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Government regulation doesn't create competition. Edit: It's remarkable that any statement regarding regulation that isn't overtly Marxist immediately gets hal

Government regulation doesn't create competition. Edit: It's remarkable that any statement regarding regulation that isn't overtly Marxist immediately gets half a dozen down votes on HN.

DrJokepu 12y ago
Except when it does? There are like, plenty of examples of government regulation creating very real competition? For example, there is fairly decent competition in the ISP market of the United Kingdom thanks to the Enterprise Act 2002 that requires British Telecom to share its local infrastructure with its competitors. Otherwise, it would be like in many places in America: you can choose Comcast, or if you feel really adventurous and you really thought it through, you can choose Comcast too.
- jwallaceparker 12y ago
  It's government that is granting Comcast the monopoly privilege to be the only ISP on the market. That is not the natural state of a market. It's government intervention in the first place that creates the monopoly.
  - drabiega 12y ago
    How so? It certainly seems like it's a combination of high cost of entry and Comcast's ability to take a regional loss to drive out other competitors that's granting them a defacto monopoly. Also known as market forces.
    - jwallaceparker 12y ago
      Those cable lines that run down the streets into all the houses. By law nobody can use them but Comcast and by law nobody else can string up another set of lines to run to all the houses. That's the monopoly privilege.
  - deleted 12y ago
    [deleted]
  - elithrar 12y ago
    > It's government that is granting Comcast the monopoly privilege to be the only ISP on the market. Not always. Comcast may have got in early and laid substantial infrastructure (copper/fibre/HFC) - something that can be substantially cheaper if you leverage "new" (cable reserves and/or piggy-back off the utilities when they are expanding their networks. New players, however, need a substantial amount of capital to get started. Comcast (or anyone like them) can leverage their position in the market to drive up prices or push smaller players out. By using regulation to effectively turn the infrastructure into a public utility, it allows smaller players to compete. The argument against this regulation (which is in place in the UK and Australia, amongst other countries) is that the monopoly (BT/Telstra) spent money building out their network and therefore should not be forced to share it. The argument for this regulation is that often the telco built out this infrastructure in a particularly favorable environment that cannot be replicated today due to the huge costs of installing physical cable. As a further example, Telstra in Australia (previously Telecom) was government owned and therefore had a directive to supply the population with telecommunications. Many parts of their copper network (cable, conduit, pits, exchanges) were built during this phase. When they were privatised (sold by the Government) this was no longer their key directive. Any new player attempting to get into the market-even a small part (i.e. inner Sydney)-had a lot of catching up to do. Huge capital costs, a significant amount of regulatory hurdles and cable reserves to negotiate access to, etc. This is of course a simplification of the issue, and you could argue that in Telstra's case the government did effectively grant them a monopoly on the market by privatising them. But had they started out as a private company originally, I believe we would have still ended up in a similar place - getting in early when rolling out disruptive infrastructure (as trenching cable tends to be!) projects is a huge advantage in and of itself.
    - jwallaceparker 12y ago
      Hey. Great example. I think you're correct to point out that "in Telstra's case the government did effectively grant them a monopoly" in the first place. The specifics I'm talking about in the Comcast case is that government is continually granting the monopoly privilege by preventing other companies from creating infrastructure (laying wire), even if a company wishes to do so. This is precisely what allows Comcast to charge whatever it wants, begging more regulation down the road to force Comcast to charge 'fair' prices ('fair' in the minds of the legislators). If any competitor was allowed to enter what is an enormous market it would provide continual downward pressure on consumer prices. The monopolistic privilege granted to Comcast leads to higher prices, as consumers can only pay the high price or forego service.
seizethecheese 12y ago
That is the definition of antitrust regulation.
- thatswrong0 12y ago
  No it's not. There is no definition. It's all up to the interpretation of the politicians who wish to pursue it and the opinion and action of the judges on each case. Remember the Microsoft case?
- jwallaceparker 12y ago
  Can you name one monopoly that exists anywhere that is not the creation of a government in the first place? Do some digging into the history of antitrust legislation. The Sherman Antitrust legislation was an act of mercantilism designed to protect incompetent businesses who were losing market share to superior competition, most notably Standard Oil, the poster boy monopoly which gained an 85 percent market share through lower prices and economies of scale, delivering a benefit to consumers but harming their comparably inefficient competitors. It was those same competitors who spearheaded the antitrust legislation, not the poor consumers 'suffering' from lower prices and superior service at the hands of the 'monopolistic' Standard Oil.
  - jerf 12y ago
