Monopolies

[LibertiORDeth]

I have read on here that government regulation is the cause of monopolies, and in a free market monopolies do not exist. Could someone expound on this?

[acptulsa]

It seems to me that the free market is happy to create a monopoly whenever and wherever it can. And, given enough money to bribe with, one of the ways it is happy do create a monopoly for itself is through government intervention.

A monopoly created without government help: Microsoft. One created with government help: Ma Bell. One done by a combination of both: Boeing. Microsoft was totally unnecessarily. Back when a lot of wires needed to be strung to serve many telephones, or in the case of multiple water or gas lines getting buried, gas/water/electric/landline telephone monopolies could be justified. Why Boeing was allowed to take over Douglas when others could have, I don't know...

[Mr. White]

I have read on here that government regulation is the cause of monopolies, and in a free market monopolies do not exist. Could someone expound on this?

Essentially its based on the notion that companies gain widespread influence in local, state and Federal legislatures and gradually use that influence to "regulate out" their opposition. In a perfectly unregulated market, your notion holds true. The main problem is lots of regulations on business exist for purely "public good" reasons, typically environmental. These regulations impose expenses which hinder start-up businesses. Monopolies then use their purchasing power to undercut the new business until it goes under and then raise their prices again.

The argument is not without merit, but to think de-regulation would eliminate monopolies is naive. Yes, it sounds good, but would require a large overhaul of regulations and a seizure of large corporations by the government.

Bluntly, it looks good on paper but isn't practicable on a wide scale. Even if you got a "clean-slate" on the local level, the surrounding localities and states would exercise their influence and destroy your businesses. It's comparable to if America didn't practice protectionist policies, other countries would, and effectively injure us more economically than they already do.

[crazyfingers]

Microsoft was/is not a monopoly. They might dominate the market but there are other options. IMO true monopolies only come about through the coercive hand of government. I'm far from an expert on the matter though.

[acptulsa]

The idea that a perfectly free market would automatically eliminate the possibility of a monopoly is a bit dated. I don't think it would be possible for a start-up company to compete with Airbus and Boeing any time soon. The neighborhood ice cream parlor would have a tough time gaining a monopoly, but life is more complicated than that these days.

[jason43]

Take the XM/Sirius merger, they are saying the merger will create a monopoly... but the only reason that there are only two satelite radio providers is because the government only allowed those two companies to have the permits to create sat radio.

[A Ron Paul Rebel]

For me, it's common sense to see how government regulations
create and aid monopolies... For every regulation puts a new
roadblock up for those wanting to start and grow a business.
Call it 'red tape' or regulations, it comes in many forms. 'You
HAVE to do this', 'you need to prove this', 'you must pass this [test]',
'you need approval here', etc..., which makes competing with
bigger businesses very difficult.

The fact of the matter is, virtually every new regulation aids
one business and hinders another. And with out that
regulation, the natural course of evolution would have
'we the people' determining the success of every business.

But it's not just whether a regulation exists or not, it's the
education and responsibility of 'we the people' that is necessary
as well in order to evolve to better businesses. Most every
regulation (and this is the reason they get implimented so easily)
negates personal responsibility by puting the success or failure
of business in someone elses hands (ie: government) rather
than the peoples' hands.

Hunter

[MusoSpuso]

Many of you are missing the point.

The erroneous assumption implied by the OP is that "all monopolies are bad". This is incorrect.

As Ron Paul has stated and I fully agree: If a business (w/o the hand of government help/force/coercian/etc.) can provide the best quality goods at the market demand with the best pricing, then there is nothing wrong with that. The consumer is king.

Example: Someone creates the perfect shoe. It's cheap, durable and widely available. But only this company has the formula for it so they become a monopoly. So what. They provide the best product at the best price. Nothing wrong with that. That's what WE want.

So then let's say that they get greedy and decide to up the price figuring that since they have a monopoly they can do whatever they want. Well, in a truly free market, this will spark innovation and competition. Someone else will invent or provide a competing product at a cheaper price and the monopoly will no longer be in place.

In a TRULY free market, consumer is king and innovation rules to keep prices down and competition healthy. So the outright assumption that a monopoly is bad is just incorrect. If the product is cheap, reliable and widely available then who cares if it comes from just one source? Don't like it--start your own competition!!!

[acptulsa]

So then let's say that they get greedy and decide to up the price figuring that since they have a monopoly they can do whatever they want. Well, in a truly free market, this will spark innovation and competition. Someone else will invent or provide a competing product at a cheaper price and the monopoly will no longer be in place.

In a TRULY free market, consumer is king and innovation rules to keep prices down and competition healthy. So the outright assumption that a monopoly is bad is just incorrect. If the product is cheap, reliable and widely available then who cares if it comes from just one source? Don't like it--start your own competition!!!

