Yes, and governments benefit greatly from monopolies in the form of control. Consider any heavily fragmented market with several small players where control is decentralized. It’s more difficult for governments to coordinate with all these smaller players to get stuff done, like wiretapping or getting data off a server. It’s much easier for a government to sanction monopolies so they can go to a few, more powerful players, to accomplish the goal of control.
The author specifically cites large tech companies (Google, Amazon, Facebook) as examples of monopolies that have formed due to lack of state intervention.
He also says bad rules have led to monopolies as well (through regulatory capture, lobbying, etc.).
So bad things (like monopolies) can happen due to the state or due to lack of the state. Maybe the problem here isn't the state at all.
I believe overreaching IP protection laws, specifically in regards to patents and copyright are in large to blame for creation of these monopolies. In tech, one of the largest hurdles is patent wars, where the player with the biggest pockets and arsenal screws over little players just about all the time. So the assertion that the lack of state intervention is to blame for formation of these monopolies is perhaps true, but in a different light.
IP laws? The algorithm behind PageRank was published in Larry and Sergey's dissertation. Amazon started as an online bookstore. Facebook was not the first social network by a long shot.
I think IP laws and patent wars are a lot more salient when it comes to hardware (like Apple, Samsung, Motorola, etc), less so for those 3 examples.
While I think copyright was a very relevant law when selling boxed products, it's less clear that copyright is the relevant law in the age of SaaS. I think trade secrets law is much more relevant these days.
And in any case, many tech giants exist around natural monopolies, either in network effects, either obvious ones, or those from two sided marketplaces or simply economies of scale.
> many tech giants exist around natural monopolies, either in network effects
Yes, network effect is a huge part of the problem. So much in tech requires user adoption, and typically users won't adopt until others adopt, thus creating chicken and egg problem. Overcoming the network effect is extremely difficult, as we've seen from competing platforms trying to unseat facebook and twitter (tho network effect is not limited to social networks, but they are the most obvious examples)
What copyright and patent benefits does Facebook enjoy that allows it to be the dominant social network? Or Google that allows it to be the dominant search engine, video platform, and email platform?
China has had very little protection of IP, and until recently the government never intervened in the IT industry, yet monopolies like Baidu, Alibaba and Tencent still arise.
In fact, many people in China attributes Tencent's growth to its shameless copying of other people and companies' work and products. If that kind of view is true, than China's monopoly comes out because of lack of IP protection.
The largest, most monopolistic companies in china are deeply wedded to the communist party and enjoy the protections afforded by this authoritarian regime.
I would say it can be, but more importantly, it doesn't have to be:
> Well okay, there's plenty to blame the government about, but the government is the one institution that people can change... the one institution that you can affect without institutional change. That's exactly why all the anger and fear has been directed at the government. The government has a defect - it's potentially democratic. Corporations have no defect - they're pure tyrannies. So therefore you want to keep corporations invisible, and focus all anger on the government.
-- Noam Chomsky
And even if consumers are to be able to "vote with their wallets", if workers are supposed to to have a choice of employer and certain protections, there needs to be some regulation that goes for everybody, and is enforced for everybody. It's not going to happen out of generosity, or consumers researching everything on their own. How would you even make sure the food you eat is not toxic? Not that regulations make it 100% safe, but they can be a lot more efficient and very helpful, just like they can be horrible and backwards.
I really think a major obstacle is that people see government as something that acts on them, instead of something through which they ideally would act together as equals and improve their lot in a way that transcends the scope and lifespan of the individual. Yes, there is a lot of corruption, but the thing is, that's something one can get to work at -- when it comes to (some) corporations, it's too often consumers talking about them amongst each other, "hoping" things will change as they often get worse.
> People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
-- Adam Smith
When drug dealers or street gangs carve up territory, you might call that a form of local monopoly, and it comes from people themselves, no state intervention required. Usurping parts of the government for that purpose is something bigger gangs or corporations may do (also see "War is a Racket"), but it's not technically required I would say.
A gang (afaict) is a little bit like a government in that it enforces things through its own capability for violence (or through its own violence), though I'm not sure quite how important that similarity is.
If something is almost a government, but not quite, and creates a monopoly, that would I suppose technically be a counterexample to the claim that monopolies are all caused by governments. However, while it would demonstrate the claim to be false, it wouldn't demonstrate that it is far from being true.
However, I wouldn't claim that all monopolies are all from government or nearly from government. I probably wouldn't even claim that almost all monopolies are.
A government is a gang that managed to establish a monopoly on violence in some territory (which it then calls its jurisdiction). Of course, it then evolves from there, and we have democracies etc, but fundamentally that is the root of any government.
Mao gave a very concise yet accurate description of this state of affairs: "political power grows out of the barrel of a gun".
I was aiming at an intentionally more modest/mild version of that sort of idea.
(I am currently too much of a statist to really reject the idea of a state being "legitimate" , in a way that probably distinguishes it from gangs in general.)
You just equate establishing a monopoly on violence with using violence, and you say "monopoly on violence" as if that was even more violent than everybody being violent against anybody whenever they feel like it. Like there's always someone subjugating else, never groups giving themselves rules they follow for the protection of both the group and the individuals. You know, the root of our ability to write things on the internet, instead of just screaming gutturally in the mud with rats in our hair, and other things.
And Mao didn't know shit. Violence is for those who do not have power.
> All political institutions are manifestations and materializations of power; they petrify and decay as soon as the living power of the people ceases to uphold them.
Try disobeying any law, and then resisting any agent of state that comes to apprehend you, and you'll see just how right Mao was.
Yes, in practice, it's threat of violence rather than actual violence doing the trick most of the time. But the reason why that threat is respected is precisely because the violence behind it is very real, and we all know it.
And this all has nothing to do with majority rule etc. A gang that has most neighborhood residents as its members is still a gang. And when gangs do get formed "for protection of both the group and the individuals", they still need to use violence (or threat of violence) towards that goal, oppressing those that would oppress them otherwise. So you might end up with a "good guy with a gun", but it's still a guy with a gun. Remove them, and government becomes an advisory council, making recommendations rather than laws.
> Try disobeying any law, and then resisting any agent of state that comes to apprehend you, and you'll see just how right Mao was.
I don't think tried to understand the distinction between power and violence that Arendt makes.
How does potentially getting arrested for breaking a law prove that political power comes from violence?
> Yes, in practice, it's threat of violence rather than actual violence doing the trick most of the time. But the reason why that threat is respected is precisely because the violence behind it is very real, and we all know it.
It can just as well be a mutual and voluntary agreement. It's not like people who don't rape or murder usually all just refrain from that because it's illegal and would be met with violence, so I would argue the opposite is also true, we made certain things illegal so we can deal with it in a structured manner where the laws ideally apply equally to each. Just like children don't just obey or imitate adults out of fear, just like many open source projects are successful without any threats.
The "violence" in "monopoly on violence" isn't any more sinister than the "road safety regulation" in "monopoly on road safety regulation", at least insofar every affected individuum is part of the entity that has said monopoly.
> So you might end up with a "good guy with a gun", but it's still a guy with a gun.
Yes, and? You just keep stating that as if it means something. What is your point, in relation to my original point of government being ours in principle, and being changeable? It's not like that there is no gun if you don't have a "good guy with a gun", that gun is a given, so why even bring it up?
> It can just as well be a mutual and voluntary agreement.
If it were a completely mutual and voluntary agreement, then you wouldn't need a government as such, or laws, or any enforcement thereof. And that would be an anarchist commune, not a state.
Any place that has laws, and penalties for breaking those laws, has an implicit threat of violence against law-breakers - it's really that simple. And if it is making that threat at all, it's because it expects the law to be broken by some.
> The "violence" in "monopoly on violence" isn't any more sinister
I didn't say anything about it being sinister in principle. It's only sinister if it causes more violence than it prevents.
> What is your point, in relation to my original point of government being ours in principle, and being changeable?
I was specifically responding to another person saying that "a gang is a little bit like government", further expanding on that. It was not directed at you or your comment.
It's hard to not mention and ascribe some degree of responsibility to the government. This is especially true of current events books written with a majoritarian viewpoint, which believes that the government has a strong role to play in the market. The only writers/journalists/etc that I've seen advocate for a non-state oriented POV are Austrian libertarians, and I have encountered very few of them.
Peter Thiel has made similar remarks. He said that IT has been only area to see major progress in recent decades, in contrast to e.g. transportation, because it is relatively unregulated. (Hence Twitter rather than flying cars.) Of course, Thiel also holds the view that monopolies are often a good thing.
Software is unlike any prior field because it's so... clean.
Energy, agriculture, transportation - all built on the unintuitive building blocks of physics, and our approximate understanding of the universe. The clean abstraction layers and separation of concerns in IT is unparalleled, with powerful positive feedback begetting further innovations.
Applying advances to other fields also grew economies of scale rapidly, supporting innovation while barriers to entry were low. We're now approaching the end to low-hanging fruit and maturing into the consolidation phase, as further innovation requires greater capital and time commitment.
just because software exists on layer(s) of abstraction means nothing. It still requires hardware to run on - and still adheres to the laws of physics. I don't take much stock in your clean argument at all.
I'm sure that it's all the lack of regulation and not the fact that there wasn't any software more than a few decades ago whereas cars and planes are twice as old as electronic computers.
Thiel's monopoly comments seem to provoke a lot of confusion; they make more sense if you replace the word "monopoly" with "a position in the market such that customers are willing to pay significantly more for what you sell than for their best available alternative." Some examples:
* Apple is able to charge a premium on iPhones relative to the best non-Apple alternatives because a lot of people are willing to pay it. (Do they have a monopoly on smartphones? Definitely not; there are loads of companies selling good phones. But they have a monopoly on their smartphones.)
* Fast food joints are forced into heated low-margin competition with each other because they're pretty interchangeable. If McDonald's starts charging too much, people will just shrug and buy basically the same food from Burger King.
* Classic monopolies are extreme cases. At one point if you wanted telephone service in the US you either paid whatever AT&T was charging or you didn't get telephone service.
When people hear Thiel's comments they tend to think of classic monopolies, but most of the examples he gives are of companies that have plenty of competitors -- and a durable advantage that they can use to maintain decent profits margins without customers jumping ship.
There are loads of products that I would consider classical monopolies in tech. E.g. Youtube/Facebook/Android/Whatsapp.
Sure you could use one of the alternatives, but then you won't get the content/people/apps/audience/... that are on those large platforms, which makes them basically useless.
For what it's worth, if a private company held a monopoly on the roads in this country I would bet dollars to donuts that we'd have flying cars by now.
I think about this often. I imagine self-driving cars built on 30 year old tech in which the road drives the car via curbside sensors (much easier problem to solve). I daydream about service reps walking through bumper-to-bumper traffic handing out coupons and apologizing for the unexpected delays.
Pay to drive the premium roads when you’re in a rush, or take the discount lanes with advertising printed along the roadway.
We could have quiet, porous asphalt with better water absorbtion. So many fantasies, I digress.
Come to think of it, I don't understand how Google keeps its near-monopoly on search. It has the users because it can afford to invest more in search quality, because of a near-monopoly on search ads; and advertisers buy those ad clicks because Google has the users. So this loop might seem hard to break.
But what stops an aggregator from offering to put your ad on multiple search engines, so you pay for clicks from Google and whatever other search engines people are using? There may not currently be a lot of extra clicks available that way, but it's more than nothing, and you'd benefit from whatever improved competition might come up, and incidentally give it more resources to improve with and to cut Google's margins to your further benefit.
AFAIK this isn't happening, but why? Is there another moat I don't know of?
The aggregator might lack some targeting options of the native platform, the UI could be different, it would be a new point of failure and I would need to trust my money with the intermediary.
> AFAIK this isn't happening, but why? Is there another moat I don't know of?
Well, Adsense / Analytics is another. Google can track you across the internet, and offer that information to search query bidders. If you don't want to bother spending money advertising to people who read HN, it's achievable. Less so for say, Bing or Yahoo. Being able to target better than other platforms alters your willingness to pay to advertise there vs elsewhere.
I suspect they also have a better grasp of the value of traffic acquisition. They pay a lot of web related tech firms to use their search engine over competitor's. We know the only time they lost a bid for Firefox's search placement was when a former Google executive was working for a competitor. It's not clear whether Marissa brought Yahoo some better insight into the value, or if she just needed to accept a higher risk of overpaying for traffic.
Good points. So, overall, I guess an effective competitor is quite possible (given enough tons of capital and patience), but that capital isn't on offer because it would only yield a "competitive" profit, not a monopoly profit, and these days competition is for losers. (To exaggerate some. And I'm really ignorant about this. Thanks.)
If one thinks the important thing is a dominant position in the relations of production, the effect would be reversed - the tendency to monopoly means more power for the monopoly, means it getting government help. Whether or not there is a "free market", whatever that means, would also be affected by the desires of monopolies.
Markets only exist in the first place because of "government help": without government creating and enforcing property law contract law, and numerous other laws, there would be no markets.
So, like most of what Milton Friedman said, it's a dumb, wrong, and misleading statement.
And of course, monopolies exist quite happily in the libertarian fantasy of version of a free market, because economies of scale and network effects exist.
Trade cannot happen without the threat of violent attack against those who would otherwise freely use particular land or possessions, aka rules, aka law enforcement, aka government.
Trade can happen with any two or more people who have different things (and the things need not even be physical).
Stable markets, on the other hand, require a stable government of some sort to maintain them. And that's what you really need for the economic side of what we would think of as civilization.
> Markets only exist in the first place because of "government help": without government creating and enforcing property law contract law, and numerous other laws, there would be no markets.