    "Can you name one monopoly that exists anywhere that is not the creation of a government in the first place?" Microsoft. I'm a libertarian, but one of the reasons I can't even consider being an anarchist is that I consider anti-trust regulation to be a good and proper function of a government. I'd break up a lot more, personally. It's one thing that I find the otherwise-excitable class warriors to be bizarrely reticent to do. I'd also observe that antitrust regulations do not forbid monopolies... they forbid the abuse of monopolies, according to a certain definition of abuse. Microsoft was not punished for having a dominant desktop OS, they were punished for using that dominance to engage in shenanigans to try to "abusively" (in accordance with the legal definition) extend that dominance into a another sphere. Of course that is the theory, and what happens in the courtroom in fact may be arbitrarily related to the theory, but that is the theory.
panarky 12y ago
Adam Smith described how free markets can deliver socially beneficial results when individuals and firms compete vigorously with each other. Since when does ensuring vigorous competition equate to Marxism? Seems pretty capitalist to me.
- jwallaceparker 12y ago
  Regulatory intervention into a marketplace is not "ensuring vigorous competition." Markets are vigorously competitive in their natural state. This is the nature of a market, where firms compete for customers' business. This can only be hindered with regulatory interference where a legislator is arbitrarily granting privileges to certain firms and not others. That's crony capitalism or mercantilism. It's not a free market.
  - AnthonyMouse 12y ago
    Free markets don't exist without governments. They don't have a natural state. A government is a monopoly on force that enforces property rights and contracts. If there was no government then you would have no market incentive to do anything because you would have no protection from theft or breach of contract. The contours of what you can own as property and what you can enforce in a contract are necessarily defined by the government. The problem with idealized free markets is that "free" is not the natural state of a market. You can act as a de facto government by having a monopoly on something other than force (like land or infrastructure), and de facto government actions have all the same defects as de jure government actions, generally with none of the public accountability.
peterashford 12y ago
Government intervention is practically required to allow competition. Any market left to its own devices will devolve into a monopoly. Governments are required to regulate to avoid monopolies thereby preserving a level playing field on which competition can occur. When Adam Smith was talking about a "Free market", the freedom he was talking about was freedom to enter and freedom to exit a market. That is, freedom from barriers to market. These freedoms are guaranteed by governments. Businesses left to themselves will raise the barriers to market thereby making the market non-free in Smith's terms. Oh, and pointing this out is not "Marxist".
- jwallaceparker 12y ago
  The Marxist term was misused in this case, you're right. I was just making a general comment about a perceived anti-capitalist bias in these forums. "Any market left to its own devices will devolve into a monopoly." This is not an observable phenomenon. A market left to its own devices will continually deliver better, cheaper products to its customers over time. This is the effect competition has on a marketplace. "Businesses left to themselves will raise the barriers to market thereby making the market non-free in Smith's terms." If a business is not using physical force or fraud then the only barriers they can erect to keep out competitors are superior offerings in the marketplace. Microsoft is such a great example here. Their competitors were crying monopoly but Microsoft had created its marketshare through innovation and entrepreneurship. If they abuse this marketshare by offering inferior products at high prices, it creates a market opportunity for another competitor to create better products at more attractive prices. In this sense it's the free consumer choice that's providing the "regulation" in the market. Businesses have to follow the consumer's wants to gain marketshare. The only government "regulatory" role in a market is to settle disputes about property or fraud or criminal behavior. With that basic structure in place, Adam Smiths's "invisible hand" would take care of the rest.
acdha 12y ago
If you think using regulation to keep markets functioning is a Marxist, don't complain about down votes until you learn some basic economics and history from sources other than industry propagandists pretending to be libertarians.
- jwallaceparker 12y ago
  You're right. Regulation is not explicitly Marxist. My edit was born of a frustration with the general bias in this community in which advocating for capitalism or free markets is guaranteed to earn you down votes.
  - radmuzom 12y ago
    You are making the false assumption that capitalism = free market. One might argue that after taking into account historical context, modern capitalism is completely opposite to free markets. For example, in a free market, labour unions would be as powerful as the owners of capital - in the modern world, capital owners have a disproportionate influence on law-making to subdue this power. A very good example in the recent past is the wage collusion by Apple, Google and many other companies (working to preserve the interests of the capital owners) to suppress the power of the free market.
    - jwallaceparker 12y ago
      > You are making the false assumption that capitalism = free market. anarco-capitalism = free market crony capitalism != free market I use the term capitalism to describe the anarco flavor. Capitalism is defined as the private ownership of production, and when this idea is adhered to rigidly you end up with something exactly like or closely approximating the anarco-capitalist flavor. > in the modern world, capital owners have a disproportionate influence on law-making to subdue this power. You're right. It's abhorrent but this is not capitalism, this is a mixed economy (state capitalism or crony capitalism) in which firms use government to buy influence over the marketplace. I am not advocating for that.
  - acdha 12y ago

Government regulation doesn't create competition. Edit: It's remarkable that any statement regarding regulation that isn't overtly Marxist immediately gets half a dozen down votes on HN.