And if the product is all-American air tankers for the Air Force? Shall we whip one out in our garages and bid against Boeing?

[MusoSpuso]

And if the product is all-American air tankers for the Air Force? Shall we whip one out in our garages and bid against Boeing?

Government contracts create government monopolies. Those companies have a stranglehold because of the government.

In this case government regulation is stifling the innovation and competition I was speaking about.

Look at how Boeing, Lockheed etc. got started. They had to start somewhere. They got to where they are however by government preference.

Government preference != free market.

[jason43]

Many of you are missing the point.

The erroneous assumption implied by the OP is that "all monopolies are bad". This is incorrect.

As Ron Paul has stated and I fully agree: If a business (w/o the hand of government help/force/coercian/etc.) can provide the best quality goods at the market demand with the best pricing, then there is nothing wrong with that. The consumer is king.

Example: Someone creates the perfect shoe. It's cheap, durable and widely available. But only this company has the formula for it so they become a monopoly. So what. They provide the best product at the best price. Nothing wrong with that. That's what WE want.

So then let's say that they get greedy and decide to up the price figuring that since they have a monopoly they can do whatever they want. Well, in a truly free market, this will spark innovation and competition. Someone else will invent or provide a competing product at a cheaper price and the monopoly will no longer be in place.

In a TRULY free market, consumer is king and innovation rules to keep prices down and competition healthy. So the outright assumption that a monopoly is bad is just incorrect. If the product is cheap, reliable and widely available then who cares if it comes from just one source? Don't like it--start your own competition!!!

Ron Paul said that about regular corporations vs government sponsored corporations on the daily show.

There is a big difference between creating the best product and selling more than your competition, and taking the profits from your great product, buying out all your competition, and then having no competition and raising your prices as high as you want. Especially with things like oil, food, natural resource production and so on.

Imagine if general mills bought out all the other food companies and then doubled their prices. It would be great for the shareholders, but not so great for the people who have to eat. Monopoly is the elimination and buying out of all competition, not being the best of breed for a product.

[acptulsa]

Government contracts create government monopolies. Those companies have a stranglehold because of the government.

In this case government regulation is stifling the innovation and competition I was speaking about.

Look at how Boeing, Lockheed etc. got started. They had to start somewhere. They got to where they are however by government preference.

Government preference != free market.

True. And McDonnell Douglas got to where it is today by government preference. The government seldom preferred their product, and this gave Boeing an advantage in the airliner market as Boeing got more development funds covered by the taxpayer. Yet, I think you would agree that the common defense is a legitimate function of government.

So, perhaps I'm using a bad example. Let's try again. Should the Union Pacific and the BNSF be allowed to merge? If they do merge, and begin price gouging, how the hell do you expect anyone else to be able to get all that land and build all of that infrastructure today? Isn't there a place, in certain circumstances, for the government to protect the public by forbidding the creation of monopolies where new competition isn't really feasible?

[ARealConservative]

Predatory pricing being a result of monopolies is a myth perpetuated by communist sympathizers at the turn of the last century.

Carnegie Steel is often used as an example, yet commodity prices for steel was declining at 58% percent during the period that his "monopoly" was supposedly engaging in predatory pricing.

It is utter BS designed to scare the populace into central planning.

If you want to read an interesting story, read up on Dow Chemicals and supposed predatory pricing.

[jason43]

True. And McDonnell Douglas got to where it is today by government preference. The government seldom preferred their product, and this gave Boeing an advantage in the airliner market as Boeing got more development funds covered by the taxpayer. Yet, I think you would agree that the common defense is a legitimate function of government.

So, perhaps I'm using a bad example. Let's try again. Should the Union Pacific and the BNSF be allowed to merge? If they do merge, and begin price gouging, how the hell do you expect anyone else to be able to get all that land and build all of that infrastructure today? Isn't there a place, in certain circumstances, for the government to protect the public by forbidding the creation of monopolies where new competition isn't really feasible?

Yes, there is a balance.

Things like the electric company need to be regulated, because you can't switch to another product. The electric company that serves your area is the one you get. If they trippled your bill and you had no recourse other than a "tough shit buddy" there would be nothing you could do. That said, I dont think that there should be price controls on electric either, otherwise you get blackouts and such because the companies lose money and have to shut down...

Nothing is ever going to be perfect because people always figure out ways to screw each other. Full deregulation would screw everyone, but regulation screws everyone too.

I'd just like to see regulation reduced.

[jason43]

Predatory pricing being a result of monopolies is a myth perpetuated by communist sympathizers at the turn of the last century.

Carnegie Steel is often used as an example, yet commodity prices for steel was declining at 58% percent during the period that his "monopoly" was supposedly engaging in predatory pricing.

It is utter BS designed to scare the populace into central planning.

If you want to read an interesting story, read up on Dow Chemicals and supposed predatory pricing.

Well then why have competition at all?