We have archaeological evidence that trading networks (and over fairly long distances, at that) existed long before anything we'd recognize as formal contract law was around, and certainly long before anything like international laws and regulations.
Likewise, one of the first things that develops when a government collapses (or, conversely, becomes overly restrictive) is a robust black market.
Contracts can be (and are) made in the absence of government-enforced contract law all the time. The parties to the contract simply develop their own mechanisms for enforcement (which can range from social pressure to outright violence).
Surely you're not trying to argue that drug dealers are likely to sue each other in court when one of them breaks the deal?
> Contracts can be (and are) made in the absence of government-enforced contract law all the time. The parties to the contract simply develop their own mechanisms for enforcement (which can range from social pressure to outright violence).
Agreed, but monopolies are also not uncommon under such conditions. Drug dealers have "turf", for example.
It is true that governments can be complicit or implicated in formation of monopolies, but I personally think the more fundamental problem with the idea of free market is the assumption that consumers afford meaningful consideration and choice.
I believe that people, generally: don't vote with their money for greater good but rather personal utility, by choice or lack of economical standing (A form of The Tragedy of Commons), poorly understand the long term impact of their choices, people’s choice is swayed by deceitful and psychological trickery of targeted advertisement. I am not sure how free market can address this without outside (generally legal or consumer advocacy) intervention.
Hmm, based on your interpretation, it seems like a lot of money could be made by offering people ostensibly free services, while quietly collecting and monetizing their data.
But who knows if your theories about people choosing convenience are accurate...
> people, generally: don't vote with their money for greater good but rather personal convenience
Not personal convenience, but personal benefit--people want to be better off after buying something than they were before. That in itself is a perfectly reasonable thing to want.
There are, generally speaking, two potential problems: (1) people might misjudge whether they will actually be better off (through lack of information or lack of understanding or failure to recognize longer term consequences); (2) people might individually be better off but society as a whole could be net worse off due to externalities (costs not borne by the people making the choices and so not considered by them).
It is true that these problems are unavoidable in a free market. However, outside intervention does not, in general, solve them. In fact it almost always makes it worse, because whoever is making the outside intervention has even less at stake in the choices about what to "vote with money" for than the people making those choices.
I think the best we can do is to try to give people the best tools we can for making their own choices, not trying to dictate those choices by outside intervention.
You're right, personal benefit is a factor too, so I replaced "Convenience" with "Utility" which is more apt and covers both Convenience and Benefit.
> It is true that these problems are unavoidable in a free market. However, outside intervention does not, in general, solve them.
Not convinced. For example, in Australia there exists laws that mandates that retailers either exchange or refund when products are "not fit for purpose" or "faulty", this simple law has eliminated a whole heap of bullshit products that doesn't work because people simply return them.
> For example, in Australia there exists laws that mandates that retailers either exchange or refund when products are "not fit for purpose" or "faulty", this simple law has eliminated a whole heap of bullshit products that doesn't work because people simply return them.
Consider the trade off you're making. Without that law, some retailers will have more generous return policies than others, and the first group will have higher prices (because the policy costs them money). If you prefer that, you patronize one of those retailers, and they don't carry those products because they don't want the returns.
But once you pass the law, the second category of retailers goes away. And they had lower prices, even for the items that weren't garbage.
In your example, the cheap retailers are subsidizing the price of the quality products with the ill-gotten gains from selling the crap products to less-informed customers. Those customers unwittingly waste their money, so that others can buy slightly cheaper products.
The completely free market does not work in practice, because people are not rational, perfectly informed actors. They make non-optimal choices and tend to not learn from them, and they're easily swayed by advertising.
Sensible warranty and returns laws exist because businesses have gotten away with providing lousy quality products for far too long. And consider the longer term effect of sensible consumer protection laws. If a product gets returned too frequently due to quality issues, the seller will stop carrying that item, improving the overall quality of his selection of goods on offer. The manufacturer will wise up and either improve quality or go out of business.
In the EU, any online purchase can be returned no questions asked (in like new condition and original packaging) for 14 days after receiving the item, though you do have to pay the return shipping costs. This has markedly improved the quality of items on offer, because the sellers don't want to carry items that get returned too often, ie. crap products. Prices haven't gone up.
> The completely free market does not work in practice, because people are not rational, perfectly informed actors. They make non-optimal choices and tend to not learn from them, and they're easily swayed by advertising.
I mean, I agree with being being irrational, but I'm not sure that that's the reason that free markets don't work. If you're comparing to government intervention, then you're also comparing to people, after all, and even worse, to people who often make a less-informed decision, because:
1. They're not as personally aware of all the relevant info, since they are removed from the situation.
2. They often care less in general because it doesn't affect them.
3. They often make decisions that tend to stick around long after they are no longer relevant - but unlike biased humans who often don't learn from their mistakes, these actors' mistakes are written into law and can't be changed.
4. They often have different motivations than the irrational people they are supposedly helping.
(Of course, 4 is often the whole point - we as a society have different desires than individual people, and we sometimes want to enshrine those things, even at their expense.)
The only way you're doing better than individual actors is if you're assuming the people creating the laws/regulations are better informed/better educated/smarter or for some other reason can make better decisions (which obviously is sometimes true, but sometimes not).
The main places where "government" provides value, in my opinion, are where there are market failures, or where collective action gives a lot of benefit. And of course, that's assuming a lot of basics are met, like strong rule of law, police force, etc (these could themselves be thought of as collective action).
> The main places where "government" provides value, in my opinion, are where there are market failures, or where collective action gives a lot of benefit.
Unfortunately, even in cases where there is a lot of theoretical benefit to collective action, government intervention rarely, if ever, realizes that benefit--for exactly the reasons #1 through #4 that you give.
I like to use in this context a paraphrase of the old joke about regular expressions: Some people, whenever they see a problem, think "We'll just get the government to fix it." Now they have two problems.
> In your example, the cheap retailers are subsidizing the price of the quality products with the ill-gotten gains from selling the crap products to less-informed customers. Those customers unwittingly waste their money, so that others can buy slightly cheaper products.
Not so. If a retailer is selling garbage, some people may buy it, but those people will promptly figure that out, stop buying those brands and leave them bad reviews. And the retailer has incentives not to carry bad products even if they don't accept returns because getting burned doesn't make for repeat customers.
The cost in forcing returns is that it requires you to buy insurance you may not need, which costs money even if all of the products are functional because people return things for reasons other than defects and the retailer will command a risk premium. If someone buys the wrong product, it costs the retailer money to have to process the original transaction, then the refund, then restock the product at a lower price because it's open box. Someone who knows they won't need to return the product doesn't need that insurance, but you're forcing them to pay a premium to cover it anyway.
Forcing the retailer to accept returns also makes it riskier for them to accept new suppliers into their stores. If the supplier starts providing low quality merchandise, the retailer has to eat the cost of the 10,000 items it has in stock, plus the value of wasted shelf space, plus the cost of processing all the returns -- so they stop buying from upstart suppliers, even if the new supplier would have provided good quality products. Which harms competition and allows the incumbent suppliers to charge higher prices.
> Prices haven't gone up.
There has been inflation rather than deflation, consumer products that used to be 16 ounces are now 10, the percentage share of value that goes to business investors rather than employees or customers (i.e. wealth inequality) has increased, by what metric have prices not gone up?
>"Not so. If a retailer is selling garbage, some people may buy it, but those people will promptly figure that out, stop buying those brands and leave them bad reviews. And the retailer has incentives not to carry bad products even if they don't accept returns because getting burned doesn't make for repeat customers."
Yes, but only those people, there is no shortage of new customers to fleece. Online reviews can (and are) bought and sold, even the supposedly trustworthy review sites such as Trustpilot have been caught manipulating scores, and in some cases (Yelp) hiding reviews until the business in question ponies up for a "partner agreement".
The whole point of a mandatory return period is for consumer protection. A product should be fit for purpose and not break shortly after being taken into use. A warranty period of 6 months to a year ensures that products are fit for purpose. It also discourages the production and sale of disposable junk products, which is a better use of resources and more environmentally sound.
> (2) people might individually be better off but society as a whole could be net worse off due to externalities (costs not borne by the people making the choices and so not considered by them).
I'd add (2a), due to zero-sum games. This is frequent in competitive situations; I buy something (e.g. advertising) to get ahead, and now you have to buy it too just to keep competing. Then you buy more of it, and I have to buy as well. And since effects of each purchase get cancelled out by other party's purchase, everyone is back where they started. In a perfectly abstract way, there's no externality here - though in practice, anything you buy involves some externalities, so you have them here too, in addition to wasting mine and yours and other competitor's money.
It's a trench warfare.
> It is true that these problems are unavoidable in a free market. However, outside intervention does not, in general, solve them. In fact it almost always makes it worse, because whoever is making the outside intervention has even less at stake in the choices about what to "vote with money" for than the people making those choices.
Can't agree with that. Free market by itself is neither willing, nor in a position to, account for externalities. Also, you could group (2), (2a), and couple other similar things under the general label of "coordination problems", i.e. things that look like iterated prisoner's dilemma if you squint. For that, the best solution involves an outside party unilaterally establishing accepted rules of behaviour, forcing cooperation instead of defection.
> I think the best we can do is to try to give people the best tools we can for making their own choices, not trying to dictate those choices by outside intervention.
Again, this is how we get into coordination problems. This solves (1), but really causes (2).
> the best solution involves an outside party unilaterally establishing accepted rules of behaviour, forcing cooperation instead of defection.
This assumes that there is an outside party that (a) knows what the best rules of behavior are, which means it has to know when cooperation is in fact a net benefit; and (b) will in fact enforce those rules of behavior, and not be co-opted into enforcing other rules instead.
History shows that no such outside party ever actually exists.
It'd be interesting to investigate how this relates to tech companies' hiring of politicians, and the 'revolving door' effect between industry and government.
Perhaps Friedman's theory remains completely true, while in reality the separation between the two players has blurred over time. Cui bono?
He was mostly talking of for-pay goods and services. The current trend of offering "free" services, that are anything but, is severely distorting the market. It's exploiting a current gap in consumer knowledge where people are massively undervaluing the literal value of their private information. But in a normal pay-to-play business, the argument is self evident. Either the monopolizer is malicious or benevolent. If they're benevolent then a monopoly doesn't matter. If they're malicious then that means that they're exploiting their market positioning to artificially inflate the prices of their goods/services.
When a company has unreasonably high prices this enables competitors to come in and gain marketshare easily by offering lower prices. And you're definitely right that the company can do things like try to buy out the smaller company, perhaps put pressure on their suppliers, etc. But this is a never ending game since for instance the smaller competitor could then even begin to develop their own supply chain, etc. And a small company getting bought out for some fat paycheck before they even really hit their stride is hardly discouraging to other would-be competitors! So long as the pie and the end of the tunnel is large enough, there will be an incentive to compete against the monopoly.
There is also the innovation issue. Coercive monopolies do not often innovate. Their focus is on profit whereas innovation tends to be focused on competition. This lack of innovation once again offers a big gap in the market for competitors. The aerospace industry vs SpaceX are the best example here. Boeing/Lockheed had a partially government enforced coercive monopoly in a field with greater barriers to entry than practically any 'material' industry. Yet a guy with 'nothing' but a few hundred million and the understanding that something worth on the order of let's say $20 million of material costs should not cost $500 million to build and launch, was able to enter the field and rapidly rise to dominance by working on nothing but innovation and non-monopolistic prices. Boeing/Lockheed by contrast were still so stuck in the past with their MBA style executive leadership that now, many years after the 'threat' of SpaceX has become self evident, that they've still been unable to effectively react.
So to avoid retro-fitting the past to fit a narrative, I expect in the future we'll be able to spin an exact tale of the telecoms industry. Once again another [heavily government enabled] monopoly that's completely failed to innovate and charges unreasonably high prices. Something like the proposed SpaceX constellation of LEO satellites for the purpose of low-cost high-stability internet stands to leave them completely taking over that industry. Of course the failure of Google fiber is an argument to the contrary, but that gets into an entirely different tangent and I think there were many reasons for that failure that lay squarely with Google.
> Why would that be true? Once a company becomes big enough, it has resources to squash competition in various ways.
Notice how most of the squashing methods are government based: Patents, litigation cost of unmeritorious litigation, government-enforced contracts that should not be enforced under any reasonable antitrust rules, regulatory capture, etc.
The main non-governmental one is economies of scale, but that has a hard limit. The monopolist can't extract more from the market than the efficiency it creates by being a monopoly, or it would make it viable for competitors to enter. In an industry with low fixed costs, that doesn't buy you much.
The place where you would actually expect to see monopolies is the "natural monopoly" industries that are dominated by fixed costs. But even there, there's a limit to what the monopoly can do before competitors appear when there aren't government restrictions on entering the market. Starting a neighborhood ISP isn't cheap, but if the incumbent is offering slow service for high prices, it's what would happen, because paying (or even borrowing) $10,000 to invest in a new fast ISP that serves your own home is cheaper than paying more than that amount over time for worse service from the incumbent. But not if the incumbent has laws passed to make that purposely uneconomical or outright prohibited.
Imagine if there were no governments. Big companies could hire mercenaries to enforce their contracts, but small companies would have no means at all to protect themselves.
"Imagine if there were no governments" is a category error. There are always governments, not all of them are formal. Whoever has the most mercenaries can make rules.
The thing that works is to have a coercive force which is primarily used to quell other large coercive forces. So you have a police force that prevents violence etc.
But it needs to be limited in scope, because it has no natural predators. It's always tempting to use the coercive force for <thing> where <thing> is literally anything. Laws are molasses. They have benefits, but they also have costs, and the fact that the costs and benefits apply to separate people makes it much too easy to do net-negative things.