DrJokepu 12y ago

Except when it does? There are like, plenty of examples of government regulation creating very real competition? For example, there is fairly decent competition in the ISP market of the United Kingdom thanks to the Enterprise Act 2002 that requires British Telecom to share its local infrastructure with its competitors. Otherwise, it would be like in many places in America: you can choose Comcast, or if you feel really adventurous and you really thought it through, you can choose Comcast too.

jwallaceparker 12y ago
It's government that is granting Comcast the monopoly privilege to be the only ISP on the market. That is not the natural state of a market. It's government intervention in the first place that creates the monopoly.
- drabiega 12y ago
  How so? It certainly seems like it's a combination of high cost of entry and Comcast's ability to take a regional loss to drive out other competitors that's granting them a defacto monopoly. Also known as market forces.
  - jwallaceparker 12y ago
    Those cable lines that run down the streets into all the houses. By law nobody can use them but Comcast and by law nobody else can string up another set of lines to run to all the houses. That's the monopoly privilege.
- deleted 12y ago
  [deleted]
- elithrar 12y ago
  > It's government that is granting Comcast the monopoly privilege to be the only ISP on the market. Not always. Comcast may have got in early and laid substantial infrastructure (copper/fibre/HFC) - something that can be substantially cheaper if you leverage "new" (cable reserves and/or piggy-back off the utilities when they are expanding their networks. New players, however, need a substantial amount of capital to get started. Comcast (or anyone like them) can leverage their position in the market to drive up prices or push smaller players out. By using regulation to effectively turn the infrastructure into a public utility, it allows smaller players to compete. The argument against this regulation (which is in place in the UK and Australia, amongst other countries) is that the monopoly (BT/Telstra) spent money building out their network and therefore should not be forced to share it. The argument for this regulation is that often the telco built out this infrastructure in a particularly favorable environment that cannot be replicated today due to the huge costs of installing physical cable. As a further example, Telstra in Australia (previously Telecom) was government owned and therefore had a directive to supply the population with telecommunications. Many parts of their copper network (cable, conduit, pits, exchanges) were built during this phase. When they were privatised (sold by the Government) this was no longer their key directive. Any new player attempting to get into the market-even a small part (i.e. inner Sydney)-had a lot of catching up to do. Huge capital costs, a significant amount of regulatory hurdles and cable reserves to negotiate access to, etc. This is of course a simplification of the issue, and you could argue that in Telstra's case the government did effectively grant them a monopoly on the market by privatising them. But had they started out as a private company originally, I believe we would have still ended up in a similar place - getting in early when rolling out disruptive infrastructure (as trenching cable tends to be!) projects is a huge advantage in and of itself.
  - jwallaceparker 12y ago
    Hey. Great example. I think you're correct to point out that "in Telstra's case the government did effectively grant them a monopoly" in the first place. The specifics I'm talking about in the Comcast case is that government is continually granting the monopoly privilege by preventing other companies from creating infrastructure (laying wire), even if a company wishes to do so. This is precisely what allows Comcast to charge whatever it wants, begging more regulation down the road to force Comcast to charge 'fair' prices ('fair' in the minds of the legislators). If any competitor was allowed to enter what is an enormous market it would provide continual downward pressure on consumer prices. The monopolistic privilege granted to Comcast leads to higher prices, as consumers can only pay the high price or forego service.

seizethecheese 12y ago

That is the definition of antitrust regulation.

thatswrong0 12y ago
No it's not. There is no definition. It's all up to the interpretation of the politicians who wish to pursue it and the opinion and action of the judges on each case. Remember the Microsoft case?
jwallaceparker 12y ago
Can you name one monopoly that exists anywhere that is not the creation of a government in the first place? Do some digging into the history of antitrust legislation. The Sherman Antitrust legislation was an act of mercantilism designed to protect incompetent businesses who were losing market share to superior competition, most notably Standard Oil, the poster boy monopoly which gained an 85 percent market share through lower prices and economies of scale, delivering a benefit to consumers but harming their comparably inefficient competitors. It was those same competitors who spearheaded the antitrust legislation, not the poor consumers 'suffering' from lower prices and superior service at the hands of the 'monopolistic' Standard Oil.
- jerf 12y ago
  "Can you name one monopoly that exists anywhere that is not the creation of a government in the first place?" Microsoft. I'm a libertarian, but one of the reasons I can't even consider being an anarchist is that I consider anti-trust regulation to be a good and proper function of a government. I'd break up a lot more, personally. It's one thing that I find the otherwise-excitable class warriors to be bizarrely reticent to do. I'd also observe that antitrust regulations do not forbid monopolies... they forbid the abuse of monopolies, according to a certain definition of abuse. Microsoft was not punished for having a dominant desktop OS, they were punished for using that dominance to engage in shenanigans to try to "abusively" (in accordance with the legal definition) extend that dominance into a another sphere. Of course that is the theory, and what happens in the courtroom in fact may be arbitrarily related to the theory, but that is the theory.

