Isn't monopolization an inevitable consequence of Pikkety's observed behaviour that capital begets more capital and it's increasingly concentrating in fewer places? Not only can concentrations of capital in private companies enable them to gobble up smaller competition until there is nothing left, it also enables them to control legislation over it.
I'm not sure if me observing this relation is correct, but if it is then politics must be very strong to resist the trend. I sure hope it is.
Only tangentially. I recently finished Pikkety's "Capital" and found it very much to be (as you said) about observed behavior not theory. His primary discussion is about labor vs capital return split of output (and its resulting effect on individual inequality). He does discuss observed economies of scale for returns on capital which could have monopolistic effects. (aka returns on 1 million might be 5% but for 100 million might be 7%)
The power of monopolies and indeed of corporations in general is directly tied to the power of the State. It's no surprise to those who understand this that, as the federal government has grown in size, strength, and scope, corporations have followed.
In fact, I'd go so far as to say that consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State. Whether that be through IP law, limited liability, regulatory capture, or explicit utilization, monopoly in one industry requires the support of the largest monopoly there is: that on coercion, aka the State.
Never have I seen evidence of a lasting consumer-hostile monopoly that existed without the involvement of the State. As far as I can tell, natural monopolies are a myth grown from mistaken economic theory.
>The power of monopolies and indeed of corporations in general is directly tied to the power of the State.
No it isn't. This flies in the face of basic economics, and even worse, very much "in your face" evidence we have if you look at nations across the world. Weak governments continually fall victim/enable private entities. Governments that have power to withstand those pressures have regulatory teeth (i.e. big government).
There isn't any model, theoretically or by experience, where in monopolies exist in a system without sufficient state powers. There hasn't ever been a time where monopolies were not directly handled by exercising state powers. You will find monopolies across history and the present that only exist because of the inaction/inability of states to do anything about it. The existence of monopolies is very much in fact a direct symptom of weak/dysfunctional governments.
> > The power of monopolies and indeed of corporations in general is directly tied to the power of the State.
> No it isn't.
Yes, it is for corporations (monopolies are a more complex question.) Corporations are creations of the state; everything done through them is an exercise of state power.
> corporations are creations of the state; everything done through them is an exercise of state power
Legally, yes. Politically, it's more complicated. The banana republics were largely run by the domestic subsidiaries of foreign companies. Just because the subsidiaries were chartered by the state doesn't mean they didn't have more power than the state.
> Legally, yes. Politically, it's more complicated. The banana republics were largely run by the domestic subsidiaries of foreign companies. Just because the subsidiaries were chartered by the state doesn't mean they didn't have more power than the state.
That was an exercise of state power (often quite directly, with implicit or explicit threat, and in some cases direct application, of conventional state power), just not exclusively of the state chartering the local subsidiary, often instead the one chartering the parent.
EDIT: But there is the point that, especially in a weaker government, the private power of people (foreign or not, individual or corporate themselves) that own a corporation may be more relevant than government power in determining the power of that corporation; that's not really about the power of corporations as such, though.
> in a weaker government, the private power of people (foreign or not, individual or corporate themselves) that own a corporation may be more relevant than government power
In these cases, the centers of power co-mingle. See Korea's chaebols; the House of Saud relative to Saudi Aramco and the state of Saudi Arabia; or Vatican City's relationship with the Holy See and Catholic Church. TL; DR Rising state power doesn't mean rising corporate power. In many arenas, the two compete.
I'm not immediately seeing the distinction you're trying to draw here, given the topic-can you elaborate on this a bit so that I can possibly understand your position a bit more?
> I'm not immediately seeing the distinction you're trying to draw here
Corporations are legal entities. For a legal entity to have meaning, it must be based on a set of laws. The state creates and administers laws. Therefore, corporations are a creature of the state. Theoretically, the state has unlimited power to create, destroy and manipulate corporations to its will.
In reality, it's more complicated. Just because someone has a legal right doesn't mean they have the political power to exercise it. When President Miguel R. Dávila of Honduras attempted to exercise state power over the Cuyamel Fruit Company, the latter raised a mercenary army and staged a coup d'état [1]. There are numerous other examples of private corporations running pet states for their own benefit.
Once you rise to the level of discussing sovereign power, the distinction between a state and a corporation becomes meaningless. What matters is power--how it's organized is something of a convenience. (For example, try drawing neat lines between the Saudi state, the House of Saud and Saudi Aramco. Or between Vatican City, the Holy See and the Catholic Church.) We're nowhere near that point in America--the federal government could fine into ruin, jail the leadership of or break up any company on earth.
This meme of states always having more power than corporations because the latter is a legal creature of the former is overly simplistic. It similarly doesn't follow that a strong state means strong corporations. In many arenas, states compete for power with corporations. Teddy Roosevelt taking on the robber barons required a strong state; in contrast, Korea is an example of a weak state relative to its corporations.
> power of monopolies...in general is directly tied to the > There have been entire countries and regions purely run by private entities.
I'm interested in an example of an entire country run by a private entity that was not a dictatorship. It doesn't help that the terms "run" and "private entity" vary from person to person, but something akin to the HEIC - https://en.wikipedia.org/wiki/Company_rule_in_India is what was conjured when talking about private entity rule.
> I don't know what you think adding that adjective is going to change, but sure.
I'm implying no readers/posters have "experience" as stated. The adjective is a clarification, in the case that there was something missed from the strange phrasing.
Make lobbying illegal, and make representatives more accountable to their constituents? Decentralize the government more, and make it more state and local instead of federal?
"Natural monopolies" are impermanent. They fluctuate between states of monopoly and states of competitiveness. While there will be times when a single firm serves the market unchallenged, there will also be times when the market is not served by any firm, and times when multiple firms are competing to be the sole survivor. The de jure monopoly is therefore instituted to prevent the former, at the expense of the latter.
According to microeconomic theory, a natural unprotected monopoly has to operate at a different price point than a legally protected monopoly, because attempting to operate at that point invites new firms to enter and attempt to unseat the incumbent. It therefore follows that every natural monopolist will attempt to seek legal protection for their monopoly, and would be willing to pay up to the marginal amount of profit between the price points of natural and protected monopoly in order to acquire or retain that protection. Where the legal framework is not available, the monopolist firm can just hire a brute squad to take out upstart competitors.
So because there is a real economic difference between protected monopoly and natural competitive monopoly, the mere possibility of protected monopoly is a source of political corruption. And once corruption has taken root, every natural monopoly can then invest in its own protection, even where such protection might not be needed, because protected monopolies can charge higher prices, which is all (economic) profit.
If the cost to enter the market is very high a monoply can portect itself simply by there being implicit knowldege that a competitor entering the market will result in the monopoly lowering their prices temorairly. With a high cost to enter + high risk of failure + low returns even if the monopoly is broken, a monopoly can protect itself effectively without the help of a state.
The entry of a new competitor could also cause both the incumbent monopolist and the challenger to fail, if the monopolist hasn't kept a deep enough war chest filled, for weathering such challenges.
But why keep a war chest, when you could use the same funds to greater effect by buying political protection and distributing the remainder to the owners?
While it is possible to effectively protect a monopoly without help, appropriating the machinery of the state where possible is much more efficient. As I mentioned previously, where the state cannot be used, the company could hire a gang to burn down competitor capital more cheaply than trying to duke it out in a fair fight on the open market.
If you're DeBeers, and someone opens a diamond mine that threatens your cartel in a place with little law enforcement, your carrot is a buyout offer, and your stick is murdering key personnel and destroying vital equipment using "security contractors". You don't need to lower prices, if you can make the new guy go bankrupt without ever bringing anything to market.
Yeah, this is more an example of monopolies naturally eroding. DeBeers held prices above equilibrium, and other players entered the market and now they don't have a stranglehold on it. (The extent of their hold on it was played up by journalists anyway...)
I think there is a correlation, but it could run the other way - the means of production coming more and more into the hands of monopolies might have the result of the government growing as well.
I think it works both ways in a positive feedback loop. Corporations have an interest in using state power against competition, and Statists will increase state power to "keep corporations under control" with anti-trust and whatnot.
