale are so high that the state is simply "getting ahead" of the inevitable monopoly (e.g. national infrastructure). Of course, corruption could also be what you mean by "regulation" that leads to monopolies, but all of this is predicate on the absence of corruption or cartels. If that's not the case you can throw all your assumption out of the window anyway.
- munksbeer 9mo ago
  > I'm not aware of how regulation of competitive markets would lead to monopoly. It depends what you mean by regulation, right? Many industries have extremely onerous and costly regulation which creates barriers for new entrants to those markets.
  - throwaway132448 9mo ago
    Yes onerous regulation can definitely hurt the competitiveness of a market, it is just another barrier to entry.
- Eddy_Viscosity2 9mo ago
  > I'm not aware of how regulation of competitive markets would lead to monopoly Competitive markets will always tend toward monopoly because that is the state at which the highest profits can be extracted. Regulation can, in some cases, help push it a bit faster in that direction by making barriers to enter the market even more onerous and expensive thus limiting or even eliminating new competitors. This allows the existing large competitors to either continue to knock out or buy up smaller ones, and the few remaining large ones to either merge to a single entity or settle into a state of non-competitive action (effectively collusion) where the market then either is or behaves as a monopoly.
ndsipa_pomu 9mo ago
Depends on what you call a "free market". The usual understanding is that a free market relies on the participants having sufficient information and being able to trade freely. However, the necessary information is usually hidden by sellers so that buyers can't make a "rational" decision in what to purchase (see The Market for Lemons: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons). Trading freely is compromised as well as markets will almost always favour the larger purchaser and so there's an incentive for companies to become every larger in order to consolidate power and profits. So, it's not so much that free markets lead to monopolies, but our bastardised version of free markets that lead to monopolies. Also, free market advocates are rarely advocates of actually free markets, but instead advocates of asymmetric markets that favour the large incumbents.
ninalanyon 9mo ago
Of course they lead to monopolies. If you start with a large number of equally capable suppliers and one somehow gains an edge then that one will be more profitable than the rest allowing it to invest and reduce its costs. This makes it even more competitive and provides a positive feedback loop. Eventually its competitors go bankrupt or get bought out by it. Regulation can certainly exacerbate the problem, for instance rules that have a fixed annual cost or where the costs do not increase in line with volume favour larger concerns. The idea that a totally free market can exist is a fantasy based on assumptions that simply cannot hold water. Regulation is necessary in order to prevent the powerful from abusing the weak. The fact that there are poor regulations does not invalidate the concept.
- Jensson 9mo ago
  But that isn't happening though, you have local specialists everywhere that global giants still can't outcompete. Amazon is only dominant in USA and so on, they mostly just dominate a regulatory environment and can't compete well outside of it.
  - esseph 9mo ago
    Amazon does a lot these days, are you talking about their ground satellite terminal service? Grocery Service? What about Online Pharmacy? Do you need to buy a car? Would you like some satellite internet? Do you need a k8s cluster, they'll even handle lifecycle management for you. They also seem well on their way toward seriously hurting the USPS, FedEx, and UPS, and will be outpacing the entire US Postal Service in total volume as of 2028. Would you like to watch a movie or buy an album? Health insurance? I'm of course talking about maybe 1/50th of the services they offer these days, it is extensive. "competing"
    - lossolo 9mo ago
      I'm not aware of any country besides the US in which Amazon dominates in anything.
      - 9mo ago
layla5alive 9mo ago
Try playing the Monolopy board game, you'll answer your own question.

hliyan 9mo ago

Yes, there's an entire body of work, starting with Ayn Rand, that vehemently argues that government interference in the economy is what leads to monopolies.

throwaway132448 9mo ago
There are entire bodies of work that argue against the heliocentric nature of the solar system - that doesn't make them credible or relevant.
- Eddy_Viscosity2 9mo ago
  and that the earth is flat.
- oneeyedpigeon 9mo ago
  The person you're replying to was using an example to show how there isn't consensus, they weren't saying they agree with Ayn Rand. In fact, given their tone, if I had to make I guess, I'd say they disagree with her take.
  - throwaway132448 9mo ago
    I think we've been far too generous in the last decade with whose opinion is relevant to whether there is a meaningful "consensus" on a matter or not. Hence why I say that Ayn Rand is to economics as geocentrists are to astronomy - they're simply not relevant to a definition of consensus that has any value to me.
    - oneeyedpigeon 9mo ago
      My opinion of Ayn Rand is no more flattering than yours, but I accept that she has quite a few powerful 'followers'. I wouldn't be surprised if quite a few of the current administration were big Ayn Rand fans. Their opinions may be absurd but, sadly, they are also relevant.