panarky 12y ago

Adam Smith described how free markets can deliver socially beneficial results when individuals and firms compete vigorously with each other. Since when does ensuring vigorous competition equate to Marxism? Seems pretty capitalist to me.

jwallaceparker 12y ago
Regulatory intervention into a marketplace is not "ensuring vigorous competition." Markets are vigorously competitive in their natural state. This is the nature of a market, where firms compete for customers' business. This can only be hindered with regulatory interference where a legislator is arbitrarily granting privileges to certain firms and not others. That's crony capitalism or mercantilism. It's not a free market.
- AnthonyMouse 12y ago
  Free markets don't exist without governments. They don't have a natural state. A government is a monopoly on force that enforces property rights and contracts. If there was no government then you would have no market incentive to do anything because you would have no protection from theft or breach of contract. The contours of what you can own as property and what you can enforce in a contract are necessarily defined by the government. The problem with idealized free markets is that "free" is not the natural state of a market. You can act as a de facto government by having a monopoly on something other than force (like land or infrastructure), and de facto government actions have all the same defects as de jure government actions, generally with none of the public accountability.

peterashford 12y ago

Government intervention is practically required to allow competition. Any market left to its own devices will devolve into a monopoly. Governments are required to regulate to avoid monopolies thereby preserving a level playing field on which competition can occur. When Adam Smith was talking about a "Free market", the freedom he was talking about was freedom to enter and freedom to exit a market. That is, freedom from barriers to market. These freedoms are guaranteed by governments. Businesses left to themselves will raise the barriers to market thereby making the market non-free in Smith's terms. Oh, and pointing this out is not "Marxist".

jwallaceparker 12y ago
The Marxist term was misused in this case, you're right. I was just making a general comment about a perceived anti-capitalist bias in these forums. "Any market left to its own devices will devolve into a monopoly." This is not an observable phenomenon. A market left to its own devices will continually deliver better, cheaper products to its customers over time. This is the effect competition has on a marketplace. "Businesses left to themselves will raise the barriers to market thereby making the market non-free in Smith's terms." If a business is not using physical force or fraud then the only barriers they can erect to keep out competitors are superior offerings in the marketplace. Microsoft is such a great example here. Their competitors were crying monopoly but Microsoft had created its marketshare through innovation and entrepreneurship. If they abuse this marketshare by offering inferior products at high prices, it creates a market opportunity for another competitor to create better products at more attractive prices. In this sense it's the free consumer choice that's providing the "regulation" in the market. Businesses have to follow the consumer's wants to gain marketshare. The only government "regulatory" role in a market is to settle disputes about property or fraud or criminal behavior. With that basic structure in place, Adam Smiths's "invisible hand" would take care of the rest.

acdha 12y ago

If you think using regulation to keep markets functioning is a Marxist, don't complain about down votes until you learn some basic economics and history from sources other than industry propagandists pretending to be libertarians.

jwallaceparker 12y ago
You're right. Regulation is not explicitly Marxist. My edit was born of a frustration with the general bias in this community in which advocating for capitalism or free markets is guaranteed to earn you down votes.
- radmuzom 12y ago
  You are making the false assumption that capitalism = free market. One might argue that after taking into account historical context, modern capitalism is completely opposite to free markets. For example, in a free market, labour unions would be as powerful as the owners of capital - in the modern world, capital owners have a disproportionate influence on law-making to subdue this power. A very good example in the recent past is the wage collusion by Apple, Google and many other companies (working to preserve the interests of the capital owners) to suppress the power of the free market.
  - jwallaceparker 12y ago
    > You are making the false assumption that capitalism = free market. anarco-capitalism = free market crony capitalism != free market I use the term capitalism to describe the anarco flavor. Capitalism is defined as the private ownership of production, and when this idea is adhered to rigidly you end up with something exactly like or closely approximating the anarco-capitalist flavor. > in the modern world, capital owners have a disproportionate influence on law-making to subdue this power. You're right. It's abhorrent but this is not capitalism, this is a mixed economy (state capitalism or crony capitalism) in which firms use government to buy influence over the marketplace. I am not advocating for that.
- acdha 12y ago