There were monopolies before the New Deal's expansion of the federal government in the 1930s. Antitrust law is based around those early 1900s monopolies.
It doesn't necessarily disprove your correlation, but its food for thought.
Electric utilities. They existed, if I understand correctly, before there were government regulations, and the government regulations formed in response to the electric monopolies.
Any citations for that? I know this is the narrative, that monopolies happened and were bad, so regulations were formed reactively. But I haven't ever seen evidence that this was what happened. As far as I can tell, people just thought it was what would happen, so they proactively did so.
Best I could find on short notice is the history of the California Public Utilities Commission (https://en.wikipedia.org/wiki/California_Public_Utilities_Co...). It originated in the desire to control the power of the Southern Pacific Railroad, which had a stranglehold on transportation in California, and used it to squeeze all the money out. That is, first the monopoly (on efficient transportation) happened, then abuse happened, then outrage happened, then regulation happened.
Note that anybody could have built a competing railroad... but it hadn't happened.
"Among our major railroads, the most scandalous histories were those of the Union Pacific and the Central Pacific (now called Southern Pacific). These were the two lines built with a federal government subsidy. The Union Pacific collapsed into bankruptcy soon after its construction, with what was, perhaps, the most disgraceful scandal in the history of any railroad; the scandal involved official corruption. The road did not become properly organized and managed until it was taken over by a private capitalist, Edward H. Harriman.
The Central Pacific — which was built by the “Big Four” of California, on federal subsidies — was the railroad which was guilty of all the evils popularly held against railroads. For almost thirty years, the Central Pacific controlled California, held a monopoly, and permitted no competitor to enter the state. It charged disastrous rates, changed them every year, and took virtually the entire profit of the California farmers or shippers, who had no other railroad to turn to. What made this possible? It was done through the power of the California legislature. The Big Four controlled the legislature and held the state closed to competitors by legal restrictions—such as, for instance, a legislative act which gave the Big Four exclusive control of the entire coastline of California and forbade any other railroad to enter any port. During these thirty years, many attempts were made by private interests to build competing railroads in California and break the monopoly of the Central Pacific. These attempts were defeated—not by methods of free trade and free competition, but by legislative action.
This thirty-year monopoly of the Big Four and the practices in which they engaged are always cited as an example of the evils of big business and free enterprise. Yet the Big Four were not free enterprisers; they were not businessmen who had achieved power by means of unregulated trade. They were typical representatives of what is now called a mixed economy. They achieved power by legislative intervention in business; none of their abuses would have been possible in a free, unregulated economy.
The same Central Pacific is notorious for a land deal which led to the dispossession of farmers and to bloody riots in the late 1870’s. This is the incident which served as the basis for the anti-business novel, The Octopus, by Frank Norris, the incident which caused great public indignation and led to hatred of all railroads and of all big business. But this deal involved land given to the Big Four by the government—and the subsequent injustice was made possible only by legislative and judicial assistance. Yet it was not government intervention in business that took the blame, it was business.
At the other side of the scale, the railroad that had the cleanest history, was most efficiently built in the most difficult circumstances, and was responsible, single-handed, for the development of the entire American Northwest, was the Great Northern, built by J. J. Hill without any federal help whatever. Yet Hill was persecuted by the government all his life—under the Sherman Act, for being a monopolist (!)."
From the chapter "NOTES ON THE HISTORY OF AMERICAN FREE ENTERPRISE"
Um, the UP and CP were far from the only lines built with federal subsidies (presumably meaning land grants). The NP, SP, and A&P all received land grants as well. The GN was the big exception.
And the GN wasn't single-handedly responsible for the development of the American Northwest. The NP was there first, for one thing.
The text you quoted seems to be reading history quite selectively.
> Never have I seen evidence of a lasting consumer-hostile monopoly that existed without the involvement of the State. As far as I can tell, natural monopolies are a myth grown from mistaken economic theory.
I disagree, not with your premise but with this conclusion, because there's also little evidence of monopolies that broke down without involvement from the state. One also has to consider industries and states are all different.
In a country like the US with a codified anti-monopoly law, yeah, you need collusion with the state to turn the blind eye. But precisely cause this anti-monopoly law exists, it's that monopolies HAVE been broken down, by the state.
There's industries like software where a random developer can create something that grows into a huge corporation, or a OSS project that completely changes the industry, etc. because the cost of entry is so low. But there's also industries that are ridiculously hard to get into and require massive investments that only other big companies can make. The free market IS rich-gets-richer territory.
> there's also little evidence of monopolies that broke down without involvement from the state
That's not evidence that anti-trust laws are necessary.
> monopolies HAVE been broken down
My premise is that those monopolies existed as a result of state involvement in the first place.
You can't use the existence of anti-trust law as evidence that it's necessary. You must give evidence that monopolies which existed before anti-trust were bad for consumers. You must also show that those monopolies weren't created by other government actions (the solution in those cases would be to just reverse such government action, not anti-trust).
> ridiculously hard to get into and require massive investments that only other big companies can make
The capital barrier-to-entry argument is exactly what I was referring to by "mistaken economic theory". Competition doesn't just stop happening because it's expensive. You gave the solution yourself: cross-industry competition. Capital gains from one industry flow into competition in others.
Only in a situation where one company controlled a majority of the industries in the economy would preventing competition would possible. And such a firm would be hugely inefficient.
> free market IS rich-gets-richer territory
Getting richer requires risk. Risk is often rewarded, but risk goes both ways. Also, there's no evidence that the free market is any worse in this aspect than other systems.
Standard Oil is the canonical example of a monopoly needing to be broken up by the government. But in the book "Titan" by Chernow, SO's market share steadily shrank throughout the years of SO's anti-trust trial, as competitors had by then figured out how to compete with SO and were outmaneuvering Rockefeller.
Do you even know what a natural monopoly is? Have you ever seen anywhere in the world where the business of a natural monopoly is actually not a monopoly? Is there anywhere in the world where a can buy a house and can have 5 different companies with 5 different sets of pipes attached to my house in fierce competition with each other offering me water service? I would really like to check out such a place.
This is one of the things that is really annoying about economics. Because the result of economics depends on money, even the simplest most obvious things will be disputed. In physics nobody will seriously say that gravity on Earth makes things fly up, but boy in economics there will be an endless supply of serious scholars writing books and articles and earnestly arguing on TV shows that up is down and down is up.
Because of course if you convince people that up is down and down is up in economics, you can get really rich. If you can convince the public that there is no such thing as a natural monopoly, there will still be natural monopolies but they won't be treated as such by the government, and then you have a license to print money.
Utilities are heavily regulated by the state so you're not really refuting the parent's point. They didn't say that we should get rid of the government and industries it's propping up. They said that you can't have a monopoly without government support and your example reinforces that.
For example, if there was no regulation of water utilities, anyone could just put a big tank on their property (bought from anywhere) and hire any number of water supply companies to come fill it. To the best of my knowledge this isn't legal due to numerous laws and regulations.
I agree that the situation we have now provides healthy water reliably (normally). The point the OP was trying to make isn't that monopolies always provide a bad result, it's that they exist due to government backing and regulation.
Where water utilities exist, they're typically run or at least regulated by government. Of course, there are many areas where there is no water utility and property owners dig their own wells. It's very common in large areas of the US.
Great point. Do you know if you're allowed to just dig a well anywhere? Like if I was in Redwood City and I didn't want to use the monopoly water provider, could I just dig a well if my yard had room for it?
I assume it is specified by zoning/laws--although it probably varies. In general (unless you already have a well), I would also assume you're better off just getting town water if it's available. Wells are expensive and not necessarily reliable whereas water from the local utility is usually a pretty low cost, at least in my case.
Same applies to septic.
It's probably also going to be dependent on the town (presumably) whether you have to pay for a hookup if it becomes available.
Why would the incentive structure of competition suddenly disappear when applied to utilities? Food and housing are equally inelastic and have high barriers of entry, but we see competition there.
The water example you gave is an example of the government proactively monopolizing such utilities. It's exactly what I was talking about.
Never have I seen evidence of water, power, etc naturally monopolizing and being hostile to consumers. Firms just can't keep out competition without state intervention.
