11 ms·

It isn't strange, most monopolies are born out of bad government policies, not the market.

seanmcdirmid 13y ago
> It isn't strange, most monopolies are born out of bad government policies, not the market. Citation needed. There are government mandated monopolies but you can also achieve a monopoly using purely free market tools and simply lock up all supply and/or distribution via aggressive investments. You seem to imply government-induced monopolies > free market monopolies, but provide no evidence or even an argument that this is indeed true. You just state it as a universally recognized fact, when that is obviously not the case.
- talmand 13y ago
  I would have to agree with the most monopolies are government created because, at least in the US, there are laws that actively try to prevent a free market monopoly. Plus, it's much more difficult to create a market-based monopoly because in a somewhat free market it creates an opportunity for a competitor to take advantage of factors that only monopolies tend to have if they are not government created. But I don't see the claim of government monopolies > free market monopolies you reference.
- Mikeb85 13y ago
  > Citation needed. Any real economist. Inevitably, if any industry is profitable, competition will arise. Government regulation (often through corruption) is the only mechanism which ensures a lack of competition. This can be observed in any industry throughout the last 100 years. You're right that companies can lock up the vast majority of a market by out-competing others, but this generally doesn't last very long (typically a decade or less).
  - dragonwriter 13y ago
    > Inevitably, if any industry is profitable, competition will arise. An industry can be profitable for the existing market participants and still have a high enough cost of entry as to have a negative expected profit over any meaningful timeframe for a prospective new entrant. In practice, this is likely to change due to changing external conditions (e.g., technological progress that lowers the cost of entry or creates previously-impossible substitutes) but there is no theoretical reason why this must be the case.
    - Mikeb85 13y ago
      > but there is no theoretical reason why this must be the case. Yet it has always turned out to be the case anyway... Even in the world of offshore drilling (which probably has a higher cost of entry than any other business you could possibly enter) there are tons of start-ups, joint ventures, etc... Of course, the oil business is also very susceptible to corruption, but wherever land rights are auctioned fairly, you see good competition.
  - revscat 13y ago
    This is flatly incorrect. 1) Property. If you have a monopoly on the property in a given area you can charge whatever you want for rent, and no competition will be around to add competition. 2) Vertical monopolies. If your company buys out not just the competition, but the entire supply chain, and there is a high cost of entry to being able to enter the market -- say automobiles -- then you can quash competition as it arises. 3) Coal mines. If the only job you can get is in a coal mine, and the operator of said mine owns all the mines in your geographic region, you don't have much of a choice. This is especially true if you are working 12+ hours a day 7 days a week for a pittance, or are a minor child. 4) This is libertarian fantasy and rightfully deserves the scorn and ridicule it has so far received in this thread. There are many, many ways to abuse the market to the detriment of the workers, both with and without regulation.
    - Xdes 13y ago
      If a monopoly raises the price too high then the consumer will seek a substitute or simply not purchase the good. This is true regardless of the form of the monopoly. 1) If rent is too high then renters will leave. 2) If an automobile is too expensive then consumers will use mass transit or carpool. 3) If there is a coal shortage due to labor conditions then consumers will use natural gas or other alternative sources of energy.
      - huxley 13y ago
        "It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong." -- Richard P. Feynman Your hypothesis doesn't take into account the complexities of people's lives which often overwhelm simple economic models. 1. 26.4% of all US renters spend over 50% their income on rent. The most commonly agreed-upon sustainable percentages are between 25-33%. 2. Sadly, there doesn't appear to be much correlation between the cost of transportation (car purchase, gasoline, car maintenance) and mass transit/car pooling increases. In North America, the idea of status being linked to the automobile is a strong counterincentive to mass transit/car pooling. People would rather be poorer than to be thought as too poor to drive. 3. Switching from one fuel to another is not a simple choice for homeowners, you need to switch your furnace (which may be tied to a long-term contract with the fuel supplier), you need to have a local supplier, and you will inevitably face the fact that as demand in the new fuel increases, so will its price.
  - AnIrishDuck 13y ago
    > Any real economist. Any real economist can cite many monoplies that arise through market forces alone. > Inevitably, if any industry is profitable, competition will arise. This is not true. There are many different definitions of "profit", and there are many cases where an industry that makes a real business profit will not support a competitor that makes an economic profit. The obvious example is markets with very large economies of scale [1]. > Government regulation (often through corruption) is the only mechanism which ensures a lack of competition. This can be observed in any industry throughout the last 100 years. I'm interpreting this to mean "only through government intervention can we ensure a lack of competition". Again, this is not true. Any party that can make a massive capital investment (which already vastly reduces the pool of competition) can enter a space and make any future entrance by a competitor completely unprofitable. To see an example of this, lets go a century back in time to the day of Standard Oil. Standard Oil was notorious for leveraging its massive capital advantage to destroy its competitors. It would enter a new market and lower its prices (leveraging its massive war chest). Once its competitors left business, it would raise prices again to screw over consumers. After many people caught wind of this blatant market manipulation, it turned to deceptive practices and things like tying agreements [2]. What government policy led to the dominant monopoly of Standard Oil? > You're right that companies can lock up the vast majority of a market by out-competing others, but this generally doesn't last very long (typically a decade or less). Standard Oil was supreme for over thirty years. If only we could invent a time machine, to hear the gales of laughter from the businessmen of the day at the notion that Rockefeller became the king of oil by "out-competing" others. He became dominant through backroom deals and anti-competitive practices. Government intervention was what finally ended the Standard Oil monopoly. It was also likely the only thing (barring the death of Rockefeller or some kind of market shift) that ever would. 1. http://en.wikipedia.org/wiki/Economies_of_scale http://en.wikipedia.org/wiki/Economies_of_scale 2. http://en.wikipedia.org/wiki/Standard_oil#Monopoly_charges_and_anti-trust_legislation http://en.wikipedia.org/wiki/Standard_oil#Monopoly_charges_a...