throwaway132448 9mo ago

I didn't say that free markets lead to monopolies: I qualified that with the need for economies of scale. Those may not exist - but look at most of the markets you interact with in your daily life and try and find the ones that don't. I'm not aware of how regulation of competitive markets would lead to monopoly. Are you referring to "regulation" in the form of state-endorsed/controlled monopolies? Those usually exist in situations where barriers to entry and economies of scale are so high that the state is simply "getting ahead" of the inevitable monopoly (e.g. national infrastructure). Of course, corruption could also be what you mean by "regulation" that leads to monopolies, but all of this is predicate on the absence of corruption or cartels. If that's not the case you can throw all your assumption out of the window anyway.

munksbeer 9mo ago
> I'm not aware of how regulation of competitive markets would lead to monopoly. It depends what you mean by regulation, right? Many industries have extremely onerous and costly regulation which creates barriers for new entrants to those markets.
- throwaway132448 9mo ago
  Yes onerous regulation can definitely hurt the competitiveness of a market, it is just another barrier to entry.
Eddy_Viscosity2 9mo ago
> I'm not aware of how regulation of competitive markets would lead to monopoly Competitive markets will always tend toward monopoly because that is the state at which the highest profits can be extracted. Regulation can, in some cases, help push it a bit faster in that direction by making barriers to enter the market even more onerous and expensive thus limiting or even eliminating new competitors. This allows the existing large competitors to either continue to knock out or buy up smaller ones, and the few remaining large ones to either merge to a single entity or settle into a state of non-competitive action (effectively collusion) where the market then either is or behaves as a monopoly.

ndsipa_pomu 9mo ago

Depends on what you call a "free market". The usual understanding is that a free market relies on the participants having sufficient information and being able to trade freely. However, the necessary information is usually hidden by sellers so that buyers can't make a "rational" decision in what to purchase (see The Market for Lemons: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons). Trading freely is compromised as well as markets will almost always favour the larger purchaser and so there's an incentive for companies to become every larger in order to consolidate power and profits. So, it's not so much that free markets lead to monopolies, but our bastardised version of free markets that lead to monopolies. Also, free market advocates are rarely advocates of actually free markets, but instead advocates of asymmetric markets that favour the large incumbents.

ninalanyon 9mo ago

Of course they lead to monopolies. If you start with a large number of equally capable suppliers and one somehow gains an edge then that one will be more profitable than the rest allowing it to invest and reduce its costs. This makes it even more competitive and provides a positive feedback loop. Eventually its competitors go bankrupt or get bought out by it. Regulation can certainly exacerbate the problem, for instance rules that have a fixed annual cost or where the costs do not increase in line with volume favour larger concerns. The idea that a totally free market can exist is a fantasy based on assumptions that simply cannot hold water. Regulation is necessary in order to prevent the powerful from abusing the weak. The fact that there are poor regulations does not invalidate the concept.

Jensson 9mo ago
But that isn't happening though, you have local specialists everywhere that global giants still can't outcompete. Amazon is only dominant in USA and so on, they mostly just dominate a regulatory environment and can't compete well outside of it.
- esseph 9mo ago
  Amazon does a lot these days, are you talking about their ground satellite terminal service? Grocery Service? What about Online Pharmacy? Do you need to buy a car? Would you like some satellite internet? Do you need a k8s cluster, they'll even handle lifecycle management for you. They also seem well on their way toward seriously hurting the USPS, FedEx, and UPS, and will be outpacing the entire US Postal Service in total volume as of 2028. Would you like to watch a movie or buy an album? Health insurance? I'm of course talking about maybe 1/50th of the services they offer these days, it is extensive. "competing"
  - lossolo 9mo ago
    I'm not aware of any country besides the US in which Amazon dominates in anything.
    - 9mo ago

layla5alive 9mo ago

Try playing the Monolopy board game, you'll answer your own question.