Ok then give me an example. In the entire world there are places with weak governments and with laissez faire governments. Is there any place where I can buy a house with five different independent water delivery and sewage removal systems attached to it?
If there isn't then you would have to rethink your theories don't you.
The fact of the matter is that there is such a thing as a natural monopoly and just a cursory examination of the facts on the ground and the history of the last 150 years or so will prove it.
> there are places ... with laissez faire governments
Not really
> Is there any place where I can buy a house with five different independent water delivery and sewage removal systems attached to it?
I never claimed that it exists. I claimed it was possible. A thing doesn't need to exist to be possible.
> The fact of the matter is that there is such a thing as a natural monopoly
Name some, then. Show me the evidence of all these natural monopolies which cropped up on their own, taking advantage of consumers, and resulting in the necessity of making them state utilities.
I’m not sure it directly helps anyone’s argument here, but 5 minute’s searching gave this study of water service in Nigeria, with a mixture of public and private services competing to provide potable water using different strategies.
I think two responses to this would be a) that sounds like terrible public and private provision, and b) the competing water providers don’t all use pipes — they use boreholes, tankers, and rainwater collection, so they don’t count. But that’s probably how competition against an apparent natural monopoly would work: what might undermine Comcast, say, isn’t another cable company digging up the road, but a wireless broadband provider, or some technological alternative that circumvent the apparent advantages of the monopolist.
Because digging pipes to every house is expensive. The first company to do so does so in the expectation of serving every house. The second company would do so only in the expectation of getting business from every other house. Pretty soon - well before there are five companies serving each house - it doesn't make economic sense to dig trenches and install pipes in order to be the fifth company offering service to each house.
And you ignored hristov's challenge. He wanted evidence (though phrased in a way that implied presenting it was impossible), and you responded with argument. Produce the evidence: Where in the world are there no government regulations on water companies, and it resulted in five companies offering service to each house? Where? Show us the data. Without that, you have argument, but the real world contradicts you...
I wasn't claiming that it existed somewhere in the world. I was arguing against the idea that a natural monopoly which is harmful to consumers can exist or has existed. He didn't give any evidence that one has. All he gave was a status quo fallacy. Just because water utility competition doesn't exist, doesn't mean it can't exist, or wouldn't exist in a free market.
I don't need to give evidence. I'm not the one advocating for government action, I support inaction.
You argued that consumer hostile monopoly’s don’t exist without government. When presented with direct evidence that they do exist you when back to theory.
Look, theory that does not apply in the real world is meaningless. And in the real world monopoly’s exist without government backing, making your argument invalid. That’s perfectly ok, but now it’s time for you to realize you made a false argument and think of some new idea of how things operate.
> when presented with direct evidence that they do exist you when back to theory
When was that? He never named a bunch of natural monopolies which exploited consumers.
> in the real world monopoly’s exist without government backing
Where is the evidence of this. My original comment clearly stated that I hadn't seen any evidence of consumer-hostile monopolies occurring without government backing. And in this thread, I've yet to see any lists of monopolies period, let alone ones people claimed to be natural.
I already addressed the water delivery monopolies when I said this:
> The water example you gave is an example of the government proactively monopolizing such utilities.
Every water utility I know of is heavily regulated by local governments. Why? I don't know. I've never seen any evidence that such regulations were reactive in nature. But that fact of reality is not evidence that water delivery is an industry which will naturally monopolize to a point at which it is harmful to consumers.
In the entire history of the world -- not a single place where there was water utility competition? It seems that if such a thing were possible it would have happened at least once.
We haven't been even theoretically capable of building a base on the Moon until last few decades, and we are barely capable even now. But we've been capable of building water delivery pipes for hundreds, if not thousands of years.
>Never have I seen evidence of water, power, etc naturally monopolizing and being hostile to consumers.
Come to Florida and checkout FPL post hurricane. They are pretty notorious for restoring power to wealthy neighborhoods first. That’s pretty hostile. Otherwise I think most agree they have a difficult job and seemingly continue to get better in terms of preparedness and restoration in these events.
Going to the state intervention and water pipes as an example, even if the state said anyone can join in and compete whenever they want, it begs the question of how that would be possible without the state being involved. At any given point tom, dick or Harry want to start a water company the publi roads get ripped up yet again to lay pipe. Do Tom, dick and Harry all get to rip up my yard and connect to my home without my consent? If connections aren’t done all at once, do public roads get ripped up for every home that wants water connection from a new supplier?
The NFL May be such an example of a monopoly (according to the courts) that doesn’t rely on state intervention, but good luck building your own stadium or contracting to use theirs any given Sunday. Are the hostile to consumers? I suppose that question is debatable based on your definition, in the case of my local team they price out consumers and have record low attendance and didn’t allow competitors to use their stadiums (USFL) to the detriment of football fans who wanted alternative leagues.
> Come to Florida and checkout FPL post hurricane.
It looks to me like FPL is a utility heavily regulated in its rates and operation by the Florida state government. Seems like a lot of government involvement to me.
> Going to the state intervention and water pipes as an example, even if the state said anyone can join in and compete whenever they want, it begs the question of how that would be possible without the state being involved.
The roads could be built to facilitate expansion and competition. Roads could be avoided altogether through technology like directional drilling or tunneling. Competitors could get started by servicing new development first, then expanding into existing areas.
As it stands, existing cities were designed with centralized utilities in mind. It makes it hard to monkey patch competition on top.
> Do Tom, dick and Harry all get to rip up my yard and connect to my home without my consent?
They shouldn't, but utilities use eminent domain all the time.
> public roads get ripped up for every home that wants water connection from a new supplier?
I don't think roads should be public either, but that's for another discussion.
> The NFL May be such an example of a monopoly
Talk about a bad example. The NFL gets all sorts of subsidies including cities building their stadiums for them! The military uses the NFL as a main medium for advertising.
My reading of the OP was there is no evidence of government supported monopolies being hostile to consumers, the top two example you seem to agree with me that these government supported monopolies are hostile to consumers. As you say if we open up water to competition, as many as possible can immeenient domain a pipe into my house. I could have 1,000 water pipes from 1,000 companies sticking out of my wall and I have no say.. that seems hostile.
I don’t think you can just imagine some magical road that allows for unlimited pipes and electric to run through it that just accommodates more competition without real hostility to consumers.
The military doesn’t “use” stadiums they form partnerships with the NFL and pay to advertise...the military isn’t helping protect the NFL monopoly the way OP says. And not all stadiums are build by the cities or tax payer funds. But in my case they did, admittedly, but again it can be argued they are hosilte (pricing out the local fans, while the stadium sits half empty).
I think you missed the part about OP claiming these State backed monopolies aren’t hostile to consumers (or I completely misunderstood this part of the post)...as your post seems to concur with mine, they are sometime hostile.
> My reading of the OP was there is no evidence of government supported monopolies being hostile to consumers
Which OP are you referring to?
> As you say if we open up water to competition, as many as possible can immeenient domain a pipe into my house. I could have 1,000 water pipes from 1,000 companies sticking out of my wall and I have no say.. that seems hostile.
I don't think that would actually happen of course. Nor do I think eminent domain is a valid power of the State. My point was that this already happens. I think a much better system could spontaneously exist when the market is involved. An example is given by WalterBright: https://news.ycombinator.com/item?id=18536896
> I don’t think you can just imagine some magical road that allows for unlimited pipes and electric to run through it that just accommodates more competition without real hostility to consumers.
Obviously, scarcity is a thing. Unlimited competition isn't possible. I'd say 2-6 competitors is about right, depending on your situation.
> The military doesn’t “use” stadiums they form partnerships with the NFL and pay to advertise...the military isn’t helping protect the NFL monopoly the way OP says.
My point was that the military is a large source of NFL funding, but I shouldn't have even brought that up. It's entirely unnecessary, because the NFL isn't a monopoly. Sports entertainment is a super competitive arena, with multiple sports and multiple levels per sport, including college football.
> And not all stadiums are build by the cities or tax payer funds.
Sure, but regardless my point that they get huge subsidies from governments stands.