    - Mikeb85 13y ago
      > He became dominant through backroom deals and anti-competitive practices. Backroom deals AKA corruption. Corruption and regulation are two sides of the same coin. Had the market been perfectly competitive (ie. state governments not succumbing to corruption) the monopoly likely would not have formed and lasted. Your only example merely proves my point. Try to find a monopoly that has arisen in an open market, free from government 'intervention' (either regulation OR corruption).
  - mikeash 13y ago
    Ask five economists a question, and you'll get six answers. Anyone who pretends that economists agree on anything is not worth taking seriously.
  - seanmcdirmid 13y ago
    Any real economist? Then surely they are unified on this position, and there isn't any debate at all because its just so sparkingly obvious (again, this isn't true, there are plenty of theories out there). Free market monopolies are only allowed to last a decade or less BECAUSE of government intervention; otherwise they would last much longer. Your 100 year time line horizon corresponds to about the time when governments began regulating and dismantling monopolies.
- kcorbitt 13y ago
  Consider the fact that if you refuse to do business with a private-sector monopoly the worst that'll happen is that you'll get a slightly less-effective alternative or in the worst case go without the good. If you refuse to participate in a government-mandated monopoly you can face civil and criminal charges. Also, a private-sector monopoly, no matter how seemingly entrenched, is always vulnerable to disruption (when was the last time you used a PC manufactured by IBM? Or were forced to use IE against your will, for that matter? And yet those were both at one time monopolies that came very close to being broken up by the justice department because people claimed the free market could never topple them). That's why that "distopian future scenario" the OP referenced didn't come about in most of the world. Other browsers came about that users liked better and despite the big advantage IE gets from being bundled with most PCs others have had success in the market. Contrast that with the difficulty in breaking a government-enforced monopoly like the one referenced in the article.
  - revscat 13y ago
    > Consider the fact that if you refuse to do business with a private-sector monopoly the worst that'll happen is that you'll get a slightly less-effective alternative or in the worst case go without the good. That can be pretty bad if the "good" you are going without is food, shelter, a necessary medical procedure, or some other fundamental requirement.
    - kcorbitt 13y ago
      That's true, of course. But while I'm no history buff the main examples I can think of regarding monopolies of these commodities have always been government-induced (war-time rations, communist food lines, etc.). Am I missing examples of when a private company in a functional capitalist system forced the population at large to buy their food from them? There might be examples with crony capitalism, but in the end that's a breed of "capitalism" in quotes that's effectively government-enforced anyway.
      - jessaustin 13y ago
        I think I agree with the main thrust of your arguments, but can you point at an existing capitalist system that is not in many respects "crony" capitalism? (Switzerland, maybe? I've heard good things about them.) I suspect we need a new term for what we want. "Capitalism" is too sullied by use.
revscat 13y ago
I don't know where to start. 1) Monopolies can and do happen in the absence of regulation. Indeed, it is frequently only through regulation or direct governmental action that competition can be encouraged. (The breakup of the AT&T monopoly comes to mind.) 2) The simple fact of the matter is that government and economic policy go hand-in-hand. Governments create the currency and enforce contracts. They also set the rules for the market. Without those rules -- laws -- markets descend quickly into chaos similar to what you see today in Somalia or Afghanistan: societies driven by tribal loyalties, inefficient, brutal, cruel, and repressive. There are no monopolies in Somalia because there is no system in place for establishing corporate charters or enforcing contracts. This requires a strong government to serve as arbiter between disputing economic interests.
- jessaustin 13y ago
  I don't know where to start. Eh, you might reserve that tone for posts in which you're mostly correct. Ma Bell was not in any real sense broken up at any point in time. Presumably you're referring to the consent decree that took effect in 1984, but it's also possible you've been fooled by the fig-leaf Comm Act of '96. The result of all that mummery is that right now we have 2.5 phone companies in the USA (which organizations operate the exact same way they did it before the "breakup"), and various tiny morsels the two big daughters haven't yet consumed and excreted. The main outcome has been that telecom executives have extracted vast fortunes from investors, which was probably the point in the first place. That's not even to mention the fact that it was the original Comm Act of '34 that gave Bell its ironclad, FCC-enforced monopoly initially. There is hope, however, because eventually the consumer will only need an ISP, rather than the Frankenstein's monster that is "the phone company". ISPs connect, directly or indirectly, with backbone providers, and there is a functioning market of those. As long as the FCC doesn't outlaw ISPs, sanity will prevail in communications, someday. It's funny that you mention Somalia, because it's a direct refutation of the point you're attempting to make (i.e., no government -> monopoly). It's as if Somalia is such a favorite hobbyhorse of the corporatists that they can't actually talk about how great corporatism is without mentioning it.
  - criley2 13y ago
wahsd 13y ago
Correction: Monopolies require corrupt government policies to establish them, perpetuate them, and protect them.
jaigouk 13y ago
Bill Gates visited S.K several years ago. And after that, everything changed.
PhasmaFelis 13y ago
Citation, please.