Capitalism is propelled by competition, when you take it away, about 50 years later things go to shit. It happened with regulations and I'm sure it happens with deregulation. The people who are in a place to take advantage always do.

[ARealConservative]

Well then why have competition at all?

Capitalism is propelled by competition, when you take it away, about 50 years later things go to shit. It happened with regulations and I'm sure it happens with deregulation. The people who are in a place to take advantage always do.

A monopoly will cease to be a monopoly if they fail to remain competitive.

There will be very few examples of where this doesn't apply.

[acptulsa]

Yes, there is a balance.

I believe so, too. And on a larger scale, I think Enron proved that even things which must be a monopoly on the local level, like electric service providers, must not be all affiliated on a national level.

There is a place for government to say no to monopoly. And toward that end, one reason I prefer to decentralize the federal government is so there won't be a monopoly there, either. After all, back when states were allowed to be different, there was competition among them to make our lives better. I know its true--I remember those days.

[heartless]

Microsoft has many lobbyists, how can you say they are not Government "Regulated"?

[A Ron Paul Rebel]

Isn't there a place, in certain circumstances, for the government to protect the public by forbidding the creation of monopolies where new competition isn't really feasible?

Still missing the point...

A free market doesn't mean that everything will always be rosie.
If a company was to 'buyout' all of it's competition and then
raise prices to gouge, then eventually educated consumers
WOULD see the demise of that company! It may take some time,
and it may take extensive co-operation (between small businesses)
but a free market would prevail and would result in a better
product at a better price, period. And any regulations would
simply stifle that progress.

p.s. Most of the examples [of free market] I see listed here
actually aren't 'free market companies'... There are dozens, even
hundreds of regulations that go into giving them the market
advantage whether it be intentional or unintentional.

[Truth Warrior]

Isn't the Fed, bottom-line, just another example of a government created and supported private banking cartel ( AKA monopoly :p )? :D

[LibertiORDeth]

The idea that a perfectly free market would automatically eliminate the possibility of a monopoly is a bit dated. I don't think it would be possible for a start-up company to compete with Airbus and Boeing any time soon. The neighborhood ice cream parlor would have a tough time gaining a monopoly, but life is more complicated than that these days.

What if we were at square one with only start-up companies?

[Tedhunter]

Congress created the Federal Reserve, a privately owned central bank, and gave them a monopoly over our nation's money supply. :mad:

[jason43]

The whole federal government is what you get with a monopoly, there is no way to get rid of it because it is too powerful and doesn't allow competition.

[Truth Warrior]

The whole federal government is what you get with a monopoly, there is no way to get rid of it because it is too powerful and doesn't allow competition.

The only REAL power that government has is the subservient obedient support that ENOUGH of the American people give to it.<IMHO>

When you really stop and think about that, hasn't that really always been the case thoughout all of recorded human history?

[Mordan]

Yes, there is a balance.

Things like the electric company need to be regulated, because you can't switch to another product. The electric company that serves your area is the one you get. If they trippled your bill and you had no recourse other than a "tough shit buddy" there would be nothing you could do. That said, I dont think that there should be price controls on electric either, otherwise you get blackouts and such because the companies lose money and have to shut down...

Nothing is ever going to be perfect because people always figure out ways to screw each other. Full deregulation would screw everyone, but regulation screws everyone too.

I'd just like to see regulation reduced.

about the electric company or the water supply company.

In a free market, I think those companies should be owned and controlled by customers. Customers = shareholders.
we need a new kind of company.

[acptulsa]

about the electric company or the water supply company.

In a free market, I think those companies should be owned and controlled by customers. Customers = shareholders.
we need a new kind of company.

This is being tried. They're called rural electric co-ops.

[Mordan]

Still missing the point...

A free market doesn't mean that everything will always be rosie.
If a company was to 'buyout' all of it's competition and then
raise prices to gouge, then eventually educated consumers
WOULD see the demise of that company! It may take some time,
and it may take extensive co-operation (between small businesses)
but a free market would prevail and would result in a better
product at a better price, period. And any regulations would
simply stifle that progress.

p.s. Most of the examples [of free market] I see listed here
actually aren't 'free market companies'... There are dozens, even
hundreds of regulations that go into giving them the market
advantage whether it be intentional or unintentional.

ron paul rebel. would you agree to a "free world market" giving individuals the right to pollute the air?
quottas are bought directly on the world market. there is no country disctinction.

[A Ron Paul Rebel]

ron paul rebel. would you agree to a "free world market" giving individuals the right to pollute the air?
quottas are bought directly on the world market. there is no country disctinction.

I think you are asking (or combining) a couple different
questions here. And they are trick questions at that.

Do I agree with a 'free world market'? Right off hand, I'd say yes.

