4 ms·

Hardly a law of nature. Its a school of thought. Centralization leads to other inefficiencies such as Economic deadweight loss, and a lack of competition.

Hardly a law of nature. Its a school of thought. Centralization leads to other inefficiencies such as Economic deadweight loss, and a lack of competition. The cartel/monopolist economy, as created by Centralization, has it's own issues. Does Economies of scale outweigh the economic surpluses gained from a more competitive economy? Well, that's something one should ask an ivory tower Economist. See also: Google's increasingly long list of discontinued products, many of which were acquires from burgeoning young businesses.

roymurdock 11y ago
Not making any value judgments. I agree that centralization leads to problems (from the consumer's viewpoint) of collusion, lack of choice, etc. That's why the government has a duty to intervene when monopolies threaten to burden consumers - a competing law of nature called decentralization through regulation. Ask an economist and you'll get different normative answers of how we should craft policy, but the positive answer will be the same across the board: it has happened with clothing manufacturing, publishing, radio, TV, food production, etc. and is now happening with the internet. A nascent and initially fragmented medium/industry attracts investment and develops standards; large conglomerations begin to form and M&A smaller players to gain market share, leading to a saturated market of heavy-weight players.
- sbov 11y ago
  This would be ignoring history though. The concept of "being online" started centralized with heavy weight players - AOL, prodigy, compuserve, etc.
  - nostrademons 11y ago
    Also virtualization - VMWare started out as the dominant player, but then Xen came out, which first led to AWS becoming dominant but now results in a number of cloud hosting and VPS providers, many of which are more cost-effective than AWS. And PCs - it started out as a decentralized market between Apple, Commodore, Tandy, Atari, Osborne, etc, but then centralized under IBM before being decentralized again with IBM clones like Dell, Compaq, etc. That in turn forced the centralization of the OS market under Microsoft (driving out Apple, CP/M, Acorn, Atari) and microprocessors under Intel (driving out Motorola and MOS technologies). I think it's more accurate to say that the point of centralization moves up and down the value chain based on technological developments, market deals, and corporate strategy. When things get too centralized, a savvy entrepreneur will come in as a small-time complement, then find a way to encourage competition and commoditize his complements, riding the wave to a very prosperous monopoly. When competition becomes too intense in those markets, the bigger players will start eating the smaller players, and eventually the market consolidates.

roymurdock 11y ago

Not making any value judgments. I agree that centralization leads to problems (from the consumer's viewpoint) of collusion, lack of choice, etc. That's why the government has a duty to intervene when monopolies threaten to burden consumers - a competing law of nature called decentralization through regulation. Ask an economist and you'll get different normative answers of how we should craft policy, but the positive answer will be the same across the board: it has happened with clothing manufacturing, publishing, radio, TV, food production, etc. and is now happening with the internet. A nascent and initially fragmented medium/industry attracts investment and develops standards; large conglomerations begin to form and M&A smaller players to gain market share, leading to a saturated market of heavy-weight players.

sbov 11y ago
This would be ignoring history though. The concept of "being online" started centralized with heavy weight players - AOL, prodigy, compuserve, etc.
- nostrademons 11y ago
  Also virtualization - VMWare started out as the dominant player, but then Xen came out, which first led to AWS becoming dominant but now results in a number of cloud hosting and VPS providers, many of which are more cost-effective than AWS. And PCs - it started out as a decentralized market between Apple, Commodore, Tandy, Atari, Osborne, etc, but then centralized under IBM before being decentralized again with IBM clones like Dell, Compaq, etc. That in turn forced the centralization of the OS market under Microsoft (driving out Apple, CP/M, Acorn, Atari) and microprocessors under Intel (driving out Motorola and MOS technologies). I think it's more accurate to say that the point of centralization moves up and down the value chain based on technological developments, market deals, and corporate strategy. When things get too centralized, a savvy entrepreneur will come in as a small-time complement, then find a way to encourage competition and commoditize his complements, riding the wave to a very prosperous monopoly. When competition becomes too intense in those markets, the bigger players will start eating the smaller players, and eventually the market consolidates.