You dont have to imagine, just see what happen in relatively weak governments: Drug cartels, war lords, mafia syndicates, union busting, etc, etc. This is just a hunch but I wouldn't be surprised if the biggest part of actual monopolies is enforced by illegal means.
Then someone would assume that power. Anarchy is not stable.
> Big companies could hire mercenaries to enforce their contracts
In the absence of any other government, any “company” is a government unto itself. And any that raises an army, by whatever means, pretty quickly makes that even more clear.
In my view, no business can grow beyond the size of, say, a mom-and-pop grocery store or a family farm without a number of government institutions that we take for granted: The money system, limitation of liability, police, the tort system, and so forth.
That wasn't clear from your comment, but I was supporting what I thought you were saying. Businesses have to be capable of reaching a size where it makes sense to talk about monopolies, and once you've reached that point, then you're already up to your eyeballs in government involvement.
I would question if it's ever possible to have "free markets" at all (it's definitely not in the neoclassical sense, which relies on the assumption of everybody having the same, perfect information of all prices).
Let alone in actual societies where anything like laws exist. So I think what comes more through in that quote is more Friedman's ideology around Government intervention than any actual practical economics.
I think one factor he didn't comprehend was lock-in via de-facto standards controlled by single corporations. Take AWS or Microsoft Windows as examples. Businesses that build a lot of infrastructure around those products are stuck with no choice but to continue to use them or ditch many years and sometimes tens or even hundreds of millions of dollars in sunk cost.
Computing seems to facilitate this particular kind of monopoly more easily than physical systems.
That may have been true once, but I don’t think it is true today.
Scale effects and negotiation power means large companies are able to reach structurally lower costs per unit than small ones, which creates an incentive to grow big. This also makes them slow to respond to change, so normally upstarts push them aside. But in the modern VC-backed ecosystem competitors are bought out without having a say in it. The upstart becomes part of the big player.
Even if companies thread that needle and grow big, shareholders love mergers (for reasons I still don’t understand), so over time you get fewer and fewer big players. The regulatory capture is just icing on the cake, but I think you would get market concentration anyway, unless the government took a stronger stance against mergers and acquisitions.
Has Friedman has actually said that? If so it runs counter to the economic consensus.
Corporate lobbyists tend to cite an academic case for deregulation that has not been made. As the article rightly points out Adam Smith is frequently trotted out as an advocate of deregulated free markets, when in fact he was very clear that a free market must be regulated.
There's a ~debate between Rand and Donahue where she claims the same frenetically. He makes the point that any large company can buy off competition [1]. I don't know where the theory for free market being the most perfect game came from but I can't stand it.
Government can derail things as much as they can fix things. That's why we should have better anti monopoly laws to keep the market free, as in equal chances given equal efforts & quality.
With the current low interest rates there's no capitalism in the world, just crony capitalism, which inflated some asset classes, like the housing market, stock market and private companies that plan to go to the American stock market.
This problem will be corrected in the next 10-15 years, but it won't be an easy ride.
> The American skies have gone from an open market with many competing airlines to a cozy oligopoly with four major airlines.
It is clear why we have reached this point. Most monopolies are allowed to exist because of state influence (which happens thru many forms, regulation, patents, or plain direct support), all increasing the barrier to entry for would-be competitors. You see this in most heavily regulated markets.
There are other markets where the cost of entry is so high anyway (investment-wise) that naturally very few companies can make it - this is something that is not an issue per se.
Tech would be an example. Instagram was only a dozen or so people when FB bought them. Unfortunately FB was able to do so and kill competition that way.
Except airlines were heavily deregulated in 1978. In my mind it's also "clear why we have reached this point", except that I've come to the opposite conclusion that you have.
With regard to the routes they could fly and the prices they could charge, yes. But they were never de-regulated with regard to the safety requirements they had to meet or the qualifications their pilots and crew and maintenance workers have to have. Those regulations have, if anything, gotten more stringent over time. And those regulations pose a huge barrier to entry for new competitors, and favor large airlines over small ones because a large airline can more easily absorb the costs of compliance.
That's true. I'm not saying the safety regulations are a bad idea. I'm just saying that they have the side effect of giving the advantage to large airlines and posing a barrier to entry for new competitors. (And that, since they are indeed regulations and have gotten more stringent over time, it is a mistake to think of the airline industry as being "deregulated" in the sense of the term "regulation" that is being used in this discussion.)
This is the problematic false dichotomy. If you give someone a choice between "this specific set of onerous, expensive, competition-destroying regulations" or "you will be killed", they make the obvious choice.
But those aren't the only options. Existing regulations are poorly optimized. It would be possible to save the same number of lives -- more lives -- by doing more work to improve the benefit:burden ratio of regulations.
The problem is that people aren't interested in this. It's detail-oriented work that doesn't make for good sound bites, so the beneficiaries (the general public) aren't organized enough to know how to ask for it, and the organized incumbents don't want it because it would result in a larger number of viable competitors.
And it's too easy for incumbents to make the sound bites go the other way, by pretending that not spending a billion dollars to save one life is irresponsible, even though the same billion dollars could save more than a thousand lives if saved here and used beneficially somewhere else.
> Could you give us an example of a specific FAA or NTSB regulation which has a suboptimal benefit:burden ratio?
Sure. The air traffic control system is 20th century technology that has air traffic controllers doing things manually that could be done by computers. A better automated system would have the same or better safety while requiring significantly less labor.
The FAA has been actively working to modernise the air traffic control system for decades. It's a hard problem. I fail to see how that addresses the point?
The point is that it's a hard problem whose solution yields large returns, but we're expending resources to solve it at a rate that takes decades to produce the solution.
Very true. But we also don't want to overpay. Heck, no one wants to die but some people smoke cigarettes. Despite what people identify as their preference, their behavior reveals what really matters to them.
In freer markets, people have the option to buy the safety that's appropriate for them. A person who's concerned about car safety may buy a Volvo and someone who'd rather have the money can buy a 90s Corolla. The analogy would be that regulations prohibit airlines from offering a lower safety at cost levels that consumers may find palatable. If airliners became an order of magnitude less safe, they'd still be on-par with the safety offered by other legal modes of transportation.
A better analogy might be this - overly zealous regulations probably make it more expensive to achieve a given level of safety. Engine inspections are a great example - they have to be done on a regular schedule despite operating conditions and monitoring. These regulations disincentivize jet engine manufacturers from developing and deploying on board monitoring equipment that could flag engines for inspection when they need it and avoid unnecessary inspections.
Yes, and even after 9/11 there is clear data showing that people stopped flying en masse and took the wheel instead, resulting in increased overall death count.
> However, Professor Gerd Gigerenzer, a German academic specialising in risk, has estimated that an extra 1,595 Americans died in car accidents in the year after the attacks – indirect victims of the tragedy.
With driving people think they are in control and that safety is determined by their own skills. When you sit in a plane you are at the mercy of the airline and the pilot. I would more compare it to buying a car. And there are a lot of safety regulations on cars. When you buy a car you know that the steering or brakes won't fail randomly.
More to the point, foreign carriers are literally not allowed to fly US domestic routes. Plenty of international competition would love to (and foreign governments might even subsidise those flights!) but trade protection keeps them out.
It's more than just trade protection, it's a matter of national security. US airlines are legally subject to having their aircraft commandeered to transport military personnel in wartime. It wouldn't be feasible to enforce that requirement on foreign airlines.
...I don't see that as being nearly as big of a (potential) national security risk as, say, a plane from a country with much lower national standards being flown into a major hub and either accidentally or maliciously crashing into populated areas.
I'm honestly not sure how "we can't legally commandeer the plane to transport military personnel in wartime" qualifies as a national security issue. Seems more like a logistical issue in that unlikely event.
Logistical issues are national security issues. It's an insurance policy against the possibility of another large-scale war involving immediate full mobilization. Fortunately we haven't really had a war like that since WWII but the risk is still there.
Safety and security issues are handled separately. Some foreign airlines are banned from landing at any US airport because they're not trusted.
The intent of the policy is to maximize the number of airliners available from domestic carriers. They don't want domestic carriers to be driven out of business by foreign competitors.
They've become more stringent over time because there are more flights now, and had they not become more stringent, then we would have daily crashes and fewer people would be willing to fly.
> and had they not become more stringent, then we would have daily crashes and fewer people would be willing to fly.
Not sure you can make such a claim. There are other industries where standards and safety practices improve over time without the need of strong regulatory leadership. Case in point: occupational injuries have been decreasing over time across the board:
Occupational injuries have been decreasing over time largely due to deindustrialization. There just aren't as many people working in factories and mines any more.
There are a ton of regulations for dangerous workplaces. Without them we would still see people get killed by machines in factories or poisoned by vapors.
Safety comes at a cost. If you want to makes planes ultimately safe, you would not allow them to fly, period. Just like NASA has now an objective of "safe flights" and basically does not send humans in space anymore because they can't guarantee zero fatality.
Safety is not a binary variable: it's a trade-off vs economical factors and the cost of each ticket. Since some people have to fly anyway, this means decreased spending in other areas of the economy.
But planes are ultimately safe, to the extent that the major US airlines often go a whole year with zero passenger deaths. And this safety doesn't even cost more; it's actually cheaper than the alternative when you net out all the costs.
Also, there is no real market for airline tickets, because you can't, as a consumer, decide to resell them. So their prices are often set in very bizarre ways (leading to prices jumping around minute to minute by crazy algorithms.) I think a big part of this situation is for security purposes.
I think the idea is that tickets are tied to a real person's identity (via their passport number), you can't sell to somebody else, who might be a threat, because the airline won't let them on. Compare to, say, a car, where no one verifies that you aren't selling your car to someone without a license (or that intends to commit a terror attack, say).
>And those regulations pose a huge barrier to entry for new competitors, and favor large airlines over small ones because a large airline can more easily absorb the costs of compliance.
Have you seen the EU airline market? It's _insanely_ competitive with dozens of airlines flying everywhere, all with rigorous safety standards.
So are you suggesting that the airlines should be allowed to use pilots that are less qualified to fly, and maintenance crew that is less qualified to maintain aircraft? Seriously?
In my opinion, both lead to monopolies and oligopolies.
Ekianjo is right, in the sense that entities with lots of capital will become rent-seeking entities in over-regulated/mis-regulated markets because of very high barriers to entry. Examples include ISP's and insurance markets.
You are also right, in the sense that entities will rush to control a heavily de-regulated market. To that end, companies with lots of capital can afford to outspend or acquire their undersized competition. Examples include Air-transit post-1978 and the Internet 2.0.
There isn't one single legislation that led us here and there is no one-size-fits-all solution that can solve each monopoly. We have to evaluate each industry and each market on its own to determine how the state would break the oligopoly.
That's also the problem of our current political systems which favor party lines instead of individual thinking. It's very inefficient to drive reforms.
With regard to airlines, I think there's another factor in play: the core business of airlines is not selling tickets to individuals and families, it's selling tickets to businesses for work-related travel. The government and most large corporations negotiate contract fares with the airlines, and large airlines have an obvious advantage in doing this.
That you don't need state influence for cartels to form, but they rather do it naturally, has been known for a very long time.
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
> It is clear why we have reached this point. Most monopolies are allowed to exist because of state influence (which happens thru many forms, regulation, patents, or plain direct support), all increasing the barrier to entry for would-be competitors. You see this in most heavily regulated markets.
If I may disagree. Capitalism is great at allocating capital unless prevented from doing so. We collectively have come to agree that human labour can be purchased, but not humans themselves. Some things may be held publicly, some privately. Zero regulation is good because in the absence of hindrances people can do what they want but some of those choices hurt other people so regulations are introduced.
Why is it virtually impermissible to point out that everything else notwithstanding certain patterns keep recurring to individual markets in particular and the economy as a whole. The first is this. In the absence of regulation in mature markets companies will form cartels/trusts/oligopolies. It is so universal it is akin to a natural law. Failure to act on that hurts the economy in general. We used to be good at recognising this, we aren't so good any more. The second is this. People want greater returns over lesser returns. This leads to ever greater financialisation and capital chasing its own tail unless prevented from doing so. It will inevitably lead to super dodgy things like stock buy-backs (which in any healthy market ought to be virtually banned).
FTA: “The results were so good that in 2016 United’s board approved a stock buyback of $2 billion, which is the financial equivalent of spraying yourself with champagne.”
That's terrible. There is a direct correlation between ballooning exec salaries, corporate stock buy-backs and stagnating workers' compensation.
> There are other markets where the cost of entry is so high anyway (investment-wise) that naturally very few companies can make it - this is something that is not an issue per se.
An incorrect analysis of what ails the economy will over time have dire consequences. It may be hard to see it if you're doing okay but lots of people are not doing okay. There's political anger. Populists will blame outsiders like immigrants (don't get me wrong, I'm for strict immigration policies – but that's the incorrect cause and effect diagnosis – but blaming immigrants (illegal or otherwise) is scapegoating).
I have practically stopped reading HackerNews because too many on here appear to be too financially secure owing to the industry they are in, their backgrounds, luck, and hard work. Someone just died in Paris over protests over fuel price hikes. If those entrusted to keep the system healthy fail to do so in a controlled orderly manner then the people will introduce disorder by forceful means. I am not advocating this. I am against this. But the chances of this not happening are rapidly shrinking. I hope I'm wrong but all the macro indicators and with history as my guide tells me that I am not.
We never really had an open market with many competing airlines. Only a few large airlines ever had full nationwide route networks covering all the major hubs and spokes. The smaller carriers might have helped hold prices down on a few less popular routes, but overall I think travelers are generally better off with four airlines that fly pretty much everywhere.