> missed the part about OP claiming these State backed monopolies aren’t hostile to consumers
I'm not sure who you're referring to by OP, but my position is that state-backed monopolies are the only ones which can be hostile to consumers. Otherwise, the hostility is just opportunity for competitors.
The phone company has been characterized many times as a natural monopoly. But it certainly wasn't in its early days. Telephone companies sprouted like weeds and all competed with each other.
I don't know what the interconnection between them was like.
But I can say that in the days before the internet achieved dominance, the various privately operated networks provided gateways so one could connect to the next. In fact, the term "inter"net came from connecting existing networks together.
Lastly, it's not necessary for competing water companies to run parallel sets of water pipes to your home. Your neighborhood may have a communal pipe, and then water companies compete to connect to that pipe. There may be pipes connecting various other pipes. The water companies compete to fill those pipes, or rent access to those pipes to deliver the water to individual subscribers.
I.e. a free market water system need not at all look like the current monopoly utility system.
Not quite, the usual case was a local monopoly, due to network effect. As with railroads, in fact the large players had to be forced by government to allow interoperation. Facebook is equally reluctant now.
The railroads were a great example of a interference in a market. In its early days it paid more to market to DC than to customers and might still today.
I’m going from pure memory so correct if I’m wrong, but the only cross continental railroad that didn’t immediately go bust after finish was the only one not being paid by the mile by the government.
> consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State
AT&T creates the first phone network. No one can use their network because it's their property, and the phones installed in people's homes are also owned by AT&T, rented by consumers. How is competition going to appear?
I suppose you could say the state is enforcing property laws, but even in the absence of functional governments people often prevent theft (there was a time before police, after all).
Ma Bell was a monopoly created by the federal government.
It probably would have happened like this:
- phone is invented
- consumers want it
- AT&T starts in one city, other companies start up in other cities
- eventually people want to speak between cities
- different phone companies start networking with each other to provide that service
- AT&T has old infrastructure in the city where they started and consumers aren't happy, so one of AT&Ts competitors goes into that city and starts setting up a newer network that's higher quality
It wasn't created by the federal government, and it did start locally in a single city. The city was New Haven, Connecticut. I believe other cities were initially franchises.
Regardless, you see the exact same thing happen with railroads, with them holding monopolies on the rail lines they built (sometimes with incompatible rail).
AT&T wasn't created by the government, yet there was a government intervention into the market, led by nationalisation.
"
Around 1917, the idea that everyone in the country should have phone service and that the government should promote that began being discussed in government. AT&T agreed, saying in a 1917 annual report: "A combination of like activities under proper control and regulation, the service to the public would be better, more progressive, efficient, and economical than competitive systems." In 1918 the federal government nationalized the entire telecommunications industry, with national security as the stated intent. Rates were regulated so that customers in large cities would pay higher rates to subsidize those in more remote areas. Vail was appointed to manage the telephone system with AT&T being paid a percentage of the telephone revenues.
"
Your analysis is completely unmoored from history. The scope of government authority today is the lowest it's been since the 1940s. Back then government agencies would use a few pages of broadly-worded statutes and regulations to impose sweeping controls: setting prices, telling airlines what routes they could fly and trucks what routes they could drive, telling telecoms where they could build wires. Government agencies today have to invoke thousands of pages of regulations just to achieve the most minor ends. The Interstate Commerce Commission had vastly greater powers than any of the three-letter agencies that replaced it. This is true not just in the U.S., but in Europe as well.
Yet, despite the entire Western world being at the tail end of a decades-long process of deregulation, corporations are bigger than ever. That's not because of the State, it's because of technology. Amazon, Microsoft, Apple, Google--all are the result of massive economies of scale enabled by technology. Amazon isn't monopolizing retail because the State is giving it special privileges. It is doing so because smaller retailers cannot compete with Amazon's nationwide logistical infrastructure and footprint.
I think any liability is tied to the power of the State.
You are, after all, being found liable through the legal process (probably the courts.)
On your last point, one natural monopoly that thrived completely independent of any States, is the monopoly of force exerted by Warlords over their domains.
Given the choice between Warlords and a State Government, I chose a State Government, even with all its other problems. Hopefully the government is reasonably democratic, and a nation of laws.
Limited liability refers to the privilege that firms gain when they are sanctioned by the State. This privilege is characterized as the owners (shareholders) of the corporation not being liable for the actions of the corporation.
This is a creation of the state. Without LL, destructive corporate actions could result in suits against the shareholders or at least the operators of the company. Shareholders would like to limit the risk they take, so they would be likely to pressure firms to act more carefully. With LL, firms can take whatever risk they want, and the only consequences stockholders see is if the stock price of the company falls.
In addition to that, the idea that a state arises to prevent warlords is fantasy. In reality, warlords evolve to become the state as they legitimize their position as rulers.
This is absolutely not true, corporations in the absence of state power could simply hire paramilitary forces to do whatever is necessary to get ahead. Stateless capitalism would very quickly become something akin to feudalism.
Just because it's true that certain regulations create economic minimums that prevent new entrants into the market doesn't mean that this is the sole thing that causes monopolies, as immense vertical integration can lower costs to the point where only the largest organizations can provide services at said lowest margin. The problem only becomes bigger once they prevent new entrants, and begin to raise prices since there is no competition.
The essence of a state is to hold a monopoly on physical force, so there's no other agent in the market providing coercion to whoever is willing to pay for it.
Without this, any market that has multiple agents providing force-as-a-service based on their own code of rules, ceases to exist in a matter of weeks and simply becomes a territory of gang-rule. The state has to hold a monopoly on coercion.
Once this monopoly on coercion is secured before the state, the state's only responsibility regarding the markets comes down to enforcing property rights and establishing a system of courts and judical practices to resolve disputes between free agents in the market.
If such a government later decides to enter the market through nationalising industries, and/or establishing state-controlled for-profit organisations, and/or rationing/licensing entries to individual professions, it starts exercising coercion in the field of voluntarily trading agents, thus skewing competition in favor of those who is willing and is able to make deals with policy-makers. And once there's a regulation in favor of one of the players in the market, there's hardly any way for their competitors to outperform them, but to go to other policy-makers that might help to pass another set of regulations that would potentially harm the first player. And this is how monopolies are created in the first place - in the end, there's going to be a dominant player that has used all the opportunities to squeeze competition from the market through various regulations that work handy for their particular business, and at the same time prevent any other new player to enter the competition, even if they have enough money for it - precisely because they have to comply with the government regulations that already benefit the monopoly.
Yes, and of course other countries than the US will do little to keep their companies in check, so they can compete with the companies of other nations. So this is a problem that crosses borders, and thus we probably can't solve it.
I have a hard time finding a single statement in your comment I agree with.
> The power of monopolies and indeed of corporations in general is directly tied to the power of the State.
That's a big claim with zero evidence. It would certainly seem that the lack of strong national government and insufficient power at the state level was what lead to powerful corporations/trusts like Standard Oil.
> It's no surprise to those who understand this that, as the federal government has grown in size, strength, and scope, corporations have followed.
My understanding of the Gilded Age was that corporations were only stopped because laws were passed at the federal level after monopolies had already become a problem and caused pushback from voters. eg.
> In 1890, Congress passed the Sherman Antitrust Act, which made it illegal to monopolize or restrain (or attempt to do so) interstate commerce. On the basis of this Act, the United States filed a suit against five sugar manufacturing companies to keep them from merging after one firm purchased the stock of the other four (E.C. Knight Co. was one of the four firms bought out). The American Sugar Refining Company had gained control over 98 percent of the sugar refining business in the United States in this way and was considered a monopoly. ( http://landmarkcases.org/en/Page/401/How_Interpretation_of_t... )
Further, I don't think there was a notable increase of federal government until the Depression and New Deal era, followed by significant military expansion before, during and after WW2. Arguably there was major growth in the 60s and 70s (HUD, DoT, DoE, DoEd, EPA, etc.) But I feel it's fairly clear that government size and corporate size change largely independently.
> In fact, I'd go so far as to say that consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State.