> It isn't strange, most monopolies are born out of bad government policies, not the market. Citation needed. There are government mandated monopolies but you can also achieve a monopoly using purely free market tools and simply lock up all supply and/or distribution via aggressive investments. You seem to imply government-induced monopolies > free market monopolies, but provide no evidence or even an argument that this is indeed true. You just state it as a universally recognized fact, when that is obviously not the case.

talmand 13y ago
I would have to agree with the most monopolies are government created because, at least in the US, there are laws that actively try to prevent a free market monopoly. Plus, it's much more difficult to create a market-based monopoly because in a somewhat free market it creates an opportunity for a competitor to take advantage of factors that only monopolies tend to have if they are not government created. But I don't see the claim of government monopolies > free market monopolies you reference.
Mikeb85 13y ago
> Citation needed. Any real economist. Inevitably, if any industry is profitable, competition will arise. Government regulation (often through corruption) is the only mechanism which ensures a lack of competition. This can be observed in any industry throughout the last 100 years. You're right that companies can lock up the vast majority of a market by out-competing others, but this generally doesn't last very long (typically a decade or less).
- dragonwriter 13y ago
  > Inevitably, if any industry is profitable, competition will arise. An industry can be profitable for the existing market participants and still have a high enough cost of entry as to have a negative expected profit over any meaningful timeframe for a prospective new entrant. In practice, this is likely to change due to changing external conditions (e.g., technological progress that lowers the cost of entry or creates previously-impossible substitutes) but there is no theoretical reason why this must be the case.
  - Mikeb85 13y ago
    > but there is no theoretical reason why this must be the case. Yet it has always turned out to be the case anyway... Even in the world of offshore drilling (which probably has a higher cost of entry than any other business you could possibly enter) there are tons of start-ups, joint ventures, etc... Of course, the oil business is also very susceptible to corruption, but wherever land rights are auctioned fairly, you see good competition.
- revscat 13y ago
  This is flatly incorrect. 1) Property. If you have a monopoly on the property in a given area you can charge whatever you want for rent, and no competition will be around to add competition. 2) Vertical monopolies. If your company buys out not just the competition, but the entire supply chain, and there is a high cost of entry to being able to enter the market -- say automobiles -- then you can quash competition as it arises. 3) Coal mines. If the only job you can get is in a coal mine, and the operator of said mine owns all the mines in your geographic region, you don't have much of a choice. This is especially true if you are working 12+ hours a day 7 days a week for a pittance, or are a minor child. 4) This is libertarian fantasy and rightfully deserves the scorn and ridicule it has so far received in this thread. There are many, many ways to abuse the market to the detriment of the workers, both with and without regulation.
  - Xdes 13y ago
    If a monopoly raises the price too high then the consumer will seek a substitute or simply not purchase the good. This is true regardless of the form of the monopoly. 1) If rent is too high then renters will leave. 2) If an automobile is too expensive then consumers will use mass transit or carpool. 3) If there is a coal shortage due to labor conditions then consumers will use natural gas or other alternative sources of energy.
    - huxley 13y ago
      "It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong." -- Richard P. Feynman Your hypothesis doesn't take into account the complexities of people's lives which often overwhelm simple economic models. 1. 26.4% of all US renters spend over 50% their income on rent. The most commonly agreed-upon sustainable percentages are between 25-33%. 2. Sadly, there doesn't appear to be much correlation between the cost of transportation (car purchase, gasoline, car maintenance) and mass transit/car pooling increases. In North America, the idea of status being linked to the automobile is a strong counterincentive to mass transit/car pooling. People would rather be poorer than to be thought as too poor to drive. 3. Switching from one fuel to another is not a simple choice for homeowners, you need to switch your furnace (which may be tied to a long-term contract with the fuel supplier), you need to have a local supplier, and you will inevitably face the fact that as demand in the new fuel increases, so will its price.
- AnIrishDuck 13y ago
