Economics

[CodeMonkey]

I have been reading a general introduction to economics book, and there are some things I would like clarified from a free-market/Austrian economics point of view.

Monopolies: I have heard people say that monopolies can only arise from government intervention, but this isn't true at all. Monopolies can come about from limited resources (e.g. ALCOA owning 90% of the aluminum mines) or limited demand.

Oligopolies: When there are a few large companies providing most of the supply, they can engage in price setting via collusion, or they will often compete through marketing rather than lowering prices or improving quality. These can arise in the same ways as monopolies.

It is probably un-libertarian to interfere with these types of markets, but leaving them alone can be very destructive. I believe even Jefferson wanted to give government the power to stop monopolies.

Does anyone know the Austrian school/libertarian answer to these problems, or know of a resource where this is discussed?

[Darren McFillintheBlank]

..

[Bradley in DC]

I have been reading a general introduction to economics book, and there are some things I would like clarified from a free-market/Austrian economics point of view.

Monopolies: I have heard people say that monopolies can only arise from government intervention, but this isn't true at all. Monopolies can come about from limited resources (e.g. ALCOA owning 90% of the aluminum mines) or limited demand.

Oligopolies: When there are a few large companies providing most of the supply, they can engage in price setting via collusion, or they will often compete through marketing rather than lowering prices or improving quality. These can arise in the same ways as monopolies.

It is probably un-libertarian to interfere with these types of markets, but leaving them alone can be very destructive. I believe even Jefferson wanted to give government the power to stop monopolies.

Does anyone know the Austrian school/libertarian answer to these problems, or know of a resource where this is discussed?

Not my area, but here's a quick go. First off, historically "monopolies" were government grants protecting special interests from competition and could NOT otherwise exist in a free market. Alas, the language has been corrupted (I still consider myself a "liberal" but that's another thread).

Is a 90% market share really a "monopoly"? There are always alternatives, always. Usually, the way a company gains an unnatural market share is the same way special interests always have: government intervention. Examples would be the licensing laws and other regulations, often in the name of "consumer protection" that raise barriers to entry and inflict a disproportionate regulatory burden on smaller institutions (see Fed Staff Study 171 on banking, but I'm pretty sure the results hold true throughout all industries).

Joseph Becker back in the end of the 1990s when we worked together in Dr. Paul's office wrote legislation repealing the anti-trust laws that Dr. Paul introduced that had a lot of good information in it. You could probably find it with THOMAS.

[Kuldebar]

One of many favorites on economics, but this one really lays out the groundwork and covers a wide range of areas in a relaxing read:

http://g-ec2.images-amazon.com/images/G/01/ciu/f9/01/1f2892c008a07087ed725010._AA240_.L.jpg


Economics in One Lesson (http://jim.com/econ/contents.html)


Also from From Man vs. the Welfare State, 42–46


Long Before the Microsoft Case, Some Commonsense Ideas about Competition and Monopoly

The fears of most economists concerning the evils of "monopoly" have been unwarranted and certainly excessive. In the first place, it is very difficult to frame a satisfactory definition of economic monopoly. If there is only a single drug store, barber shop, or grocery in a small isolated town (and this is a typical situation), this store may be said to be enjoying a monopoly in that town. Again, everybody may be said to enjoy a monopoly of his own particular qualities or talents….

On the other hand, nearly all economic monopolies are limited by the possibility of substitution. If copper piping is priced too high, consumers can substitute iron or plastics; if beef is too high, consumers can substitute lamb; if the original girl of your dreams rejects you, you can always marry somebody else. Thus, nearly every person, producer, or seller may enjoy a quasimonopoly within certain inner limits, but very few sellers are able to exploit that monopoly beyond certain outer limits. There has been a growing literature in recent years deploring the absence of perfect competition; there could have been an equal emphasis on the absence of perfect monopoly. In real life competition is never perfect, but neither is monopoly….

The real problem is not whether or not there is "monopoly" in a market, but whether there is monopolistic pricing….

The theory that there can be such a thing as a monopoly price, higher than a competitive price would have been, is certainly valid. The real question is, how useful is this theory either to the supposed monopolist in deciding his price policies or to the legislator, prosecutor, or court in framing antimonopoly policies? The monopolist, to be able to exploit his position, must know what the "demand curve" is for his product. He does not know; he can only guess; he must try to find out by trial and error. And it is not merely the unemotional price response of the consumers that the monopolist must keep in mind; it is what the effect of his pricing policies will probably be in gaining the good will or arousing the resentment of the consumer. More importantly, the monopolist must consider the effect of his pricing policies in either encouraging or discouraging the entrance of competitors into the field. He may actually decide that his wisest policy in the long run would be to fix a price no higher than he thinks pure competition would set.

In any case, in the absence of competition, no one knows what the "competitive" price would be if it existed. Therefore, no one knows exactly how much higher an existing "monopoly" price is than a "competitive" price would be, and no one can be sure whether it is higher at all!

Yet antitrust policy, in the United States at least, assumes that the courts can know how much an alleged monopoly or "conspiracy" price is above the competitive price that might have been….

—

[CodeMonkey]

One of many favorites on economics, but this one really lays out the groundwork and covers a wide range of areas in a relaxing read:




Economics in One Lesson (http://jim.com/econ/contents.html)


Also from From Man vs. the Welfare State, 42–46

Thanks, that looks like some good stuff. I'll see about picking those up.

[BuddyRey]

I've actually tried reading Austrian economics books, because it all completely eludes and frustrates me. Much of it seems contradictory or non-intuitive, even though RP supports it, which makes it alright with me. I also have no mind for numbers, formulas, or left-brain stuff in general.

I was starting to enjoy Hayek's "Road to Serfdom" though.