Counterpoint: most people choose the cheaper option, which encourages a race to the bottom, and oligopolies can outlast smaller competition. Once the oligopoly has won, it starts to dictate the rules.
We should make informed choices, but who has the time and energy to dig and evaluate the market share and long-term consequences of the fridge they're going to buy?
In many of the industries listed, competition is regulated out of existence, thanks to the large corporations' deep lobbying pockets. I looked into starting an ISP when Spectrum left New York, and wow. It's not too cost prohibitive, except for the licensing and regulatory fees. It's absolutely incredibly expensive.
Big tech companies arent really monopolies. A ton of them can disappear overnight, its just a trendy thing to harp on. Look at the irrelevance of IBM, CISCO, HP, Intel, Oracle, etc. The list goes on and on, companies fail to innovate after a certain point and most die. Enough with the monopoly narrative.
I'm saying that its true that some are monopolies, but none really stay that way for long, and so its completely overrated to worry about. It's a similar talking point to how we are in an "AI bubble", good for clicks on an article.
Look at FB stock, it just dropped from 220 -> ~130, they saw almost half of their market cap wiped away in a few weeks. The monopoly idea is a narrative invented to stoke fear, outrage, and page clicks. It's a talking point for psuedo educated people.
Monopolies, whether ephemeral or eternal, are bad. Disappearance of a monopoly does not mean the data collected disappears nor does it repair the torn social fabric.
I entirely disagree. Monopolies discourage innovation and creativity. American companies do not operate in some bubble; we have to remain competitive with the outside world, with countries that would seek to erode our competitive advantage. Internal competition is a great way to ensure that we do not fall behind others.
I also don't think bringing up FB's stock price is relevant, not sure what your point is getting at there?
The danger of a monopoly lies in its ability to exploit a market, not in its longevity.
Markets can change in ways that destroy monopolies. For example, if in 1900 you had a monopoly on horse-drawn carriages, that wouldn't have prevented you from being put out of business by the advent of the automobile.
They were once the big bad "monopolies". Now they're just mediocre companies. Weird how manipulated people can be by narratives. Show me any company who has dominated for 50 years, thats something to worry about. Both FB and Google could lose 50% of their value in a month. See the recent FB stock drop. Its a complete fallacy, a trendy thought narrative, its propaganda.
Why does the author refer to this as "fake capitalism"? Isn't this what capitalism is?
It reminds me of the arguments that communism must be a good idea because we haven't seen true communism yet. We've seen true capitalism for much longer and much more clearly than we've ever seen any form of communism, and it's exactly what the US has. You can't just hope that maybe with a little more regulation, or a little less regulation, or something, capitalism will magically work. Capitalism sets up incentives for people to figure out regulatory capture and lobbying in whatever regime you come up with. Capitalism sets up incentives for companies to influence the public to believe that certain forms of government intervention are perfectly natural (take copyright, for instance - if you convince everyone to get rid of copyright, you'll just set up incentives for companies to convince everyone to bring it back). If you think this isn't working right, please work with the folks who want to figure out an alternative.
> Why does the author refer to this as "fake capitalism"? Isn't this what capitalism is?
The author appears to be conflating the terms "capitalism" and "highly competitive markets", which are not at all the same thing. "Capitalism" is, as you say, perfectly compatible with regulatory capture and co-opting the government to help stymie potential competitors; in fact that is exactly how the "capitalists" of the late 19th century in the US operated.
I think when people say "fake capitalism" or "true capitalism" they're talking about unrestricted and unregulated free markets. It's also important to realize that the thought tied to Communism and Capitalism is one in the same; I'm sure most would be surprised that Karl Marx and Friedrich Engels were the ones that coined the phrase and idea of Capitalism.
> Capitalism sets up incentives for people to figure out regulatory capture and lobbying in whatever regime you come up with. Capitalism sets up incentives for companies to influence the public to believe that certain forms of government intervention are perfectly natural (take copyright, for instance - if you convince everyone to get rid of copyright, you'll just set up incentives for companies to convince everyone to bring it back). If you think this isn't working right, please work with the folks who want to figure out an alternative.
I like your line of thought but I'm unsure if I agree with the fact that copyright could be incentivized to come back but that's just an opinionated view of mine. It started with the structure of the government from the beginning making it was a day 0 idea. There are also different types of capitalism; China's capitalism is different from US capitalism. So, that also is something to consider with the "fake capitalism" issue you brought up.
Overall, I think one baseline to be able to tell if capitalism is working is if one can actually go from rags to riches in today's time. I also think what people are picking at is the imbalance that happens at an economy of scale when a company becomes so large that it is the market.
> I think when people say "fake capitalism" or "true capitalism" they're talking about unrestricted and unregulated free markets.
As far as I can tell, by "fake capitalism" the author means the opposite of "competitive free markets" (emphasis mine), not unregulated ones. In fact, the author says, "The federal government has done little to prevent this concentration, and in fact has done much to encourage it." - i.e., the author supports increased regulation and government intervention as long as it's in the appropriate direction.
Yeah, I agree with your assessment of the author. I should have detailed that I was getting at more of my personal experience talking with some hardline libertarians and free market anarchists.
I think the key distinction is capitalism vs corporatism. Corporatism is feudalism wearing a capitalist mask. The elite companies in the top do operate in a free market, but the story for the rest of society is radically different. I think in the US today we have a corporatist society. Your kid wants to setup a lemonade stand on the lawn? Get ready for a visit from the police. A multinational corporation wants to produce and sell a product that involves a real possibility of poisoning the groundwater? Sure, we're all about capitalism!
It's a really ridiculous system and it's the consequence of the fact that regulatory organizations have started to become a tool for multinationals to exploit at their whims, rather than a tool to effect positive change in society as a whole. So it ends up in a system where individual to small business capitalism is hyper over-regulated whereas big business and multinational capitalism is regulated on paper yet laissez faire in practice.
Capitalism is simply the private ownership (including ability to transfer) the means of production. This is still true of the corporatist variety - unlike feudal fiefs, corporations can be bought and sold, and that makes all the difference. The only way for a feudal to aggregate more power is to go to war with other feudals for more lands, because a fief is land tenure, not property. In capitalism, because capital is property, it can be aggregated by buying it, and the more you aggregate, the more powerful you become, letting you acquire more capital etc - a positive feedback loop which means that monopolies are inevitable in pure unregulated capitalism.
Regulation is orthogonal to all that, so long as it does not interfere with the ability to aggregate capital. You can tax the corporations heavily, you can impose various safety standards on them, you can have consumer rights commissions etc - it makes it harder for them to make money from the capital that they own, but it doesn't change the fundamental equation of capital -> money -> more capital, and therefore the result is still capitalism. The only way you can stop this cycle is by imposing a limit on how much capital can be held in one hands.
Artificially limiting the 'means of production' (which is such an increasingly inappropriate and dated concept to use for these sort of discussions) is precisely the issue. Imagine a kingdom where a king created rules that, in effect, named exactly one black smith owning [puppet], one tavern owning [puppet], one brothel owning [puppet], etc. And these individuals were free to buy, sell, and trade these businesses so long as the transactions remained within the regulations of the king. That's not capitalism, not even a little.
And that is really the issue. The further you limit the ability of people to engage the market (as buyer and seller) the further away you move from capitalism. And that is precisely what our current system is doing. Repeating the same example just because it's so stupefying. In most places in America today you cannot legally setup a lemonade stand and start selling lemonade on your own property. We're creating a culture of passive consumers driven by extreme regulations against everything except such!
We don't have a problem with monopolization of lemonade stands, though. But we do have a problems with large corporations monopolizing their respective markets, and they are doing that not because they are granted said monopoly from up above, but because they are able to consolidate it.
Limiting the amount of capital one can own is not equivalent to your scheme, by the way. The rule isn't that only one guy can own a tavern, or that there can only be one tavern - the rule is that one guy cannot own more than one tavern (just as an example - I don't think that's the level at which we should actually cap capital).
The issues are intrinsically connected. People don't just start out e.g. going from nothing to building let's say a telecoms company. Entrepreneurship and creating businesses is a cycle of growth. For instance Bezos' first 'gig' followed a summer of work at McDonalds, which he hated. The next summer he setup a week long education camp for younger kids. He only got a dozen or so signups, but he probably made more from those signups than he did in last year's work at McDonalds. When you start making entrepreneurship difficult from the bottom up, you're going to end up with a really distorted picture of capitalism at the top since you're going to have some sort of strange bias in the companies represented.
And this is where I think corporatism excels. There are now just an immense number of rules and laws that are all increasingly esoteric even to operate quite simple businesses. And that's before you get into the countless fees and costs the government demands before you've even sold your first product. In other words when you kill off entrepreneurship and start moving away from capitalism, you invariably head towards corporatism which is itself headed much closer to feudalism than capitalism.
As for the king example, this was relating to the feudalism -> capitalism -> corporatism -> feudalism loop, not your specific suggestion. As for your suggestion, there are two big issues. The first is the same as discussed here. Capitalism and competition is a growth system. The reason e.g. Elon Musk was able to create a competitive rocket and vehicle company was because he earned hundreds of millions of dollars in another venture. No individual has any personal need for hundreds of millions of dollars, but it is strictly required if this individual wishes to engage in large scale ventures - the sort of which stand to massively improve society.
The second issue is probably the bigger point. We already have countless laws, on the order of thousands of pages, of laws relating to competition, anticompetitive behavior, restrictions on mergers and acquisitions, etc. These were all geared minimizing anti-competitive ownership. But the general rule in a corporatist society holds true. We have the FTC approve mergers between e.g. AT&T/Time Warner/Charter while rejecting mergers between far smaller companies that could eventually become the competitors for these sort of behemoths that increasingly stand above the law, and perhaps even above government.
In other words, write the laws and expect to see you and I only be able to own e.g. one tavern. But expect to see the king's friends somehow manage to own thousands. Corporatism in a nutshell.
Our anti-monopoly enforcement is actually much scaled back compared to what it used to be for most of 20th century. More importantly, the focus was changed. The original monopoly busting approach, at its peak under FDR, was all about ensuring that the markets stay competitive - it was hindrance to competition that had the feds cracking down on you, not e.g. jacking up prices on consumers.
That was changed under Reagan, and the new approach was that monopolies were only to be regulated if they start to affect consumers. And that's very much by design - according to the people who devised this regime, monopolies are not in and of themselves bad, because they're more efficient due to economy of scale. So, for example, if a merger happens, the reason why they can block it is if they can demonstrate that it would raise prices or reduce quality of service. If they can't prove that, that's too bad - even if the sheer size of the resulting behemoth is obviously a problem for market competitiveness, it's just out of scope.
I don't think it's a coincidence that monopolies dominate the market under these new rules, in a way that they haven't done before.
Mostly agreed - we're saying the exact same thing here.
You'll also find that going back in time there were also far fewer rules against individual entrepreneurship. And where there were rules they were enforced in a more sane fashion. E.g. - even if a kid's lemonade stand isn't obeying regulation 3753 section 3, or city ordinance 4725-4 or whatever, you don't go and shut down the stand as the stand is doing nothing but good for everybody.
But as we transition towards corporatism rules against large companies start to disappear or fail to be enforced, while those rules against small companies and individuals start to grow and become unreasonably burdensome as well as extremely actively enforced.
The one part we don't agree on is why corporations are allowed to merge. For instance it's quite evident that Time Warner alone has already exploited their monopoly to increase prices unreasonable. Internet service in America is far more expensive than in many parts of the world, yet the quality is not particularly remarkable. And there's no justifiable reason. It's just companies agreeing not to compete and then jacking up their prices. Because of this it's not reasonable to suggest they're being technically allowed to merge/acquire further competitors because there's no evidence that they won't do what they're already doing. This is just another aspect of corporatism where rules disappear as companies grow large enough.
Capitalism lacked a single intellectual backing in the way that communism did (speaking in general terms). Wikipedia also says differently on the etymology of capitalism - Louis Blanc was apparently the first person to use it in the modern sense [0].
While I sympathize with your view, I don't find it reasonable to say that Capitalism won't work if you add sufficient regulation.
There's a continuum of Capitalism->...->Socialism->...->Communism where it's been shown that both a completely free market (extreme capitalism) fails due to being unstable (for the reasons you state), but also that pure Communism fails (because people are people and systems corrupt - essentially same reasons as with Capitalism).
Somewhere in the center where you allow both the good of the many and self-interest to balance - you can have stability... but it comes at a cost of constant vigilance.
I'm not really convinced that the answer to "Neither A or B work" is "Try something in the middle," especially because in this case I'm not convinced capitalism and communism are our endpoints and it's a one-dimensional space.
If you're having trouble with Automake and having trouble with CMake, the answer is almost certainly not to use parts of Automake and parts of CMake. A much better strategy is to read go read Automake docs carefully and make sure you're doing it right (inspired, perhaps, by people who say "You're doing Automake wrong" but not taking them at face value) and see if you can get it to work; go do the same with CMake; and if neither works, go look for something completely different. Maybe Bazel. Or start figuring out where Automake and CMake are falling short and how to improve them - not how to use them better, but how to build new versions of them that actually work.
Do you know how to cook well? Go to the front of your yard, set out a table, and start selling your food. It's now a count down until you're ticketed and/or arrested, and the police also decide to take any money in your wallet along with anything valuable at your stand as 'evidence'. This is really a very important example since selling food is probably the single easiest industry that can provide substantial revenue to anybody with a bit of skill.
Rules and regulations are not inherently bad, but as they grow out of control they rapidly transition from being a net positive to a net negative on society. Go try to navigate the thousands of relevant pages of legalese full of esoteric and counter-intuitive laws in e.g. California just to open a food stall. Your utility cleaning sink is only 9" deep? Time to shut you down, it needs to be 10"! In the current state of the US it's generally unlawful for a kid to go setup a lemonade stand in their front yard. The US has rapidly transitioned towards becoming quite anti-capitalist.
