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Free markets tend to produce monopolies. You know how economies of scale are a thing? That's another way of saying that small companies lose to large companies
by kibwen 3mo ago
Free markets tend to produce monopolies. You know how economies of scale are a thing? That's another way of saying that small companies lose to large companies at scale. "Disruption" or "agility" is the only thing that small companies have going for them, but once the monopolist gets large enough they can just buy up any upstarts and keep the market all to themselves forever. This is why you require governments to periodically shake the snowglobe and restore markets to competitiveness... until the monopolist gets big enough that they just buy the government, anyway.
- pphysch 3mo agoExactly. If you ask anyone on the street, "is it easier for a fast food worker or a business-owning millionaire to make their next million dollars?", common sense will prevail. Money begets money (and power). It doesn't require an economics degree to understand this positive feedback loop.
- fragmede 3mo agoWouldn't that be more of a negative feedback loop? My signals and systems class was a long time ago, but a system that throttles to extremes is negative, not positive feedback.
- pphysch 3mo agoNope, negative feedback is dampening and stabilizing. Antitrust enforcement represents a healthy negative feedback for the natural runaway concentration of wealth and power.
- Straw 3mo agoNo, governments tend to produce monopolies. Can you find true monopolies in the free market, in the last 100 years, that have lasted for at least 20 years, without some kind of government backing/suppression of competitors? I only know of one. Things only count as monopolies if they have monopoly pricing power; Google is not a monopoly, they cannot even charge 1 cent per search. In practice, despite economies of scale, large companies age and become bloated, inflexible, etc. So there's typically plenty of room for new companies to compete. If a monopolist buys all upstarts, then that creates an even stronger incentive to make competing businesses! You don't even have to succeed in the market, you just have to get bought up! The more they buy out, there stronger incentive there will be to enter the market. No one can do this indefinitely- except with some kind of government support- say a regulation that makes it difficult to enter the market.
- vjvjvjvjghv 3mo agoWhat you are describing sounds great in theory, but the real world doesn’t work like that. In more and more areas the obstacle to enter a market is not regulations but money.
- Straw 3mo agoI'd say exactly the same about antitrust. Can you give an example of a lasting monopoly not backed by some government policy? At any point in the last 150 years?
- vjvjvjvjghv 3mo agoCan you give examples of these government policies?
- Straw 3mo agoSure. The most straightforward example would be utilities in much of the US. Companies like PG&E are literally granted a monopoly in a region. Another example would be epipens. There is a competitor, but unlike most drugs, if the doctor prescribes you an epipen, the pharmacy can't give you a generic substitute, it must be name brand. Tesla is being heavily protected from Chinese competitors by US auto tariffs. Credit Ratings agencies (in large part responsible for 2008 crash) have direct government granted status. Taxi medallions, Jones act, sugar tariffs. These are the ones that come to mind right away, but there's a whole slew of stuff- any regulation that's easier for a big business to comply with than a small competitor, for example. Even worse if the big business manages to influence the regulation to enhance this effect. Personally I'd guess Boeing is an example of this; yes, aviation does have high capital costs but I suspect that FAA regulation + Boeing cozy relationship makes it much harder for new entrants. Of course, this isn't to say the FAA regulation isn't helpful or doesn't improve air safety, just that it also has this effect.
- cogman10 3mo ago> Can you find true monopolies in the free market Your definition of monopoly isn't what people are commonly talking about when they say "monopoly". Granted, you have the correct definition, just not the colloquial one. What people say "monopoly" what they are really talking about is industries captured by few big players. For example, grocery stores. There's not a true monopoly there but there is damage done by the fact that there's very little competition in that space. Both to consumers and product manufacturers. These big grocery chains use their leverage to get prices smaller chains can't compete with. Further, they have been trying to consolidate (see Kroger Albertsons merger) to further exert anti-trust behaviors. A clear example of the damage done by this sort of hyper consolidation is what's happened to the memory market. Multiple times the 3 big players have been hit with anti-trust lawsuits because of the price fixing they've engaged in. It's true they are not true monopolies, but they exert exactly the problematic behavior of a true monopoly. It's very unlikely that the free market would ever fix this.