  > Any real economist. Any real economist can cite many monoplies that arise through market forces alone. > Inevitably, if any industry is profitable, competition will arise. This is not true. There are many different definitions of "profit", and there are many cases where an industry that makes a real business profit will not support a competitor that makes an economic profit. The obvious example is markets with very large economies of scale [1]. > Government regulation (often through corruption) is the only mechanism which ensures a lack of competition. This can be observed in any industry throughout the last 100 years. I'm interpreting this to mean "only through government intervention can we ensure a lack of competition". Again, this is not true. Any party that can make a massive capital investment (which already vastly reduces the pool of competition) can enter a space and make any future entrance by a competitor completely unprofitable. To see an example of this, lets go a century back in time to the day of Standard Oil. Standard Oil was notorious for leveraging its massive capital advantage to destroy its competitors. It would enter a new market and lower its prices (leveraging its massive war chest). Once its competitors left business, it would raise prices again to screw over consumers. After many people caught wind of this blatant market manipulation, it turned to deceptive practices and things like tying agreements [2]. What government policy led to the dominant monopoly of Standard Oil? > You're right that companies can lock up the vast majority of a market by out-competing others, but this generally doesn't last very long (typically a decade or less). Standard Oil was supreme for over thirty years. If only we could invent a time machine, to hear the gales of laughter from the businessmen of the day at the notion that Rockefeller became the king of oil by "out-competing" others. He became dominant through backroom deals and anti-competitive practices. Government intervention was what finally ended the Standard Oil monopoly. It was also likely the only thing (barring the death of Rockefeller or some kind of market shift) that ever would. 1. http://en.wikipedia.org/wiki/Economies_of_scale http://en.wikipedia.org/wiki/Economies_of_scale 2. http://en.wikipedia.org/wiki/Standard_oil#Monopoly_charges_and_anti-trust_legislation http://en.wikipedia.org/wiki/Standard_oil#Monopoly_charges_a...
  - Mikeb85 13y ago
    > He became dominant through backroom deals and anti-competitive practices. Backroom deals AKA corruption. Corruption and regulation are two sides of the same coin. Had the market been perfectly competitive (ie. state governments not succumbing to corruption) the monopoly likely would not have formed and lasted. Your only example merely proves my point. Try to find a monopoly that has arisen in an open market, free from government 'intervention' (either regulation OR corruption).
- mikeash 13y ago
  Ask five economists a question, and you'll get six answers. Anyone who pretends that economists agree on anything is not worth taking seriously.
- seanmcdirmid 13y ago
  Any real economist? Then surely they are unified on this position, and there isn't any debate at all because its just so sparkingly obvious (again, this isn't true, there are plenty of theories out there). Free market monopolies are only allowed to last a decade or less BECAUSE of government intervention; otherwise they would last much longer. Your 100 year time line horizon corresponds to about the time when governments began regulating and dismantling monopolies.
kcorbitt 13y ago
Consider the fact that if you refuse to do business with a private-sector monopoly the worst that'll happen is that you'll get a slightly less-effective alternative or in the worst case go without the good. If you refuse to participate in a government-mandated monopoly you can face civil and criminal charges. Also, a private-sector monopoly, no matter how seemingly entrenched, is always vulnerable to disruption (when was the last time you used a PC manufactured by IBM? Or were forced to use IE against your will, for that matter? And yet those were both at one time monopolies that came very close to being broken up by the justice department because people claimed the free market could never topple them). That's why that "distopian future scenario" the OP referenced didn't come about in most of the world. Other browsers came about that users liked better and despite the big advantage IE gets from being bundled with most PCs others have had success in the market. Contrast that with the difficulty in breaking a government-enforced monopoly like the one referenced in the article.
- revscat 13y ago
  > Consider the fact that if you refuse to do business with a private-sector monopoly the worst that'll happen is that you'll get a slightly less-effective alternative or in the worst case go without the good. That can be pretty bad if the "good" you are going without is food, shelter, a necessary medical procedure, or some other fundamental requirement.
  - kcorbitt 13y ago
    That's true, of course. But while I'm no history buff the main examples I can think of regarding monopolies of these commodities have always been government-induced (war-time rations, communist food lines, etc.). Am I missing examples of when a private company in a functional capitalist system forced the population at large to buy their food from them? There might be examples with crony capitalism, but in the end that's a breed of "capitalism" in quotes that's effectively government-enforced anyway.
    - jessaustin 13y ago
      I think I agree with the main thrust of your arguments, but can you point at an existing capitalist system that is not in many respects "crony" capitalism? (Switzerland, maybe? I've heard good things about them.) I suspect we need a new term for what we want. "Capitalism" is too sullied by use.