But of course this was not always the case. It's hard to pinpoint when exactly we started transitioning to the current era, probably around the 60s. And this is really the point. 'Not true communism' can not really pinpoint any era in communism as 'true communism' because the ideal and reality simply don't exist in the same plane. And while e.g. the 50s were not necessarily the penultimate example of what capitalism can yield, they were at least a really great example - as it was a time period that struck a balance between rules and regulations while not hampering individual entrepreneurship and innovation.
"The US has rapidly transitioned towards becoming quite anti-capitalist."
What you're describing is distinctly capitalist.
"Pure capitalism is defined as a system wherein all of the means of production (physical capital) are privately owned and run by the capitalist class for a profit, while most other people are workers who work for a salary or wage (and who do not own the capital or the product)."
This has nothing to do with how easy it is for someone to acquire capital in the ways you're describing. In fact that it is difficult to enter the capitalist class only emphasises that there is a difference between them and the worker class (i.e. capitalism).
No, it's not. As you can prove by a simple reduction to absurdity. Let's take a feudal system. But in this feudal system our lord will pass a law that effectively means exactly the king's 'chosen' is able to be a blacksmith. And this blacksmith then hands a good chunk of his profits right back to the lord in exchange for this monopoly. And then he does the exact same thing to create a puppet tavern, a puppet brothel, and so on. This is not a capitalist system by any imagining of the word.
The most underlying and critical point of capitalism is an individual's right of access to the market, both as a buyer and a seller. All this class distinction stuff are part of Marx's inane ramblings. They don't even make any sense. Traditionally the shop owner, shop visitors, as well as the shop workers have lived practically right next door to one another in mostly similar condition doing mostly similar things. And more importantly people can generally do as they feel. Want to open a shop? Then knock out the front wall of your home, put up a sign, and boom - you're now part of this magical "class" of business owners. Some people even just set up tables outside their house and sell whatever they happen to like making or growing. And this isn't some vague ideal. In many nations throughout the world today this is still very much the reality, and it's awesome.
This is really the unfortunate part. So many people try to come to conclusions about economic systems and what is right or wrong without having any experience outside of America or similar nations. It's like trying to judge the civility of society at large when you've only ever lived in e.g. Detroit, St. Louis, or Baltimore. Your opinions would be misinformed, at best.
You are correct that your feudal system is not a capitalist one, as the blacksmith does not own (he is not able to sell) his means of production.
The most underlying and critical point of capitalism is an individual's right of access to the marketAll this class distinction stuff are part of Marx's inane ramblings
This is not the case. The Wikipedia definition for capitalism is well cited.
Then knock out the front wall of your home, put up a sign, and boom - you're now part of this magical "class" of business owners.
Yes, there is absolutely the ability to move between classes. The use of classes in the context of this definition of capitalism is to give a broad overview of how a capitalist society is structured. In your example, owning the house and stock they sell would be considered "capital".
If they were to employ an assistant, to tidy up or help sell stock (which the assistant doesn't own) then the assistant would not own their means of production. Making the assistant a "worker".
Some people even just set up tables outside their house and sell whatever they happen to like making or growing. And this isn't some vague ideal. In many nations throughout the world today this is still very much the reality, and it's awesome.
But it's not capitalism. Hence the definition I provided.
Returning to this bit:
All this class distinction stuff are part of Marx's inane ramblings.
I think shows your true colours. Economists might respectfully disagree with Marx or his ideas, but to call them inane is just ignorance.
The blacksmith would indeed own his 'means of production'. The one and only reason he would have difficulty selling it is because of rules and regulations. This was rather the whole point of the example. As rules and regulations make it more and more difficult to access the market as a seller you move further and further away from what capitalism is.
As for Marx, something doe eyed students of today often forget is that academia can and does often go extremely far astray, particularly on social issues where a dangerous hive mind frequently emerges. For instance in the early 20th century we in the US, and the academic establishment in particular, were the biggest drivers behind eugenics. We were literally the inspiration for Hitler who saw his own work as building off our 'progress.' His work ultimately being the one and only reason that eugenics in the US was scaled back and gradually became taboo.
The rise of Marxist ideology corresponded with an extremely sharp increase in the number of individuals pursuing the social sciences and liberal arts at the postgraduate level. Unfortunately these studies, in this quantity, do not really correspond to being able to contribute to society in any meaningful way. That's not to say the arts and humanities inherently do not contribute as they most certainly do. But society cannot support a billion philosophers anymore than it can support a billion neurosurgeons or plumbers. Thus enter Marxism which is little more than a fancification of striving to live as Marx did: drink and drug yourself to stupidity while writing whatever you want. Time to put food on the table? Just mooch off Engels and your brother-in-law.
Capitalism essentially DOES work. Any argument otherwise bears to burden of proof in presenting a more desirable alternative.
There are 0 starving people in the United States, there is an actual obesity epidemic among the poor. The absolute quality of life over the last century across capitalist nations has continued to explode across all societal strata.
> There are 0 starving people in the United States,
That is somewhere between misleading and flat-out untrue. While starving to death in the US is exceedingly rare, the number is still non-zero and there are literally millions who are "food insecure" (the term used for statistics etc.) to some degree or other. That's starving, as anyone who has actually had trouble affording decent meals (as I did when I was young) would know. The fact that there are also poor people who are obese doesn't change that one bit.
And you know the funny thing? The reason there are so few people starving to the point of death is distinctly non-capitalist food programs. Capitalism failed them; social democracy saved them. That you would claim the near opposite is frankly disgusting.
> The absolute quality of life over the last century across capitalist nations has continued to explode across all societal strata.
1. I think that's true on average and probably true on the median, but it's unclear that's true for everyone. There are a lot of anecdotal stories of people working at a gas station to pay for college or even postgraduate school ~50 years ago, no loans or anything. That's just not possible today. I would bet that in terms of net worth, ~50 years ago the lowest class in the US was at least positive and is definitely not positive today.
2. In any case that's not what the author means by capitalism not working. The claim is not that quality of life has gone up, it's that the market is not operating in the way that advocates of capitalism say that it should. Perhaps you want to argue that oligopolies and regulatory capture and barriers to entry in new markets are morally good because they have had the empirical result of reducing Great Depression-style starvation. I think that's a coherent argument to make. (I'd ask some questions about how the leadup to the Great Depression involved oligopolies and regulatory capture and barriers to entry, but I imagine you could come up with convincing rebuttals.) But then you / the people who believe like you need to start selling capitalism as not free markets because that produces moral good, but as highly regulated and government-intervened markets that are centrally planned in a way that reduces suffering and quality of life and is therefore morally good. If you want to argue that the author's depiction of "capitalism" is a straw man and in fact capitalism is winning by killing needless competition, that's fine - just start saying it.
Few ever bother to separate Money, Markets, Capitalism and Corporatism when discussing this stuff. There's probably others I'm also not differentiating properly. It makes talking about what is and isn't working difficult.
When I argue with commie friends, they frequently conflate collaboration with collectivism. One claimed that the internet was greatest communist project ever.
It's a shame. A lot of people on this website would love Syndicalism but can't conceive of it because a pro-market anti-capitalist ideology doesn't make sense to them.
Speaking of monopolies, anyone heard of JA Konrath? http://jakonrath.blogspot.com/ He wrote the blog a newbie's guide to publishing. During that time he discovered publishing his refused books on Amazon KDP because the big 6 publishing companies had rejected them.
He used to be an advocate for signing with a big publishing company, and suffering their 17.5% royalty + marketing costs. Most large published books never out earn their advances your chops.
But his refused books kept growing in sales with Amazon Kindle. The books he did publish with traditional publishes kept insisting on high prices to keep the paper backs competitive. Eventually he switched to just publishing on Amazon KDP as the future and eventually got the rights to his books back.
The above book is published by Wiley. The digital version listed on Wiley's site is $14.95, the hardback is $27.95, while the amazon hardback is $18.27. The Kindle version is listed for $11.99.
Both The Economist and Bloomberg have focused on new monopolies in the past few months, and a key problem has been quantifying the "moat" that provides companies with a lasting advantage.
Seems to me that a "moat" is most easily quantified by the share market total capitalization, and to disrupt monopolies, simply introduce a tax on total market value for a firm.
Problem is that big money, aka capitalism, has been winning from government froms like democracy, and communism.
You can see this in rusia where after 1990 communism has been replaced by big money government, not democracy. In china same thing, communism has been replaced with big money government, a capitalist economic system.
And you see the same trend in the US where a democratic government has been replaced by a big money capitalistic government, only interested in serving the needs of money making.
And without a government system making rules to minimize the negative impact of the economic system, we can see all the negative aspects of capitalism. Exploitation of humans, winner takes all.
Capitalism is winning even at the level of government, and this is what it looks like.
Just like we see the need to separate state and religion, we should also separate state from the economic model. Democracy and capitalism aren't one and the same thing. Democratic governments have multiple economic models to choose from, depending on the problem they want to solve.
What were in is not capitalism, uts crony capitalism aka not capitalism. The question is, if every form of economy/government is bound to be corrupted, is this form of fake capitalism the best option? Or is there an untested alternative?
What were in is not capitalism, its crony capitalism aka not capitalism. The question is, if every form of economy/government is bound to be corrupted, is this form of fake capitalism the best option? Or is there an untested alternative?
I've commented about this before with the same quote. But since the propaganda campaign against all that is coming from the East has left an enduring mark in US, it will always be received with a sneer.
But, irrespective of that, Lenin, more than 100 years ago, said something like this:
This transformation of competition into monopoly is one of the most important — if not the most important — phenomena of modern capitalist economy. He gives ample evidence of this with official market and financial data regarding the steel industry. Even then, a few conglomerates dominated the marked.
But, again, since the story of how capitalism is the greatest, the one and only salvation of the people (does it sound like religion?) is so pervasive, no amount of evidence can undermine its foundations. If reality proves that it doesn't work, the reason HAS to be that "it wasn't implemented right in this or that country. So we must take bolder steps to implement it right". Sounds like slaughtering goats to me. If the gods didn't favor our army in battle it surely must be that we didn't slaughter enough goats at the altar and NOT that our army was ill prepared for the task at hand.
"Competition is the essence of capitalism, yet it is dying."
Sorry to have to point out something that should be blatantly obvious, but no. The essence of capitalism is capital, the accumulation of wealth in private hands that own the means of production. And capitalism has a nasty tendency toward fewer, more powerful players as they gobble up market share, muscle out competitors, erect legislative and logistical barriers. This is what capital does. It buys the power to continue itself. What you are seeing is absolutely capitalism running its normal course.
IMO, the ease of credit has led to lots and lots of consolidation and companies getting into markets where they don't belong. This has indirectly led to big companies getting bigger and even bigger and "competition slowly dying".
But, I think this is temporary. As and when credit tightening starts to happen, and it will with time, many of the companies will be hard pressed to pay what they are owed. And with time companies will start to restructure their businesses back to where things were.
There are many ways in which the big get bigger, until they become oligopolies. Some are fair (network effect, economies of scale). Others are not (predatory pricing, regulatory capture). Regulation alone can slow this process and mitigate its worst effects, but it can't stop the process entirely because there are just so many mechanisms involved. If you're OK with the idea of companies large enough to rival or even exceed the power of governments (as with the East India Company mentioned in the article) then that's the end of the story and I'm not here to argue that point. If not, then sooner or later you'll have to come to grips with the idea of a tax on size itself. Few people start out liking it (I didn't), but it's really the only alternative to the imposition of a corporate state.
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[ 1.8 ms ] story [ 230 ms ] threadNot sure how true this is, but seems worth evaluating.
He also says bad rules have led to monopolies as well (through regulatory capture, lobbying, etc.).
So bad things (like monopolies) can happen due to the state or due to lack of the state. Maybe the problem here isn't the state at all.
I think IP laws and patent wars are a lot more salient when it comes to hardware (like Apple, Samsung, Motorola, etc), less so for those 3 examples.
And in any case, many tech giants exist around natural monopolies, either in network effects, either obvious ones, or those from two sided marketplaces or simply economies of scale.
Yes, network effect is a huge part of the problem. So much in tech requires user adoption, and typically users won't adopt until others adopt, thus creating chicken and egg problem. Overcoming the network effect is extremely difficult, as we've seen from competing platforms trying to unseat facebook and twitter (tho network effect is not limited to social networks, but they are the most obvious examples)
In fact, many people in China attributes Tencent's growth to its shameless copying of other people and companies' work and products. If that kind of view is true, than China's monopoly comes out because of lack of IP protection.
I would say it can be, but more importantly, it doesn't have to be:
> Well okay, there's plenty to blame the government about, but the government is the one institution that people can change... the one institution that you can affect without institutional change. That's exactly why all the anger and fear has been directed at the government. The government has a defect - it's potentially democratic. Corporations have no defect - they're pure tyrannies. So therefore you want to keep corporations invisible, and focus all anger on the government.
-- Noam Chomsky
And even if consumers are to be able to "vote with their wallets", if workers are supposed to to have a choice of employer and certain protections, there needs to be some regulation that goes for everybody, and is enforced for everybody. It's not going to happen out of generosity, or consumers researching everything on their own. How would you even make sure the food you eat is not toxic? Not that regulations make it 100% safe, but they can be a lot more efficient and very helpful, just like they can be horrible and backwards.
I really think a major obstacle is that people see government as something that acts on them, instead of something through which they ideally would act together as equals and improve their lot in a way that transcends the scope and lifespan of the individual. Yes, there is a lot of corruption, but the thing is, that's something one can get to work at -- when it comes to (some) corporations, it's too often consumers talking about them amongst each other, "hoping" things will change as they often get worse.