You're moving the goalposts here, changing from discussions of monopolies in general to "consumer-hostile" monopolies. Further, I'd expect you're still wrong even here. Consumers might accept hostile monopoly situations if there's simply no alternative, ie, places where it's not cost effective for a company to build out to a rural location. Even if the service is bad for your power/telecom situation in some rural location, there simply might not be an alternative, aside from not getting that service.
> As far as I can tell, natural monopolies are a myth grown from mistaken economic theory.
I don't really know what to say to this. If you can look at the mechanics of road, power and telecom construction/distribution and say that natural monopolies don't exist, then clearly we must have wildly different understandings of the term.
They aren't wrong about the timing. I cite bank mergers [0] as evidence, you can see they start becoming the norm about 1981. The inflation-adjusted numbers start exploding as well [1].
I'm a bit suspicious that the real advantage of large companies is more assets, more faith and better access to credit. From an economic perspective, I can recall many mergers and acquisitions that basically failed to make money. But on the other hand, maybe a good merger is a very low key event, I can name a few in tech specifically that worked - but usually that is because the network effects of online businesses are absurdly important.
Anyone know why the tire industry (bottom line of the graph) bucked the trend and decentralized over the time period displayed?
My educated guess would be that something happened that caused value priced tires manufactured in Asia to suddenly increase in quality and capture some market share from buyers who previously shunned them but I'm really not familiar enough with the industry to put any confidence behind that claim.
All industry is in a constant cycle of centralize/decentralize. There are benefits to both so when you are at one extreme you look to the other. There generally isn't a middle ground that is easy to find.
Only anecdotally: a couple Korean tire companies (Kumho, Hankook) I had never previously heard of started showing up in the U.S. in the past decade or two. They are of high quality and at a lower price than the U.S. tire manufacturers.
From the article:
>"America was born as “a nation of farmers and small-town entrepreneurs,” the historian Richard Hofstadter once wrote, “anti-authoritarian, egalitarian and competitive.” Hostility to corporate bigness animated Thomas Jefferson and Teddy Roosevelt, as well as the labor movement, Granger movement, Progressive movement and more.
"
I disagree that Progressive Movement of today, is reflective of
> "America was born as “a nation of farmers and small-town entrepreneurs,”
Completely opposite, I think, what is called Progressive movement today -- is completely Pro-Monopoly.
It is easier for a monopoly to lobby Federal government, it is easier for a monopoly to litigate complex issues, it is easier for a monopoly to control opinion of the masses.
Therefore, it is absolutely, more desirable for monopolies to have more power concentrated within fewer individuals -- and that's done by making Federal government more and more powerful.
Powerful monopolies a fuel for political corruption, by means adapting the 'veil of political-correctness' that hides bribery and money-laundry (through well known means of: 'book signing', ' paid speeches', and 'charitable foundations')
So the self-feeding, snow-balling cycle of power is
'larger federal government' <--> 'more powerful monopolies'
And today's progressive movement' is 'larger federal government' type of ideas.
This is why I didn't identify as liberal for a long time (even though I'm wildly socially liberal) - the more power the government has, the more it tends to wind up like that. Whether in the form of classic regulatory capture, the defense-industrial complex, or the student debt industry writing the law that covers itself... it's a troubling reality of "big govenment".
However at some point, the party representing the conservative movement (i.e., the Republicans) completely abandoned this pretense, instead becoming baldly corporatist. Everybody gets their hands dirty (post Citizens United, how can you not?) but the Republicans don't even pay lip service to that idea any more. The platform is more or less what's good for big companies must be good for America. It raises employment after all!
In that world, the one which we live in, the progressive movement (ie, the Democrats) starts to seem actually anti-corporate by comparison. Of course they have tons of their own issues and different corporate patrons, but in comparison they look great. Can you imagine a Republican saying the EPA should regulate CO2?
Another way to look at it - from a progressive point of view, regulatory capture and more powerful monopolies are an undesirable side effect of attempts at regulation and reigning in the power of these companies. From the view of today's conservative, it's a desirable outcome; bigger more powerful companies means a bigger more powerful America with better jobs and fewer shipped overseas. Let them trample individual rights because they'll either do it here or do it there, and if they do it here at least it's good for employment.
The concept of monopolies needs a complete overhaul. When I worked for Steve Jobs we were more focused on differentiators, since a differentiator defined a monopoly. You don't need to control an entire market or even be the major player in a segment - you can charge high prices and extract obscene profit from everyone if you have a good differentiator - especially if it is something they need. In some circles, these are referred to as "effective monopolies".
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[ 3.0 ms ] story [ 152 ms ] threadI'm not sure if me observing this relation is correct, but if it is then politics must be very strong to resist the trend. I sure hope it is.
In fact, I'd go so far as to say that consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State. Whether that be through IP law, limited liability, regulatory capture, or explicit utilization, monopoly in one industry requires the support of the largest monopoly there is: that on coercion, aka the State.
Never have I seen evidence of a lasting consumer-hostile monopoly that existed without the involvement of the State. As far as I can tell, natural monopolies are a myth grown from mistaken economic theory.
No it isn't. This flies in the face of basic economics, and even worse, very much "in your face" evidence we have if you look at nations across the world. Weak governments continually fall victim/enable private entities. Governments that have power to withstand those pressures have regulatory teeth (i.e. big government).
There isn't any model, theoretically or by experience, where in monopolies exist in a system without sufficient state powers. There hasn't ever been a time where monopolies were not directly handled by exercising state powers. You will find monopolies across history and the present that only exist because of the inaction/inability of states to do anything about it. The existence of monopolies is very much in fact a direct symptom of weak/dysfunctional governments.
Read something else besides Ayn Rand.
> No it isn't.
Yes, it is for corporations (monopolies are a more complex question.) Corporations are creations of the state; everything done through them is an exercise of state power.
Legally, yes. Politically, it's more complicated. The banana republics were largely run by the domestic subsidiaries of foreign companies. Just because the subsidiaries were chartered by the state doesn't mean they didn't have more power than the state.
That was an exercise of state power (often quite directly, with implicit or explicit threat, and in some cases direct application, of conventional state power), just not exclusively of the state chartering the local subsidiary, often instead the one chartering the parent.
EDIT: But there is the point that, especially in a weaker government, the private power of people (foreign or not, individual or corporate themselves) that own a corporation may be more relevant than government power in determining the power of that corporation; that's not really about the power of corporations as such, though.
In these cases, the centers of power co-mingle. See Korea's chaebols; the House of Saud relative to Saudi Aramco and the state of Saudi Arabia; or Vatican City's relationship with the Holy See and Catholic Church. TL; DR Rising state power doesn't mean rising corporate power. In many arenas, the two compete.
I'm not immediately seeing the distinction you're trying to draw here, given the topic-can you elaborate on this a bit so that I can possibly understand your position a bit more?
Corporations are legal entities. For a legal entity to have meaning, it must be based on a set of laws. The state creates and administers laws. Therefore, corporations are a creature of the state. Theoretically, the state has unlimited power to create, destroy and manipulate corporations to its will.
In reality, it's more complicated. Just because someone has a legal right doesn't mean they have the political power to exercise it. When President Miguel R. Dávila of Honduras attempted to exercise state power over the Cuyamel Fruit Company, the latter raised a mercenary army and staged a coup d'état [1]. There are numerous other examples of private corporations running pet states for their own benefit.
Once you rise to the level of discussing sovereign power, the distinction between a state and a corporation becomes meaningless. What matters is power--how it's organized is something of a convenience. (For example, try drawing neat lines between the Saudi state, the House of Saud and Saudi Aramco. Or between Vatican City, the Holy See and the Catholic Church.) We're nowhere near that point in America--the federal government could fine into ruin, jail the leadership of or break up any company on earth.
This meme of states always having more power than corporations because the latter is a legal creature of the former is overly simplistic. It similarly doesn't follow that a strong state means strong corporations. In many arenas, states compete for power with corporations. Teddy Roosevelt taking on the robber barons required a strong state; in contrast, Korea is an example of a weak state relative to its corporations.
[1] https://en.wikipedia.org/wiki/Banana_republic#Honduras
Dictatorships are monopolies.
> by experience.
I think you meant historically. What ever did you mean by "theoretically"? Theory is less useful if it doesn't match practice anyway.
And?