The 'trickster' part of your question is 'giving individuals the right to
pollute the air'. Companies already pollute the air, right!? If we had
a more 'free market' there would be less pollution. (For example, if
two equal productive, valuable companies offered the same service,
but one produced more pollution than the other, an educated public
in a free market would inevitably chose the less polluting one... A
free market would evolve both of those businesses to offer a better
product at a better price which includes the pollution produced.

It's the regulations that cause the imbalance in the free market and
it's the regulations that cause the lack of education and laziness
in the public.

Here's an easy example:

Do we really need a federal regulation mandating that cars need
seatbelts? NO! A free market would definitely ensure that vehicles
would become safer and safer without government interference.

:)

[Verad]

There was a recent startup company that did what was believed that only NASA and its public counterparts in other countries could do: put a man into space using a reusable spacecraft, and all within two weeks to boot!

Competition can spring up from the least expected places. I love chaos. (:

[skinnyskittles1989]

ron paul rebel. would you agree to a "free world market" giving individuals the right to pollute the air?
quottas are bought directly on the world market. there is no country disctinction.

individuals can pollute their own property but the moment that pollution goes to someone else's property then that person is allowed to take the polluter to court for infringing upon their property

[MusoSpuso]

True. And McDonnell Douglas got to where it is today by government preference. The government seldom preferred their product, and this gave Boeing an advantage in the airliner market as Boeing got more development funds covered by the taxpayer. Yet, I think you would agree that the common defense is a legitimate function of government.

So, perhaps I'm using a bad example. Let's try again. Should the Union Pacific and the BNSF be allowed to merge? If they do merge, and begin price gouging, how the hell do you expect anyone else to be able to get all that land and build all of that infrastructure today? Isn't there a place, in certain circumstances, for the government to protect the public by forbidding the creation of monopolies where new competition isn't really feasible?

Government, yes. Federal Government, no.

To answer this dilemma and related issues brought up in another post I would point out that the power must lie in the people.

Local governments, state governments and state governments in cooperation with eachother with LIMITED federal involvement (interstate commerce) can be used constitutionally to limit "bad" monopolies and encourage free market competition.

In your specific example about railroad mergers, again I would use the example of competition and innovation. If trains became too expensive, people would use cars, planes or ships more. Or maybe even invent something new! I think of the free ("free" being the operative word here) market like that mole bopping game. If you repress or over-legislate one area of it, it will just pop up somewhere else. Restrict it enough and you start to get "black" markets or coporatism/facism which is what we have now more or less.

[Ball]

"Price gouging" is a term used for market prices when demand goes up, like in areas hit by hurricanes. What you meant to say was "monopoly prices", which can only occur given a specific demand curve (which, in turn, can easily change).

One of the better books dispelling the myths of markets tending toward monopolies is "Man, Economy, and State" by Murray Rothbard. He also explains how companies can't monopolize the entire market and perform economic calculation. This is the problem central banks face today.

The idea that markets tend toward monopolies (in spite of the lack of any evidence in support) is what led Marx to believe Communism was inevitable.

[danberkeley]

about the electric company or the water supply company.

In a free market, I think those companies should be owned and controlled by
customers. Customers = shareholders. we need a new kind of company.

why do we need to depend on a third party to provide electricity? what would
happen under your scenario is that there would be a boom in the solar power
industry and other similar industry. consumer wouldn't rely on a power-service
company because they would have their own power plant at home.

as far as customers = shareholders. this is already true. all shareholders of a power company consume power.

[Mordan]

why do we need to depend on a third party to provide electricity? what would
happen under your scenario is that there would be a boom in the solar power
industry and other similar industry. consumer wouldn't rely on a power-service
company because they would have their own power plant at home.

as far as customers = shareholders. this is already true. all shareholders of a power company consume power.

let's say you have a power plant in your county:
all customers i.e. all people with a house in your county are shareholders as in they have ONE share. This share cannot be sold. They OWN the company and have a say the decision making.
decisions to invest on solar power would be made by the shareholders.
This kind of co-op company ensures that profit isn't king. Profit will be only used by the shareholders for investments in improving their power supply or pay a bonus to the CEO of their co-op company.

[danberkeley]

let's say you have a power plant in your county:
all customers i.e. all people with a house in your county are shareholders as in they have ONE share. This share cannot be sold. They OWN the company and have a say the decision making.
decisions to invest on solar power would be made by the shareholders.
This kind of co-op company ensures that profit isn't king. Profit will be only used by the shareholders for investments in improving their power supply or pay a bonus to the CEO of their co-op company.

sounds very inefficient and much like communism. if profit isnt king, then costs are not important. also, if more than 50% of the shareholders voted to waste energy, the other >50% would be pissed and they would not be able to sell their share. remember, democracies are mob rule. but dont get me wrong, if you want to start your own co-op go ahead. i just dont want obama or clinton telling me that i have to join the co-op or be taxed to the hilt for not joining.