> People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
-- Adam Smith
When drug dealers or street gangs carve up territory, you might call that a form of local monopoly, and it comes from people themselves, no state intervention required. Usurping parts of the government for that purpose is something bigger gangs or corporations may do (also see "War is a Racket"), but it's not technically required I would say.
If something is almost a government, but not quite, and creates a monopoly, that would I suppose technically be a counterexample to the claim that monopolies are all caused by governments. However, while it would demonstrate the claim to be false, it wouldn't demonstrate that it is far from being true.
However, I wouldn't claim that all monopolies are all from government or nearly from government. I probably wouldn't even claim that almost all monopolies are.
Mao gave a very concise yet accurate description of this state of affairs: "political power grows out of the barrel of a gun".
(I am currently too much of a statist to really reject the idea of a state being "legitimate" , in a way that probably distinguishes it from gangs in general.)
And Mao didn't know shit. Violence is for those who do not have power.
> All political institutions are manifestations and materializations of power; they petrify and decay as soon as the living power of the people ceases to uphold them.
-- Hannah Arendt
Yes, in practice, it's threat of violence rather than actual violence doing the trick most of the time. But the reason why that threat is respected is precisely because the violence behind it is very real, and we all know it.
And this all has nothing to do with majority rule etc. A gang that has most neighborhood residents as its members is still a gang. And when gangs do get formed "for protection of both the group and the individuals", they still need to use violence (or threat of violence) towards that goal, oppressing those that would oppress them otherwise. So you might end up with a "good guy with a gun", but it's still a guy with a gun. Remove them, and government becomes an advisory council, making recommendations rather than laws.
I don't think tried to understand the distinction between power and violence that Arendt makes.
How does potentially getting arrested for breaking a law prove that political power comes from violence?
> Yes, in practice, it's threat of violence rather than actual violence doing the trick most of the time. But the reason why that threat is respected is precisely because the violence behind it is very real, and we all know it.
It can just as well be a mutual and voluntary agreement. It's not like people who don't rape or murder usually all just refrain from that because it's illegal and would be met with violence, so I would argue the opposite is also true, we made certain things illegal so we can deal with it in a structured manner where the laws ideally apply equally to each. Just like children don't just obey or imitate adults out of fear, just like many open source projects are successful without any threats.
The "violence" in "monopoly on violence" isn't any more sinister than the "road safety regulation" in "monopoly on road safety regulation", at least insofar every affected individuum is part of the entity that has said monopoly.
> So you might end up with a "good guy with a gun", but it's still a guy with a gun.
Yes, and? You just keep stating that as if it means something. What is your point, in relation to my original point of government being ours in principle, and being changeable? It's not like that there is no gun if you don't have a "good guy with a gun", that gun is a given, so why even bring it up?
If it were a completely mutual and voluntary agreement, then you wouldn't need a government as such, or laws, or any enforcement thereof. And that would be an anarchist commune, not a state.
Any place that has laws, and penalties for breaking those laws, has an implicit threat of violence against law-breakers - it's really that simple. And if it is making that threat at all, it's because it expects the law to be broken by some.
> The "violence" in "monopoly on violence" isn't any more sinister
I didn't say anything about it being sinister in principle. It's only sinister if it causes more violence than it prevents.
> What is your point, in relation to my original point of government being ours in principle, and being changeable?
I was specifically responding to another person saying that "a gang is a little bit like government", further expanding on that. It was not directed at you or your comment.
I spotted this (IMO badly mistaken) view of his when he first came out with it quite a while back:
http://blog.peterdonis.com/opinions/monopoly-money.html
Energy, agriculture, transportation - all built on the unintuitive building blocks of physics, and our approximate understanding of the universe. The clean abstraction layers and separation of concerns in IT is unparalleled, with powerful positive feedback begetting further innovations.
Applying advances to other fields also grew economies of scale rapidly, supporting innovation while barriers to entry were low. We're now approaching the end to low-hanging fruit and maturing into the consolidation phase, as further innovation requires greater capital and time commitment.
* Apple is able to charge a premium on iPhones relative to the best non-Apple alternatives because a lot of people are willing to pay it. (Do they have a monopoly on smartphones? Definitely not; there are loads of companies selling good phones. But they have a monopoly on their smartphones.)
* Fast food joints are forced into heated low-margin competition with each other because they're pretty interchangeable. If McDonald's starts charging too much, people will just shrug and buy basically the same food from Burger King.
* Classic monopolies are extreme cases. At one point if you wanted telephone service in the US you either paid whatever AT&T was charging or you didn't get telephone service.
When people hear Thiel's comments they tend to think of classic monopolies, but most of the examples he gives are of companies that have plenty of competitors -- and a durable advantage that they can use to maintain decent profits margins without customers jumping ship.
Sure you could use one of the alternatives, but then you won't get the content/people/apps/audience/... that are on those large platforms, which makes them basically useless.
Pay to drive the premium roads when you’re in a rush, or take the discount lanes with advertising printed along the roadway.
We could have quiet, porous asphalt with better water absorbtion. So many fantasies, I digress.
But what stops an aggregator from offering to put your ad on multiple search engines, so you pay for clicks from Google and whatever other search engines people are using? There may not currently be a lot of extra clicks available that way, but it's more than nothing, and you'd benefit from whatever improved competition might come up, and incidentally give it more resources to improve with and to cut Google's margins to your further benefit.
AFAIK this isn't happening, but why? Is there another moat I don't know of?
Well, Adsense / Analytics is another. Google can track you across the internet, and offer that information to search query bidders. If you don't want to bother spending money advertising to people who read HN, it's achievable. Less so for say, Bing or Yahoo. Being able to target better than other platforms alters your willingness to pay to advertise there vs elsewhere.
I suspect they also have a better grasp of the value of traffic acquisition. They pay a lot of web related tech firms to use their search engine over competitor's. We know the only time they lost a bid for Firefox's search placement was when a former Google executive was working for a competitor. It's not clear whether Marissa brought Yahoo some better insight into the value, or if she just needed to accept a higher risk of overpaying for traffic.
Markets only exist in the first place because of "government help": without government creating and enforcing property law contract law, and numerous other laws, there would be no markets.
So, like most of what Milton Friedman said, it's a dumb, wrong, and misleading statement.
And of course, monopolies exist quite happily in the libertarian fantasy of version of a free market, because economies of scale and network effects exist.
Trade cannot happen without the threat of violent attack against those who would otherwise freely use particular land or possessions, aka rules, aka law enforcement, aka government.
Also, what's your basis for claiming that "government" is the only way to protect people/possessions from violent attack?
Trade can happen with any two or more people who have different things (and the things need not even be physical).
Stable markets, on the other hand, require a stable government of some sort to maintain them. And that's what you really need for the economic side of what we would think of as civilization.
We have archaeological evidence that trading networks (and over fairly long distances, at that) existed long before anything we'd recognize as formal contract law was around, and certainly long before anything like international laws and regulations.
Likewise, one of the first things that develops when a government collapses (or, conversely, becomes overly restrictive) is a robust black market.
Contracts can be (and are) made in the absence of government-enforced contract law all the time. The parties to the contract simply develop their own mechanisms for enforcement (which can range from social pressure to outright violence).
Surely you're not trying to argue that drug dealers are likely to sue each other in court when one of them breaks the deal?
Agreed, but monopolies are also not uncommon under such conditions. Drug dealers have "turf", for example.
Though one could argue that IP monopolies (like Microsoft) could only form through government help - in the form of IP enforcement.
I believe that people, generally: don't vote with their money for greater good but rather personal utility, by choice or lack of economical standing (A form of The Tragedy of Commons), poorly understand the long term impact of their choices, people’s choice is swayed by deceitful and psychological trickery of targeted advertisement. I am not sure how free market can address this without outside (generally legal or consumer advocacy) intervention.
But who knows if your theories about people choosing convenience are accurate...
Not personal convenience, but personal benefit--people want to be better off after buying something than they were before. That in itself is a perfectly reasonable thing to want.
There are, generally speaking, two potential problems: (1) people might misjudge whether they will actually be better off (through lack of information or lack of understanding or failure to recognize longer term consequences); (2) people might individually be better off but society as a whole could be net worse off due to externalities (costs not borne by the people making the choices and so not considered by them).
It is true that these problems are unavoidable in a free market. However, outside intervention does not, in general, solve them. In fact it almost always makes it worse, because whoever is making the outside intervention has even less at stake in the choices about what to "vote with money" for than the people making those choices.
I think the best we can do is to try to give people the best tools we can for making their own choices, not trying to dictate those choices by outside intervention.
You're right, personal benefit is a factor too, so I replaced "Convenience" with "Utility" which is more apt and covers both Convenience and Benefit.
> It is true that these problems are unavoidable in a free market. However, outside intervention does not, in general, solve them.
Not convinced. For example, in Australia there exists laws that mandates that retailers either exchange or refund when products are "not fit for purpose" or "faulty", this simple law has eliminated a whole heap of bullshit products that doesn't work because people simply return them.
Consider the trade off you're making. Without that law, some retailers will have more generous return policies than others, and the first group will have higher prices (because the policy costs them money). If you prefer that, you patronize one of those retailers, and they don't carry those products because they don't want the returns.
But once you pass the law, the second category of retailers goes away. And they had lower prices, even for the items that weren't garbage.
The completely free market does not work in practice, because people are not rational, perfectly informed actors. They make non-optimal choices and tend to not learn from them, and they're easily swayed by advertising.
Sensible warranty and returns laws exist because businesses have gotten away with providing lousy quality products for far too long. And consider the longer term effect of sensible consumer protection laws. If a product gets returned too frequently due to quality issues, the seller will stop carrying that item, improving the overall quality of his selection of goods on offer. The manufacturer will wise up and either improve quality or go out of business.
In the EU, any online purchase can be returned no questions asked (in like new condition and original packaging) for 14 days after receiving the item, though you do have to pay the return shipping costs. This has markedly improved the quality of items on offer, because the sellers don't want to carry items that get returned too often, ie. crap products. Prices haven't gone up.
I mean, I agree with being being irrational, but I'm not sure that that's the reason that free markets don't work. If you're comparing to government intervention, then you're also comparing to people, after all, and even worse, to people who often make a less-informed decision, because:
1. They're not as personally aware of all the relevant info, since they are removed from the situation.
2. They often care less in general because it doesn't affect them.
3. They often make decisions that tend to stick around long after they are no longer relevant - but unlike biased humans who often don't learn from their mistakes, these actors' mistakes are written into law and can't be changed.
4. They often have different motivations than the irrational people they are supposedly helping.
(Of course, 4 is often the whole point - we as a society have different desires than individual people, and we sometimes want to enshrine those things, even at their expense.)
The only way you're doing better than individual actors is if you're assuming the people creating the laws/regulations are better informed/better educated/smarter or for some other reason can make better decisions (which obviously is sometimes true, but sometimes not).
The main places where "government" provides value, in my opinion, are where there are market failures, or where collective action gives a lot of benefit. And of course, that's assuming a lot of basics are met, like strong rule of law, police force, etc (these could themselves be thought of as collective action).
Unfortunately, even in cases where there is a lot of theoretical benefit to collective action, government intervention rarely, if ever, realizes that benefit--for exactly the reasons #1 through #4 that you give.
I like to use in this context a paraphrase of the old joke about regular expressions: Some people, whenever they see a problem, think "We'll just get the government to fix it." Now they have two problems.
Not so. If a retailer is selling garbage, some people may buy it, but those people will promptly figure that out, stop buying those brands and leave them bad reviews. And the retailer has incentives not to carry bad products even if they don't accept returns because getting burned doesn't make for repeat customers.
The cost in forcing returns is that it requires you to buy insurance you may not need, which costs money even if all of the products are functional because people return things for reasons other than defects and the retailer will command a risk premium. If someone buys the wrong product, it costs the retailer money to have to process the original transaction, then the refund, then restock the product at a lower price because it's open box. Someone who knows they won't need to return the product doesn't need that insurance, but you're forcing them to pay a premium to cover it anyway.
Forcing the retailer to accept returns also makes it riskier for them to accept new suppliers into their stores. If the supplier starts providing low quality merchandise, the retailer has to eat the cost of the 10,000 items it has in stock, plus the value of wasted shelf space, plus the cost of processing all the returns -- so they stop buying from upstart suppliers, even if the new supplier would have provided good quality products. Which harms competition and allows the incumbent suppliers to charge higher prices.
> Prices haven't gone up.
There has been inflation rather than deflation, consumer products that used to be 16 ounces are now 10, the percentage share of value that goes to business investors rather than employees or customers (i.e. wealth inequality) has increased, by what metric have prices not gone up?
Yes, but only those people, there is no shortage of new customers to fleece. Online reviews can (and are) bought and sold, even the supposedly trustworthy review sites such as Trustpilot have been caught manipulating scores, and in some cases (Yelp) hiding reviews until the business in question ponies up for a "partner agreement".
The whole point of a mandatory return period is for consumer protection. A product should be fit for purpose and not break shortly after being taken into use. A warranty period of 6 months to a year ensures that products are fit for purpose. It also discourages the production and sale of disposable junk products, which is a better use of resources and more environmentally sound.
I'd add (2a), due to zero-sum games. This is frequent in competitive situations; I buy something (e.g. advertising) to get ahead, and now you have to buy it too just to keep competing. Then you buy more of it, and I have to buy as well. And since effects of each purchase get cancelled out by other party's purchase, everyone is back where they started. In a perfectly abstract way, there's no externality here - though in practice, anything you buy involves some externalities, so you have them here too, in addition to wasting mine and yours and other competitor's money.