>I think you meant historically.
I don't know what you think adding that adjective is going to change, but sure.
>What ever did you mean by "theoretically"?
I meant in theory.
I'm interested in an example of an entire country run by a private entity that was not a dictatorship. It doesn't help that the terms "run" and "private entity" vary from person to person, but something akin to the HEIC - https://en.wikipedia.org/wiki/Company_rule_in_India is what was conjured when talking about private entity rule.
> I don't know what you think adding that adjective is going to change, but sure.
I'm implying no readers/posters have "experience" as stated. The adjective is a clarification, in the case that there was something missed from the strange phrasing.
According to microeconomic theory, a natural unprotected monopoly has to operate at a different price point than a legally protected monopoly, because attempting to operate at that point invites new firms to enter and attempt to unseat the incumbent. It therefore follows that every natural monopolist will attempt to seek legal protection for their monopoly, and would be willing to pay up to the marginal amount of profit between the price points of natural and protected monopoly in order to acquire or retain that protection. Where the legal framework is not available, the monopolist firm can just hire a brute squad to take out upstart competitors.
So because there is a real economic difference between protected monopoly and natural competitive monopoly, the mere possibility of protected monopoly is a source of political corruption. And once corruption has taken root, every natural monopoly can then invest in its own protection, even where such protection might not be needed, because protected monopolies can charge higher prices, which is all (economic) profit.
But why keep a war chest, when you could use the same funds to greater effect by buying political protection and distributing the remainder to the owners?
While it is possible to effectively protect a monopoly without help, appropriating the machinery of the state where possible is much more efficient. As I mentioned previously, where the state cannot be used, the company could hire a gang to burn down competitor capital more cheaply than trying to duke it out in a fair fight on the open market.
If you're DeBeers, and someone opens a diamond mine that threatens your cartel in a place with little law enforcement, your carrot is a buyout offer, and your stick is murdering key personnel and destroying vital equipment using "security contractors". You don't need to lower prices, if you can make the new guy go bankrupt without ever bringing anything to market.
Would DeBeers monopoly on diamonds count as not backed by a state? Reading their history, it seems like rhodes got lucky and reinvested.
The fact is that diamond supply has been under the control of warlords and other statist factions for a long time. I'd say that counts.
Yeah, this is more an example of monopolies naturally eroding. DeBeers held prices above equilibrium, and other players entered the market and now they don't have a stranglehold on it. (The extent of their hold on it was played up by journalists anyway...)
It doesn't necessarily disprove your correlation, but its food for thought.
Those monopolies either weren't bad for consumers, or were consequences of government action.
Note that anybody could have built a competing railroad... but it hadn't happened.
The Central Pacific — which was built by the “Big Four” of California, on federal subsidies — was the railroad which was guilty of all the evils popularly held against railroads. For almost thirty years, the Central Pacific controlled California, held a monopoly, and permitted no competitor to enter the state. It charged disastrous rates, changed them every year, and took virtually the entire profit of the California farmers or shippers, who had no other railroad to turn to. What made this possible? It was done through the power of the California legislature. The Big Four controlled the legislature and held the state closed to competitors by legal restrictions—such as, for instance, a legislative act which gave the Big Four exclusive control of the entire coastline of California and forbade any other railroad to enter any port. During these thirty years, many attempts were made by private interests to build competing railroads in California and break the monopoly of the Central Pacific. These attempts were defeated—not by methods of free trade and free competition, but by legislative action.
This thirty-year monopoly of the Big Four and the practices in which they engaged are always cited as an example of the evils of big business and free enterprise. Yet the Big Four were not free enterprisers; they were not businessmen who had achieved power by means of unregulated trade. They were typical representatives of what is now called a mixed economy. They achieved power by legislative intervention in business; none of their abuses would have been possible in a free, unregulated economy.
The same Central Pacific is notorious for a land deal which led to the dispossession of farmers and to bloody riots in the late 1870’s. This is the incident which served as the basis for the anti-business novel, The Octopus, by Frank Norris, the incident which caused great public indignation and led to hatred of all railroads and of all big business. But this deal involved land given to the Big Four by the government—and the subsequent injustice was made possible only by legislative and judicial assistance. Yet it was not government intervention in business that took the blame, it was business.
At the other side of the scale, the railroad that had the cleanest history, was most efficiently built in the most difficult circumstances, and was responsible, single-handed, for the development of the entire American Northwest, was the Great Northern, built by J. J. Hill without any federal help whatever. Yet Hill was persecuted by the government all his life—under the Sherman Act, for being a monopolist (!)."
From the chapter "NOTES ON THE HISTORY OF AMERICAN FREE ENTERPRISE"
- www.amazon.co.uk/Capitalism-Ideal-Ayn-Rand-ebook/dp/B002OSXD6E/
Historical evidence of the stated events mentioned in the excerpt could be found on
- https://en.wikipedia.org/wiki/History_of_the_Southern_Pacifi...
- https://en.wikipedia.org/wiki/Central_Pacific_Railroad
- https://en.wikipedia.org/wiki/Great_Northern_Railway_(U.S.)
And the GN wasn't single-handedly responsible for the development of the American Northwest. The NP was there first, for one thing.
The text you quoted seems to be reading history quite selectively.
I disagree, not with your premise but with this conclusion, because there's also little evidence of monopolies that broke down without involvement from the state. One also has to consider industries and states are all different.
In a country like the US with a codified anti-monopoly law, yeah, you need collusion with the state to turn the blind eye. But precisely cause this anti-monopoly law exists, it's that monopolies HAVE been broken down, by the state.
There's industries like software where a random developer can create something that grows into a huge corporation, or a OSS project that completely changes the industry, etc. because the cost of entry is so low. But there's also industries that are ridiculously hard to get into and require massive investments that only other big companies can make. The free market IS rich-gets-richer territory.
That's not evidence that anti-trust laws are necessary.
> monopolies HAVE been broken down
My premise is that those monopolies existed as a result of state involvement in the first place.
You can't use the existence of anti-trust law as evidence that it's necessary. You must give evidence that monopolies which existed before anti-trust were bad for consumers. You must also show that those monopolies weren't created by other government actions (the solution in those cases would be to just reverse such government action, not anti-trust).
> ridiculously hard to get into and require massive investments that only other big companies can make
The capital barrier-to-entry argument is exactly what I was referring to by "mistaken economic theory". Competition doesn't just stop happening because it's expensive. You gave the solution yourself: cross-industry competition. Capital gains from one industry flow into competition in others.
Only in a situation where one company controlled a majority of the industries in the economy would preventing competition would possible. And such a firm would be hugely inefficient.
> free market IS rich-gets-richer territory
Getting richer requires risk. Risk is often rewarded, but risk goes both ways. Also, there's no evidence that the free market is any worse in this aspect than other systems.
You think this is "your" premise but in fact its the dominant ideological belief of anti-trust enforcement since the Reagan administration.
This dogma is WHY we are in such a bad straight with companies with aggressive monopoly power in market after market (it extends FAR beyond tech).
Libertarian'ish ideas like yours are in fact the consensus reality in public policy.
I don't care about just anti-trust. The entire bureaucracy of the regulatory state affects the competition throughout the economy.
https://www.yalelawjournal.org/note/amazons-antitrust-parado...
For bonus points -
Please list a successful libertarian society - contemporary or historical.
In fact you can't. That because libertarianism is a type of utopianism. The society you aspire to can't exist with actual human beings in it.
This is one of the things that is really annoying about economics. Because the result of economics depends on money, even the simplest most obvious things will be disputed. In physics nobody will seriously say that gravity on Earth makes things fly up, but boy in economics there will be an endless supply of serious scholars writing books and articles and earnestly arguing on TV shows that up is down and down is up.
Because of course if you convince people that up is down and down is up in economics, you can get really rich. If you can convince the public that there is no such thing as a natural monopoly, there will still be natural monopolies but they won't be treated as such by the government, and then you have a license to print money.
For example, if there was no regulation of water utilities, anyone could just put a big tank on their property (bought from anywhere) and hire any number of water supply companies to come fill it. To the best of my knowledge this isn't legal due to numerous laws and regulations.