[dspectre]

I was wondering, what are some good book to start reading about Austrian Economics? I wanted to get a good book to get a good understanding and not start in too heavy.

[Brian4Liberty]

When was the last time that anti-trust legislation was enforced in this country? We had the infamous Microsoft case (unusual), but was the break-up of Ma Bell the last before that? It seems since Jimmy Carter that the anti-trust law is almost completely ignored by the government, as has most white collar crime...only since the spectacular crash of Enron has the government even paid lip-service to looking into big corporate crime.

Personally, I would like to see the Oil Companies (Gasoline Refining Oligopoly) and the HMO's feel some heat on this...those are the two that are really killing us. Oligopolies, lawyers and government entwined to rip-off the average American.

[Kuldebar]

I've actually tried reading Austrian economics books, because it all completely eludes and frustrates me. Much of it seems contradictory or non-intuitive, even though RP supports it, which makes it alright with me. I also have no mind for numbers, formulas, or left-brain stuff in general.
I was starting to enjoy Hayek's "Road to Serfdom" though.



I was wondering, what are some good book to start reading about Austrian Economics? I wanted to get a good book to get a good understanding and not start in too heavy.

You're right some of it is a difficult read. But, Henry Hazlitt's books are a really great way to get up to speed.

http://www.mises.org/resources/3233

Economics in One Lesson (http://www.mises.org/books/onelesson.pdf)

[Oddball]

I've actually tried reading Austrian economics books, because it all completely eludes and frustrates me. Much of it seems contradictory or non-intuitive, even though RP supports it, which makes it alright with me. I also have no mind for numbers, formulas, or left-brain stuff in general.

I was starting to enjoy Hayek's "Road to Serfdom" though.
The translations from Austrian are difficult to read, because of the way they structure their paragraphs differently tha in English.

I fould it easier to read when I went over the body of the paragraphs first, then went back and read the first and last sentences.

[johnrocks]

The translations from Austrian are difficult to read, because of the way they structure their paragraphs differently tha in English.

I fould it easier to read when I went over the body of the paragraphs first, then went back and read the first and last sentences.

Try going to school to study economics for four years like I did...best sleep I ever had!!:D

[Kuldebar]

The Parable of the Broken Window
by Henry Hazlitt:

http://i34.photobucket.com/albums/d124/Kuldebar/Broken.jpg


http://i34.photobucket.com/albums/d124/Kuldebar/Broke2.jpg

[Oddball]

Try going to school to study economics for four years like I did...best sleep I ever had!!:DWell, they were trying to put you to sleep.

If you paid attention, you may have ended up a yammering moronic douchebag, like Paul Krugman.

[johnrocks]

Well, they were trying to put you to sleep.

If you paid attention, you may have ended up a yammering moronic douchebag, like Paul Krugman.

I am more in line with Friedman,Williams and Sowell:D

[constituent]

i spent a few days wandering around at mises.org once and agreed on a few things... but felt completely shorted on his understanding (contributing writers i believe as well) of theories contrary to his own... i don't know, it was a different time then...

can someone point me to his defining work?

[Kuldebar]

can someone point me to his defining work?

Human Action: A Treatise on Economics (http://www.mises.org/resources/3250)



http://ec1.images-amazon.com/images/G/01/ciu/f1/01/461f923f8da027ae0dff8010._AA240_.L.jpg

http://www.econlib.org/Library/Mises/HmA/msHmA.html

[constituent]

thank you kuldebar

[Bradley in DC]

Anti-trust

http://www.lfb.com/index.php?deptid=19257&parentid=1&stocknumber=EC7141&page=1&itemsperpage=24

Good, readable into book

http://www.lfb.com/index.php?deptid=19253&parentid=2&stocknumber=ST7265&page=1&itemsperpage=24

[jonahtrainer]

I have been reading a general introduction to economics book, and there are some things I would like clarified from a free-market/Austrian economics point of view.

Monopolies: I have heard people say that monopolies can only arise from government intervention, but this isn't true at all. Monopolies can come about from limited resources (e.g. ALCOA owning 90% of the aluminum mines) or limited demand.

Oligopolies: When there are a few large companies providing most of the supply, they can engage in price setting via collusion, or they will often compete through marketing rather than lowering prices or improving quality. These can arise in the same ways as monopolies.

It is probably un-libertarian to interfere with these types of markets, but leaving them alone can be very destructive. I believe even Jefferson wanted to give government the power to stop monopolies.

Does anyone know the Austrian school/libertarian answer to these problems, or know of a resource where this is discussed?

Monopolies, or Trusts, are only allowed by government. There is The Law of Diminishing Returns which always prevents monopolies in a free market. In addition, there are always alternative markets. The history of the bromide (I think) illustrates this point.

As I recall it (I listened to a lecture podcast by Woods?) A German family had a monopoly of bromide in Germany. An American became successful selling bromide in America and wanted to sell in Germany and Europe. He entered Europe but encountered resistance from the German family because he did not ask their permission to sell. He then entered the German market. The German family attempted to 'slash' prices to force him out of business. So, the American, like all good entrepreneurs, bought the German's bromide in Germany and sold it in America for a profit. The more resistance from the German family the higher his profits! Obviously, the German family could not continue operating at a loss, decided to obey rather than fight against economic law and they came to some type of agreement with the European market.

Our Anti-Trust law has been established to prevent the accumulation of capital so that those who hold a monopoly on the most powerful market may face no competition to the size of their accumulated capital. That market is the Money Trust. They do not want any other potential competitors (Railroad, Steel, Telecom, Software, etc.).

Of course, perhaps a monopoly could be established if it were possible to establish one market and hold a monopoly over the Money Trust. Heaven forbid that ever happens!