It's a trench warfare.
> It is true that these problems are unavoidable in a free market. However, outside intervention does not, in general, solve them. In fact it almost always makes it worse, because whoever is making the outside intervention has even less at stake in the choices about what to "vote with money" for than the people making those choices.
Can't agree with that. Free market by itself is neither willing, nor in a position to, account for externalities. Also, you could group (2), (2a), and couple other similar things under the general label of "coordination problems", i.e. things that look like iterated prisoner's dilemma if you squint. For that, the best solution involves an outside party unilaterally establishing accepted rules of behaviour, forcing cooperation instead of defection.
> I think the best we can do is to try to give people the best tools we can for making their own choices, not trying to dictate those choices by outside intervention.
Again, this is how we get into coordination problems. This solves (1), but really causes (2).
This assumes that there is an outside party that (a) knows what the best rules of behavior are, which means it has to know when cooperation is in fact a net benefit; and (b) will in fact enforce those rules of behavior, and not be co-opted into enforcing other rules instead.
History shows that no such outside party ever actually exists.
Perhaps Friedman's theory remains completely true, while in reality the separation between the two players has blurred over time. Cui bono?
Also that which stringent free-marketers and ancaps consider a 'free market' probably can't exist at all.
Why would that be true? Once a company becomes big enough, it has resources to squash competition in various ways.
When a company has unreasonably high prices this enables competitors to come in and gain marketshare easily by offering lower prices. And you're definitely right that the company can do things like try to buy out the smaller company, perhaps put pressure on their suppliers, etc. But this is a never ending game since for instance the smaller competitor could then even begin to develop their own supply chain, etc. And a small company getting bought out for some fat paycheck before they even really hit their stride is hardly discouraging to other would-be competitors! So long as the pie and the end of the tunnel is large enough, there will be an incentive to compete against the monopoly.
There is also the innovation issue. Coercive monopolies do not often innovate. Their focus is on profit whereas innovation tends to be focused on competition. This lack of innovation once again offers a big gap in the market for competitors. The aerospace industry vs SpaceX are the best example here. Boeing/Lockheed had a partially government enforced coercive monopoly in a field with greater barriers to entry than practically any 'material' industry. Yet a guy with 'nothing' but a few hundred million and the understanding that something worth on the order of let's say $20 million of material costs should not cost $500 million to build and launch, was able to enter the field and rapidly rise to dominance by working on nothing but innovation and non-monopolistic prices. Boeing/Lockheed by contrast were still so stuck in the past with their MBA style executive leadership that now, many years after the 'threat' of SpaceX has become self evident, that they've still been unable to effectively react.
So to avoid retro-fitting the past to fit a narrative, I expect in the future we'll be able to spin an exact tale of the telecoms industry. Once again another [heavily government enabled] monopoly that's completely failed to innovate and charges unreasonably high prices. Something like the proposed SpaceX constellation of LEO satellites for the purpose of low-cost high-stability internet stands to leave them completely taking over that industry. Of course the failure of Google fiber is an argument to the contrary, but that gets into an entirely different tangent and I think there were many reasons for that failure that lay squarely with Google.
Notice how most of the squashing methods are government based: Patents, litigation cost of unmeritorious litigation, government-enforced contracts that should not be enforced under any reasonable antitrust rules, regulatory capture, etc.
The main non-governmental one is economies of scale, but that has a hard limit. The monopolist can't extract more from the market than the efficiency it creates by being a monopoly, or it would make it viable for competitors to enter. In an industry with low fixed costs, that doesn't buy you much.
The place where you would actually expect to see monopolies is the "natural monopoly" industries that are dominated by fixed costs. But even there, there's a limit to what the monopoly can do before competitors appear when there aren't government restrictions on entering the market. Starting a neighborhood ISP isn't cheap, but if the incumbent is offering slow service for high prices, it's what would happen, because paying (or even borrowing) $10,000 to invest in a new fast ISP that serves your own home is cheaper than paying more than that amount over time for worse service from the incumbent. But not if the incumbent has laws passed to make that purposely uneconomical or outright prohibited.
For anyone interested, this concept is called https://en.m.wikipedia.org/wiki/Socially_optimal_firm_size
The thing that works is to have a coercive force which is primarily used to quell other large coercive forces. So you have a police force that prevents violence etc.
But it needs to be limited in scope, because it has no natural predators. It's always tempting to use the coercive force for <thing> where <thing> is literally anything. Laws are molasses. They have benefits, but they also have costs, and the fact that the costs and benefits apply to separate people makes it much too easy to do net-negative things.
Then someone would assume that power. Anarchy is not stable.
> Big companies could hire mercenaries to enforce their contracts
In the absence of any other government, any “company” is a government unto itself. And any that raises an army, by whatever means, pretty quickly makes that even more clear.
I'm not sure how your examples limit competition.
Let alone in actual societies where anything like laws exist. So I think what comes more through in that quote is more Friedman's ideology around Government intervention than any actual practical economics.
Computing seems to facilitate this particular kind of monopoly more easily than physical systems.
It is absolutely sure that monopolies are most pervasive through the state.
Scale effects and negotiation power means large companies are able to reach structurally lower costs per unit than small ones, which creates an incentive to grow big. This also makes them slow to respond to change, so normally upstarts push them aside. But in the modern VC-backed ecosystem competitors are bought out without having a say in it. The upstart becomes part of the big player.
Even if companies thread that needle and grow big, shareholders love mergers (for reasons I still don’t understand), so over time you get fewer and fewer big players. The regulatory capture is just icing on the cake, but I think you would get market concentration anyway, unless the government took a stronger stance against mergers and acquisitions.
Advocated murdering people to get rid of unions.
https://news.ycombinator.com/newsguidelines.html
Corporate lobbyists tend to cite an academic case for deregulation that has not been made. As the article rightly points out Adam Smith is frequently trotted out as an advocate of deregulated free markets, when in fact he was very clear that a free market must be regulated.
[1] funnily, reminds me of MS
This problem will be corrected in the next 10-15 years, but it won't be an easy ride.
It is clear why we have reached this point. Most monopolies are allowed to exist because of state influence (which happens thru many forms, regulation, patents, or plain direct support), all increasing the barrier to entry for would-be competitors. You see this in most heavily regulated markets.
There are other markets where the cost of entry is so high anyway (investment-wise) that naturally very few companies can make it - this is something that is not an issue per se.
Except airlines were heavily deregulated in 1978. In my mind it's also "clear why we have reached this point", except that I've come to the opposite conclusion that you have.
With regard to the routes they could fly and the prices they could charge, yes. But they were never de-regulated with regard to the safety requirements they had to meet or the qualifications their pilots and crew and maintenance workers have to have. Those regulations have, if anything, gotten more stringent over time. And those regulations pose a huge barrier to entry for new competitors, and favor large airlines over small ones because a large airline can more easily absorb the costs of compliance.
This is the problematic false dichotomy. If you give someone a choice between "this specific set of onerous, expensive, competition-destroying regulations" or "you will be killed", they make the obvious choice.
But those aren't the only options. Existing regulations are poorly optimized. It would be possible to save the same number of lives -- more lives -- by doing more work to improve the benefit:burden ratio of regulations.
The problem is that people aren't interested in this. It's detail-oriented work that doesn't make for good sound bites, so the beneficiaries (the general public) aren't organized enough to know how to ask for it, and the organized incumbents don't want it because it would result in a larger number of viable competitors.
And it's too easy for incumbents to make the sound bites go the other way, by pretending that not spending a billion dollars to save one life is irresponsible, even though the same billion dollars could save more than a thousand lives if saved here and used beneficially somewhere else.
Sure. The air traffic control system is 20th century technology that has air traffic controllers doing things manually that could be done by computers. A better automated system would have the same or better safety while requiring significantly less labor.
In freer markets, people have the option to buy the safety that's appropriate for them. A person who's concerned about car safety may buy a Volvo and someone who'd rather have the money can buy a 90s Corolla. The analogy would be that regulations prohibit airlines from offering a lower safety at cost levels that consumers may find palatable. If airliners became an order of magnitude less safe, they'd still be on-par with the safety offered by other legal modes of transportation.
A better analogy might be this - overly zealous regulations probably make it more expensive to achieve a given level of safety. Engine inspections are a great example - they have to be done on a regular schedule despite operating conditions and monitoring. These regulations disincentivize jet engine manufacturers from developing and deploying on board monitoring equipment that could flag engines for inspection when they need it and avoid unnecessary inspections.
https://www.theguardian.com/world/2011/sep/05/september-11-r...
> However, Professor Gerd Gigerenzer, a German academic specialising in risk, has estimated that an extra 1,595 Americans died in car accidents in the year after the attacks – indirect victims of the tragedy.
I'm honestly not sure how "we can't legally commandeer the plane to transport military personnel in wartime" qualifies as a national security issue. Seems more like a logistical issue in that unlikely event.
Safety and security issues are handled separately. Some foreign airlines are banned from landing at any US airport because they're not trusted.
Not sure you can make such a claim. There are other industries where standards and safety practices improve over time without the need of strong regulatory leadership. Case in point: occupational injuries have been decreasing over time across the board:
https://www.bls.gov/news.release/archives/osh_11082018.pdf
I'd favor mechanization over 'rational human' for sure.
https://www.slideserve.com/wauna/we-need-to-continuously-imp...
Should the airline industry become more like the software eng industry, which has had such great success in producing solid and safe products?
Safety is not a binary variable: it's a trade-off vs economical factors and the cost of each ticket. Since some people have to fly anyway, this means decreased spending in other areas of the economy.
You can't just drop an argument destroying bomb like this with no citation
Have you seen the EU airline market? It's _insanely_ competitive with dozens of airlines flying everywhere, all with rigorous safety standards.
Ekianjo is right, in the sense that entities with lots of capital will become rent-seeking entities in over-regulated/mis-regulated markets because of very high barriers to entry. Examples include ISP's and insurance markets.
You are also right, in the sense that entities will rush to control a heavily de-regulated market. To that end, companies with lots of capital can afford to outspend or acquire their undersized competition. Examples include Air-transit post-1978 and the Internet 2.0.
There isn't one single legislation that led us here and there is no one-size-fits-all solution that can solve each monopoly. We have to evaluate each industry and each market on its own to determine how the state would break the oligopoly.
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
If I may disagree. Capitalism is great at allocating capital unless prevented from doing so. We collectively have come to agree that human labour can be purchased, but not humans themselves. Some things may be held publicly, some privately. Zero regulation is good because in the absence of hindrances people can do what they want but some of those choices hurt other people so regulations are introduced.
Why is it virtually impermissible to point out that everything else notwithstanding certain patterns keep recurring to individual markets in particular and the economy as a whole. The first is this. In the absence of regulation in mature markets companies will form cartels/trusts/oligopolies. It is so universal it is akin to a natural law. Failure to act on that hurts the economy in general. We used to be good at recognising this, we aren't so good any more. The second is this. People want greater returns over lesser returns. This leads to ever greater financialisation and capital chasing its own tail unless prevented from doing so. It will inevitably lead to super dodgy things like stock buy-backs (which in any healthy market ought to be virtually banned).
FTA: “The results were so good that in 2016 United’s board approved a stock buyback of $2 billion, which is the financial equivalent of spraying yourself with champagne.”
That's terrible. There is a direct correlation between ballooning exec salaries, corporate stock buy-backs and stagnating workers' compensation.
> There are other markets where the cost of entry is so high anyway (investment-wise) that naturally very few companies can make it - this is something that is not an issue per se.
An incorrect analysis of what ails the economy will over time have dire consequences. It may be hard to see it if you're doing okay but lots of people are not doing okay. There's political anger. Populists will blame outsiders like immigrants (don't get me wrong, I'm for strict immigration policies – but that's the incorrect cause and effect diagnosis – but blaming immigrants (illegal or otherwise) is scapegoating).
I have practically stopped reading HackerNews because too many on here appear to be too financially secure owing to the industry they are in, their backgrounds, luck, and hard work. Someone just died in Paris over protests over fuel price hikes. If those entrusted to keep the system healthy fail to do so in a controlled orderly manner then the people will introduce disorder by forceful means. I am not advocating this. I am against this. But the chances of this not happening are rapidly shrinking. I hope I'm wrong but all the macro indicators and with history as my guide tells me that I am not.
edit: typos and such
We should make informed choices, but who has the time and energy to dig and evaluate the market share and long-term consequences of the fridge they're going to buy?
Look at FB stock, it just dropped from 220 -> ~130, they saw almost half of their market cap wiped away in a few weeks. The monopoly idea is a narrative invented to stoke fear, outrage, and page clicks. It's a talking point for psuedo educated people.
I also don't think bringing up FB's stock price is relevant, not sure what your point is getting at there?
If monopolies can routinely be outcompeted, then what is there to be concerned about with them?
Markets can change in ways that destroy monopolies. For example, if in 1900 you had a monopoly on horse-drawn carriages, that wouldn't have prevented you from being put out of business by the advent of the automobile.
I think the distinction is between a monopoly disappearing because the market it owns disappears, or because it gets outcompeted in it.
I'm real curious how you think those companies are irrelevant.
It reminds me of the arguments that communism must be a good idea because we haven't seen true communism yet. We've seen true capitalism for much longer and much more clearly than we've ever seen any form of communism, and it's exactly what the US has. You can't just hope that maybe with a little more regulation, or a little less regulation, or something, capitalism will magically work. Capitalism sets up incentives for people to figure out regulatory capture and lobbying in whatever regime you come up with. Capitalism sets up incentives for companies to influence the public to believe that certain forms of government intervention are perfectly natural (take copyright, for instance - if you convince everyone to get rid of copyright, you'll just set up incentives for companies to convince everyone to bring it back). If you think this isn't working right, please work with the folks who want to figure out an alternative.