I've been to places where the government doesn't or can't regulate water delivery and perhaps not coincidentally, you also can't drink the water.
Same applies to septic.
It's probably also going to be dependent on the town (presumably) whether you have to pay for a hookup if it becomes available.
The water example you gave is an example of the government proactively monopolizing such utilities. It's exactly what I was talking about.
Never have I seen evidence of water, power, etc naturally monopolizing and being hostile to consumers. Firms just can't keep out competition without state intervention.
If there isn't then you would have to rethink your theories don't you.
The fact of the matter is that there is such a thing as a natural monopoly and just a cursory examination of the facts on the ground and the history of the last 150 years or so will prove it.
Not really
> Is there any place where I can buy a house with five different independent water delivery and sewage removal systems attached to it?
I never claimed that it exists. I claimed it was possible. A thing doesn't need to exist to be possible.
> The fact of the matter is that there is such a thing as a natural monopoly
Name some, then. Show me the evidence of all these natural monopolies which cropped up on their own, taking advantage of consumers, and resulting in the necessity of making them state utilities.
http://file.scirp.org/pdf/JWARP20120700002_74310948.pdf
I think two responses to this would be a) that sounds like terrible public and private provision, and b) the competing water providers don’t all use pipes — they use boreholes, tankers, and rainwater collection, so they don’t count. But that’s probably how competition against an apparent natural monopoly would work: what might undermine Comcast, say, isn’t another cable company digging up the road, but a wireless broadband provider, or some technological alternative that circumvent the apparent advantages of the monopolist.
And you ignored hristov's challenge. He wanted evidence (though phrased in a way that implied presenting it was impossible), and you responded with argument. Produce the evidence: Where in the world are there no government regulations on water companies, and it resulted in five companies offering service to each house? Where? Show us the data. Without that, you have argument, but the real world contradicts you...
I don't need to give evidence. I'm not the one advocating for government action, I support inaction.
Look, theory that does not apply in the real world is meaningless. And in the real world monopoly’s exist without government backing, making your argument invalid. That’s perfectly ok, but now it’s time for you to realize you made a false argument and think of some new idea of how things operate.
When was that? He never named a bunch of natural monopolies which exploited consumers.
> in the real world monopoly’s exist without government backing
Where is the evidence of this. My original comment clearly stated that I hadn't seen any evidence of consumer-hostile monopolies occurring without government backing. And in this thread, I've yet to see any lists of monopolies period, let alone ones people claimed to be natural.
Large scale water delivery via underground pipes was the example monopoly given. That's literally a list of 1,000+ monopolies.
> The water example you gave is an example of the government proactively monopolizing such utilities.
Every water utility I know of is heavily regulated by local governments. Why? I don't know. I've never seen any evidence that such regulations were reactive in nature. But that fact of reality is not evidence that water delivery is an industry which will naturally monopolize to a point at which it is harmful to consumers.
This comes from the fact their are zero known counter examples going back thousands of years, worldwide.
Come to Florida and checkout FPL post hurricane. They are pretty notorious for restoring power to wealthy neighborhoods first. That’s pretty hostile. Otherwise I think most agree they have a difficult job and seemingly continue to get better in terms of preparedness and restoration in these events.
Going to the state intervention and water pipes as an example, even if the state said anyone can join in and compete whenever they want, it begs the question of how that would be possible without the state being involved. At any given point tom, dick or Harry want to start a water company the publi roads get ripped up yet again to lay pipe. Do Tom, dick and Harry all get to rip up my yard and connect to my home without my consent? If connections aren’t done all at once, do public roads get ripped up for every home that wants water connection from a new supplier?
The NFL May be such an example of a monopoly (according to the courts) that doesn’t rely on state intervention, but good luck building your own stadium or contracting to use theirs any given Sunday. Are the hostile to consumers? I suppose that question is debatable based on your definition, in the case of my local team they price out consumers and have record low attendance and didn’t allow competitors to use their stadiums (USFL) to the detriment of football fans who wanted alternative leagues.
It looks to me like FPL is a utility heavily regulated in its rates and operation by the Florida state government. Seems like a lot of government involvement to me.
> Going to the state intervention and water pipes as an example, even if the state said anyone can join in and compete whenever they want, it begs the question of how that would be possible without the state being involved.
The roads could be built to facilitate expansion and competition. Roads could be avoided altogether through technology like directional drilling or tunneling. Competitors could get started by servicing new development first, then expanding into existing areas.
As it stands, existing cities were designed with centralized utilities in mind. It makes it hard to monkey patch competition on top.
> Do Tom, dick and Harry all get to rip up my yard and connect to my home without my consent?
They shouldn't, but utilities use eminent domain all the time.
> public roads get ripped up for every home that wants water connection from a new supplier?
I don't think roads should be public either, but that's for another discussion.
> The NFL May be such an example of a monopoly
Talk about a bad example. The NFL gets all sorts of subsidies including cities building their stadiums for them! The military uses the NFL as a main medium for advertising.
I don’t think you can just imagine some magical road that allows for unlimited pipes and electric to run through it that just accommodates more competition without real hostility to consumers.
The military doesn’t “use” stadiums they form partnerships with the NFL and pay to advertise...the military isn’t helping protect the NFL monopoly the way OP says. And not all stadiums are build by the cities or tax payer funds. But in my case they did, admittedly, but again it can be argued they are hosilte (pricing out the local fans, while the stadium sits half empty).
I think you missed the part about OP claiming these State backed monopolies aren’t hostile to consumers (or I completely misunderstood this part of the post)...as your post seems to concur with mine, they are sometime hostile.
Which OP are you referring to?
> As you say if we open up water to competition, as many as possible can immeenient domain a pipe into my house. I could have 1,000 water pipes from 1,000 companies sticking out of my wall and I have no say.. that seems hostile.
I don't think that would actually happen of course. Nor do I think eminent domain is a valid power of the State. My point was that this already happens. I think a much better system could spontaneously exist when the market is involved. An example is given by WalterBright: https://news.ycombinator.com/item?id=18536896
> I don’t think you can just imagine some magical road that allows for unlimited pipes and electric to run through it that just accommodates more competition without real hostility to consumers.
Obviously, scarcity is a thing. Unlimited competition isn't possible. I'd say 2-6 competitors is about right, depending on your situation.
> The military doesn’t “use” stadiums they form partnerships with the NFL and pay to advertise...the military isn’t helping protect the NFL monopoly the way OP says.
My point was that the military is a large source of NFL funding, but I shouldn't have even brought that up. It's entirely unnecessary, because the NFL isn't a monopoly. Sports entertainment is a super competitive arena, with multiple sports and multiple levels per sport, including college football.
> And not all stadiums are build by the cities or tax payer funds.
Sure, but regardless my point that they get huge subsidies from governments stands.
> missed the part about OP claiming these State backed monopolies aren’t hostile to consumers
I'm not sure who you're referring to by OP, but my position is that state-backed monopolies are the only ones which can be hostile to consumers. Otherwise, the hostility is just opportunity for competitors.
I don't know what the interconnection between them was like.
But I can say that in the days before the internet achieved dominance, the various privately operated networks provided gateways so one could connect to the next. In fact, the term "inter"net came from connecting existing networks together.
Lastly, it's not necessary for competing water companies to run parallel sets of water pipes to your home. Your neighborhood may have a communal pipe, and then water companies compete to connect to that pipe. There may be pipes connecting various other pipes. The water companies compete to fill those pipes, or rent access to those pipes to deliver the water to individual subscribers.
I.e. a free market water system need not at all look like the current monopoly utility system.
I’m going from pure memory so correct if I’m wrong, but the only cross continental railroad that didn’t immediately go bust after finish was the only one not being paid by the mile by the government.
AT&T creates the first phone network. No one can use their network because it's their property, and the phones installed in people's homes are also owned by AT&T, rented by consumers. How is competition going to appear?
I suppose you could say the state is enforcing property laws, but even in the absence of functional governments people often prevent theft (there was a time before police, after all).
