Natural Monopolies

[Zulu]

Just sitting around drinking some beer, but I have been wondering for a while what the board thinks about natural monopolies, i.e. utilities, roads, water, electricity. pretty much everything about free markets is talked about but I haven't heard too much on the subject. It seems like the only thing that is really lacking from the free market debate, or libertarian debate.

[Bman]

Just sitting around drinking some beer, but I have been wondering for a while what the board thinks about natural monopolies, i.e. utilities, roads, water, electricity. pretty much everything about free markets is talked about but I haven't heard too much on the subject. It seems like the only thing that is really lacking from the free market debate, or libertarian debate.

What's to talk about. That stuff is property.

[mczerone]

What's lacking, aside from your research efforts?

Every craftsman and skilled laborer possesses a natural monopoly - there are no problems.

"But what if one person buys all the [insert precious resource here]?"

If you imagine owning all the iron ore in the world, what would you do with it? The law of diminishing marginal return says that the last grams must be almost worthless to you, but are extremely valuable to others because they need industrial material.

What's the problem? If the 'hoarder' is anywhere near rational, he will be very likely to part with some of his iron for a cheap price. On the other hand - after all we shouldn't assume anyone is being rational - the hoarder should not be forced to part with any of the object of his obsession. Instead, if the irrationality is so extreme as to cause famine, a hindrance to industry, or any other adverse effects upon people or land, a boycott will easily break one's will and give him incentive to part with a sensible amount of his stash.

[Bman]

What's lacking, aside from your research efforts?

Every craftsman and skilled laborer possesses a natural monopoly - there are no problems.

"But what if one person buys all the [insert precious resource here]?"

If you imagine owning all the iron ore in the world, what would you do with it? The law of diminishing marginal return says that the last grams must be almost worthless to you, but are extremely valuable to others because they need industrial material.

What's the problem? If the 'hoarder' is anywhere near rational, he will be very likely to part with some of his iron for a cheap price. On the other hand - after all we shouldn't assume anyone is being rational - the hoarder should not be forced to part with any of the object of his obsession. Instead, if the irrationality is so extreme as to cause famine, a hindrance to industry, or any other adverse effects upon people or land, a boycott will easily break one's will and give him incentive to part with a sensible amount of his stash.

Good point. Let me add the person would need to spend money lots of money to protect themselves, and even the best protection can not defend against time. It's human nature. They'd lose a monopoly one way or another.

[mczerone]

Good point. Let me add the person would need to spend money lots of money to protect themselves, and even the best protection can not defend against time. It's human nature. They'd lose a monopoly one way or another.

Why do you think high-seas piracy is on the rise?

[MGreen]

Thomas DiLorenzo wrote The Myth of Natural Monopoly (http://www.mises.org/journals/rae/pdf/rae9_2_3.pdf). Cato also has a paper that provides some interesting numbers regarding the telephone industry here (http://www.cato.org/pubs/journal/cjv14n2-6.html).