revscat 13y ago

I don't know where to start. 1) Monopolies can and do happen in the absence of regulation. Indeed, it is frequently only through regulation or direct governmental action that competition can be encouraged. (The breakup of the AT&T monopoly comes to mind.) 2) The simple fact of the matter is that government and economic policy go hand-in-hand. Governments create the currency and enforce contracts. They also set the rules for the market. Without those rules -- laws -- markets descend quickly into chaos similar to what you see today in Somalia or Afghanistan: societies driven by tribal loyalties, inefficient, brutal, cruel, and repressive. There are no monopolies in Somalia because there is no system in place for establishing corporate charters or enforcing contracts. This requires a strong government to serve as arbiter between disputing economic interests.

jessaustin 13y ago
I don't know where to start. Eh, you might reserve that tone for posts in which you're mostly correct. Ma Bell was not in any real sense broken up at any point in time. Presumably you're referring to the consent decree that took effect in 1984, but it's also possible you've been fooled by the fig-leaf Comm Act of '96. The result of all that mummery is that right now we have 2.5 phone companies in the USA (which organizations operate the exact same way they did it before the "breakup"), and various tiny morsels the two big daughters haven't yet consumed and excreted. The main outcome has been that telecom executives have extracted vast fortunes from investors, which was probably the point in the first place. That's not even to mention the fact that it was the original Comm Act of '34 that gave Bell its ironclad, FCC-enforced monopoly initially. There is hope, however, because eventually the consumer will only need an ISP, rather than the Frankenstein's monster that is "the phone company". ISPs connect, directly or indirectly, with backbone providers, and there is a functioning market of those. As long as the FCC doesn't outlaw ISPs, sanity will prevail in communications, someday. It's funny that you mention Somalia, because it's a direct refutation of the point you're attempting to make (i.e., no government -> monopoly). It's as if Somalia is such a favorite hobbyhorse of the corporatists that they can't actually talk about how great corporatism is without mentioning it.
- criley2 13y ago

wahsd 13y ago

Correction: Monopolies require corrupt government policies to establish them, perpetuate them, and protect them.

jaigouk 13y ago

Bill Gates visited S.K several years ago. And after that, everything changed.

PhasmaFelis 13y ago

Citation, please.