It probably would have happened like this:
- phone is invented
- consumers want it
- AT&T starts in one city, other companies start up in other cities
- eventually people want to speak between cities
- different phone companies start networking with each other to provide that service
- AT&T has old infrastructure in the city where they started and consumers aren't happy, so one of AT&Ts competitors goes into that city and starts setting up a newer network that's higher quality
and so on, and so forth
Regardless, you see the exact same thing happen with railroads, with them holding monopolies on the rail lines they built (sometimes with incompatible rail).
" Around 1917, the idea that everyone in the country should have phone service and that the government should promote that began being discussed in government. AT&T agreed, saying in a 1917 annual report: "A combination of like activities under proper control and regulation, the service to the public would be better, more progressive, efficient, and economical than competitive systems." In 1918 the federal government nationalized the entire telecommunications industry, with national security as the stated intent. Rates were regulated so that customers in large cities would pay higher rates to subsidize those in more remote areas. Vail was appointed to manage the telephone system with AT&T being paid a percentage of the telephone revenues. "
https://en.wikipedia.org/wiki/History_of_AT%26T#Monopoly
Yet, despite the entire Western world being at the tail end of a decades-long process of deregulation, corporations are bigger than ever. That's not because of the State, it's because of technology. Amazon, Microsoft, Apple, Google--all are the result of massive economies of scale enabled by technology. Amazon isn't monopolizing retail because the State is giving it special privileges. It is doing so because smaller retailers cannot compete with Amazon's nationwide logistical infrastructure and footprint.
I think any liability is tied to the power of the State.
You are, after all, being found liable through the legal process (probably the courts.)
On your last point, one natural monopoly that thrived completely independent of any States, is the monopoly of force exerted by Warlords over their domains.
Given the choice between Warlords and a State Government, I chose a State Government, even with all its other problems. Hopefully the government is reasonably democratic, and a nation of laws.
This is a creation of the state. Without LL, destructive corporate actions could result in suits against the shareholders or at least the operators of the company. Shareholders would like to limit the risk they take, so they would be likely to pressure firms to act more carefully. With LL, firms can take whatever risk they want, and the only consequences stockholders see is if the stock price of the company falls.
In addition to that, the idea that a state arises to prevent warlords is fantasy. In reality, warlords evolve to become the state as they legitimize their position as rulers.
That article is awful. Truly terrible.
But it's not worth my time pulling it apart, if you're not interested in genuine Dialog.
Let me know.
Just because it's true that certain regulations create economic minimums that prevent new entrants into the market doesn't mean that this is the sole thing that causes monopolies, as immense vertical integration can lower costs to the point where only the largest organizations can provide services at said lowest margin. The problem only becomes bigger once they prevent new entrants, and begin to raise prices since there is no competition.
Once this monopoly on coercion is secured before the state, the state's only responsibility regarding the markets comes down to enforcing property rights and establishing a system of courts and judical practices to resolve disputes between free agents in the market.
If such a government later decides to enter the market through nationalising industries, and/or establishing state-controlled for-profit organisations, and/or rationing/licensing entries to individual professions, it starts exercising coercion in the field of voluntarily trading agents, thus skewing competition in favor of those who is willing and is able to make deals with policy-makers. And once there's a regulation in favor of one of the players in the market, there's hardly any way for their competitors to outperform them, but to go to other policy-makers that might help to pass another set of regulations that would potentially harm the first player. And this is how monopolies are created in the first place - in the end, there's going to be a dominant player that has used all the opportunities to squeeze competition from the market through various regulations that work handy for their particular business, and at the same time prevent any other new player to enter the competition, even if they have enough money for it - precisely because they have to comply with the government regulations that already benefit the monopoly.
> The power of monopolies and indeed of corporations in general is directly tied to the power of the State.
That's a big claim with zero evidence. It would certainly seem that the lack of strong national government and insufficient power at the state level was what lead to powerful corporations/trusts like Standard Oil.
> It's no surprise to those who understand this that, as the federal government has grown in size, strength, and scope, corporations have followed.
My understanding of the Gilded Age was that corporations were only stopped because laws were passed at the federal level after monopolies had already become a problem and caused pushback from voters. eg.
> In 1890, Congress passed the Sherman Antitrust Act, which made it illegal to monopolize or restrain (or attempt to do so) interstate commerce. On the basis of this Act, the United States filed a suit against five sugar manufacturing companies to keep them from merging after one firm purchased the stock of the other four (E.C. Knight Co. was one of the four firms bought out). The American Sugar Refining Company had gained control over 98 percent of the sugar refining business in the United States in this way and was considered a monopoly. ( http://landmarkcases.org/en/Page/401/How_Interpretation_of_t... )
Further, I don't think there was a notable increase of federal government until the Depression and New Deal era, followed by significant military expansion before, during and after WW2. Arguably there was major growth in the 60s and 70s (HUD, DoT, DoE, DoEd, EPA, etc.) But I feel it's fairly clear that government size and corporate size change largely independently.
> In fact, I'd go so far as to say that consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State.
You're moving the goalposts here, changing from discussions of monopolies in general to "consumer-hostile" monopolies. Further, I'd expect you're still wrong even here. Consumers might accept hostile monopoly situations if there's simply no alternative, ie, places where it's not cost effective for a company to build out to a rural location. Even if the service is bad for your power/telecom situation in some rural location, there simply might not be an alternative, aside from not getting that service.
> As far as I can tell, natural monopolies are a myth grown from mistaken economic theory.
I don't really know what to say to this. If you can look at the mechanics of road, power and telecom construction/distribution and say that natural monopolies don't exist, then clearly we must have wildly different understandings of the term.
I'm a bit suspicious that the real advantage of large companies is more assets, more faith and better access to credit. From an economic perspective, I can recall many mergers and acquisitions that basically failed to make money. But on the other hand, maybe a good merger is a very low key event, I can name a few in tech specifically that worked - but usually that is because the network effects of online businesses are absurdly important.
[0] https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_Un...
[1] https://en.wikipedia.org/wiki/List_of_largest_mergers_and_ac...
My educated guess would be that something happened that caused value priced tires manufactured in Asia to suddenly increase in quality and capture some market share from buyers who previously shunned them but I'm really not familiar enough with the industry to put any confidence behind that claim.
So, foreign competition?
I disagree that Progressive Movement of today, is reflective of
> "America was born as “a nation of farmers and small-town entrepreneurs,”
Completely opposite, I think, what is called Progressive movement today -- is completely Pro-Monopoly.
It is easier for a monopoly to lobby Federal government, it is easier for a monopoly to litigate complex issues, it is easier for a monopoly to control opinion of the masses.
Therefore, it is absolutely, more desirable for monopolies to have more power concentrated within fewer individuals -- and that's done by making Federal government more and more powerful.
Powerful monopolies a fuel for political corruption, by means adapting the 'veil of political-correctness' that hides bribery and money-laundry (through well known means of: 'book signing', ' paid speeches', and 'charitable foundations')
So the self-feeding, snow-balling cycle of power is 'larger federal government' <--> 'more powerful monopolies'
And today's progressive movement' is 'larger federal government' type of ideas.
However at some point, the party representing the conservative movement (i.e., the Republicans) completely abandoned this pretense, instead becoming baldly corporatist. Everybody gets their hands dirty (post Citizens United, how can you not?) but the Republicans don't even pay lip service to that idea any more. The platform is more or less what's good for big companies must be good for America. It raises employment after all!
In that world, the one which we live in, the progressive movement (ie, the Democrats) starts to seem actually anti-corporate by comparison. Of course they have tons of their own issues and different corporate patrons, but in comparison they look great. Can you imagine a Republican saying the EPA should regulate CO2?
Another way to look at it - from a progressive point of view, regulatory capture and more powerful monopolies are an undesirable side effect of attempts at regulation and reigning in the power of these companies. From the view of today's conservative, it's a desirable outcome; bigger more powerful companies means a bigger more powerful America with better jobs and fewer shipped overseas. Let them trample individual rights because they'll either do it here or do it there, and if they do it here at least it's good for employment.
Large mega corps can borrow money at extremely low rates. Because of this infinite access to capital, they can more easily acquire their competition.
Even if a company uses equity to purchase a competitor, they can counteract the dilution with financed stock buy backs.
Money may be too cheap for big companies and too scarce for small companies.