The author appears to be conflating the terms "capitalism" and "highly competitive markets", which are not at all the same thing. "Capitalism" is, as you say, perfectly compatible with regulatory capture and co-opting the government to help stymie potential competitors; in fact that is exactly how the "capitalists" of the late 19th century in the US operated.
> Capitalism sets up incentives for people to figure out regulatory capture and lobbying in whatever regime you come up with. Capitalism sets up incentives for companies to influence the public to believe that certain forms of government intervention are perfectly natural (take copyright, for instance - if you convince everyone to get rid of copyright, you'll just set up incentives for companies to convince everyone to bring it back). If you think this isn't working right, please work with the folks who want to figure out an alternative.
I like your line of thought but I'm unsure if I agree with the fact that copyright could be incentivized to come back but that's just an opinionated view of mine. It started with the structure of the government from the beginning making it was a day 0 idea. There are also different types of capitalism; China's capitalism is different from US capitalism. So, that also is something to consider with the "fake capitalism" issue you brought up.
Overall, I think one baseline to be able to tell if capitalism is working is if one can actually go from rags to riches in today's time. I also think what people are picking at is the imbalance that happens at an economy of scale when a company becomes so large that it is the market.
As far as I can tell, by "fake capitalism" the author means the opposite of "competitive free markets" (emphasis mine), not unregulated ones. In fact, the author says, "The federal government has done little to prevent this concentration, and in fact has done much to encourage it." - i.e., the author supports increased regulation and government intervention as long as it's in the appropriate direction.
It's a really ridiculous system and it's the consequence of the fact that regulatory organizations have started to become a tool for multinationals to exploit at their whims, rather than a tool to effect positive change in society as a whole. So it ends up in a system where individual to small business capitalism is hyper over-regulated whereas big business and multinational capitalism is regulated on paper yet laissez faire in practice.
Regulation is orthogonal to all that, so long as it does not interfere with the ability to aggregate capital. You can tax the corporations heavily, you can impose various safety standards on them, you can have consumer rights commissions etc - it makes it harder for them to make money from the capital that they own, but it doesn't change the fundamental equation of capital -> money -> more capital, and therefore the result is still capitalism. The only way you can stop this cycle is by imposing a limit on how much capital can be held in one hands.
And that is really the issue. The further you limit the ability of people to engage the market (as buyer and seller) the further away you move from capitalism. And that is precisely what our current system is doing. Repeating the same example just because it's so stupefying. In most places in America today you cannot legally setup a lemonade stand and start selling lemonade on your own property. We're creating a culture of passive consumers driven by extreme regulations against everything except such!
Limiting the amount of capital one can own is not equivalent to your scheme, by the way. The rule isn't that only one guy can own a tavern, or that there can only be one tavern - the rule is that one guy cannot own more than one tavern (just as an example - I don't think that's the level at which we should actually cap capital).
And this is where I think corporatism excels. There are now just an immense number of rules and laws that are all increasingly esoteric even to operate quite simple businesses. And that's before you get into the countless fees and costs the government demands before you've even sold your first product. In other words when you kill off entrepreneurship and start moving away from capitalism, you invariably head towards corporatism which is itself headed much closer to feudalism than capitalism.
As for the king example, this was relating to the feudalism -> capitalism -> corporatism -> feudalism loop, not your specific suggestion. As for your suggestion, there are two big issues. The first is the same as discussed here. Capitalism and competition is a growth system. The reason e.g. Elon Musk was able to create a competitive rocket and vehicle company was because he earned hundreds of millions of dollars in another venture. No individual has any personal need for hundreds of millions of dollars, but it is strictly required if this individual wishes to engage in large scale ventures - the sort of which stand to massively improve society.
The second issue is probably the bigger point. We already have countless laws, on the order of thousands of pages, of laws relating to competition, anticompetitive behavior, restrictions on mergers and acquisitions, etc. These were all geared minimizing anti-competitive ownership. But the general rule in a corporatist society holds true. We have the FTC approve mergers between e.g. AT&T/Time Warner/Charter while rejecting mergers between far smaller companies that could eventually become the competitors for these sort of behemoths that increasingly stand above the law, and perhaps even above government.
In other words, write the laws and expect to see you and I only be able to own e.g. one tavern. But expect to see the king's friends somehow manage to own thousands. Corporatism in a nutshell.
That was changed under Reagan, and the new approach was that monopolies were only to be regulated if they start to affect consumers. And that's very much by design - according to the people who devised this regime, monopolies are not in and of themselves bad, because they're more efficient due to economy of scale. So, for example, if a merger happens, the reason why they can block it is if they can demonstrate that it would raise prices or reduce quality of service. If they can't prove that, that's too bad - even if the sheer size of the resulting behemoth is obviously a problem for market competitiveness, it's just out of scope.
I don't think it's a coincidence that monopolies dominate the market under these new rules, in a way that they haven't done before.
You'll also find that going back in time there were also far fewer rules against individual entrepreneurship. And where there were rules they were enforced in a more sane fashion. E.g. - even if a kid's lemonade stand isn't obeying regulation 3753 section 3, or city ordinance 4725-4 or whatever, you don't go and shut down the stand as the stand is doing nothing but good for everybody.
But as we transition towards corporatism rules against large companies start to disappear or fail to be enforced, while those rules against small companies and individuals start to grow and become unreasonably burdensome as well as extremely actively enforced.
The one part we don't agree on is why corporations are allowed to merge. For instance it's quite evident that Time Warner alone has already exploited their monopoly to increase prices unreasonable. Internet service in America is far more expensive than in many parts of the world, yet the quality is not particularly remarkable. And there's no justifiable reason. It's just companies agreeing not to compete and then jacking up their prices. Because of this it's not reasonable to suggest they're being technically allowed to merge/acquire further competitors because there's no evidence that they won't do what they're already doing. This is just another aspect of corporatism where rules disappear as companies grow large enough.
[0]: https://en.wikipedia.org/wiki/Capitalism#Etymology
There's a continuum of Capitalism->...->Socialism->...->Communism where it's been shown that both a completely free market (extreme capitalism) fails due to being unstable (for the reasons you state), but also that pure Communism fails (because people are people and systems corrupt - essentially same reasons as with Capitalism).
Somewhere in the center where you allow both the good of the many and self-interest to balance - you can have stability... but it comes at a cost of constant vigilance.
If you're having trouble with Automake and having trouble with CMake, the answer is almost certainly not to use parts of Automake and parts of CMake. A much better strategy is to read go read Automake docs carefully and make sure you're doing it right (inspired, perhaps, by people who say "You're doing Automake wrong" but not taking them at face value) and see if you can get it to work; go do the same with CMake; and if neither works, go look for something completely different. Maybe Bazel. Or start figuring out where Automake and CMake are falling short and how to improve them - not how to use them better, but how to build new versions of them that actually work.
Rules and regulations are not inherently bad, but as they grow out of control they rapidly transition from being a net positive to a net negative on society. Go try to navigate the thousands of relevant pages of legalese full of esoteric and counter-intuitive laws in e.g. California just to open a food stall. Your utility cleaning sink is only 9" deep? Time to shut you down, it needs to be 10"! In the current state of the US it's generally unlawful for a kid to go setup a lemonade stand in their front yard. The US has rapidly transitioned towards becoming quite anti-capitalist.
But of course this was not always the case. It's hard to pinpoint when exactly we started transitioning to the current era, probably around the 60s. And this is really the point. 'Not true communism' can not really pinpoint any era in communism as 'true communism' because the ideal and reality simply don't exist in the same plane. And while e.g. the 50s were not necessarily the penultimate example of what capitalism can yield, they were at least a really great example - as it was a time period that struck a balance between rules and regulations while not hampering individual entrepreneurship and innovation.
What you're describing is distinctly capitalist.
"Pure capitalism is defined as a system wherein all of the means of production (physical capital) are privately owned and run by the capitalist class for a profit, while most other people are workers who work for a salary or wage (and who do not own the capital or the product)."
This has nothing to do with how easy it is for someone to acquire capital in the ways you're describing. In fact that it is difficult to enter the capitalist class only emphasises that there is a difference between them and the worker class (i.e. capitalism).
The most underlying and critical point of capitalism is an individual's right of access to the market, both as a buyer and a seller. All this class distinction stuff are part of Marx's inane ramblings. They don't even make any sense. Traditionally the shop owner, shop visitors, as well as the shop workers have lived practically right next door to one another in mostly similar condition doing mostly similar things. And more importantly people can generally do as they feel. Want to open a shop? Then knock out the front wall of your home, put up a sign, and boom - you're now part of this magical "class" of business owners. Some people even just set up tables outside their house and sell whatever they happen to like making or growing. And this isn't some vague ideal. In many nations throughout the world today this is still very much the reality, and it's awesome.
This is really the unfortunate part. So many people try to come to conclusions about economic systems and what is right or wrong without having any experience outside of America or similar nations. It's like trying to judge the civility of society at large when you've only ever lived in e.g. Detroit, St. Louis, or Baltimore. Your opinions would be misinformed, at best.
The most underlying and critical point of capitalism is an individual's right of access to the market All this class distinction stuff are part of Marx's inane ramblings
This is not the case. The Wikipedia definition for capitalism is well cited.
Then knock out the front wall of your home, put up a sign, and boom - you're now part of this magical "class" of business owners.
Yes, there is absolutely the ability to move between classes. The use of classes in the context of this definition of capitalism is to give a broad overview of how a capitalist society is structured. In your example, owning the house and stock they sell would be considered "capital". If they were to employ an assistant, to tidy up or help sell stock (which the assistant doesn't own) then the assistant would not own their means of production. Making the assistant a "worker".
Some people even just set up tables outside their house and sell whatever they happen to like making or growing. And this isn't some vague ideal. In many nations throughout the world today this is still very much the reality, and it's awesome.
But it's not capitalism. Hence the definition I provided.
Returning to this bit:
All this class distinction stuff are part of Marx's inane ramblings.
I think shows your true colours. Economists might respectfully disagree with Marx or his ideas, but to call them inane is just ignorance.
As for Marx, something doe eyed students of today often forget is that academia can and does often go extremely far astray, particularly on social issues where a dangerous hive mind frequently emerges. For instance in the early 20th century we in the US, and the academic establishment in particular, were the biggest drivers behind eugenics. We were literally the inspiration for Hitler who saw his own work as building off our 'progress.' His work ultimately being the one and only reason that eugenics in the US was scaled back and gradually became taboo.
The rise of Marxist ideology corresponded with an extremely sharp increase in the number of individuals pursuing the social sciences and liberal arts at the postgraduate level. Unfortunately these studies, in this quantity, do not really correspond to being able to contribute to society in any meaningful way. That's not to say the arts and humanities inherently do not contribute as they most certainly do. But society cannot support a billion philosophers anymore than it can support a billion neurosurgeons or plumbers. Thus enter Marxism which is little more than a fancification of striving to live as Marx did: drink and drug yourself to stupidity while writing whatever you want. Time to put food on the table? Just mooch off Engels and your brother-in-law.
Capitalism essentially DOES work. Any argument otherwise bears to burden of proof in presenting a more desirable alternative.
There are 0 starving people in the United States, there is an actual obesity epidemic among the poor. The absolute quality of life over the last century across capitalist nations has continued to explode across all societal strata.
That is somewhere between misleading and flat-out untrue. While starving to death in the US is exceedingly rare, the number is still non-zero and there are literally millions who are "food insecure" (the term used for statistics etc.) to some degree or other. That's starving, as anyone who has actually had trouble affording decent meals (as I did when I was young) would know. The fact that there are also poor people who are obese doesn't change that one bit.
And you know the funny thing? The reason there are so few people starving to the point of death is distinctly non-capitalist food programs. Capitalism failed them; social democracy saved them. That you would claim the near opposite is frankly disgusting.
1. I think that's true on average and probably true on the median, but it's unclear that's true for everyone. There are a lot of anecdotal stories of people working at a gas station to pay for college or even postgraduate school ~50 years ago, no loans or anything. That's just not possible today. I would bet that in terms of net worth, ~50 years ago the lowest class in the US was at least positive and is definitely not positive today.
2. In any case that's not what the author means by capitalism not working. The claim is not that quality of life has gone up, it's that the market is not operating in the way that advocates of capitalism say that it should. Perhaps you want to argue that oligopolies and regulatory capture and barriers to entry in new markets are morally good because they have had the empirical result of reducing Great Depression-style starvation. I think that's a coherent argument to make. (I'd ask some questions about how the leadup to the Great Depression involved oligopolies and regulatory capture and barriers to entry, but I imagine you could come up with convincing rebuttals.) But then you / the people who believe like you need to start selling capitalism as not free markets because that produces moral good, but as highly regulated and government-intervened markets that are centrally planned in a way that reduces suffering and quality of life and is therefore morally good. If you want to argue that the author's depiction of "capitalism" is a straw man and in fact capitalism is winning by killing needless competition, that's fine - just start saying it.
When I argue with commie friends, they frequently conflate collaboration with collectivism. One claimed that the internet was greatest communist project ever.
We're so screwed.
You're arguing semantics.
The point is not to throw the baby out with the bath water.
He used to be an advocate for signing with a big publishing company, and suffering their 17.5% royalty + marketing costs. Most large published books never out earn their advances your chops.
But his refused books kept growing in sales with Amazon Kindle. The books he did publish with traditional publishes kept insisting on high prices to keep the paper backs competitive. Eventually he switched to just publishing on Amazon KDP as the future and eventually got the rights to his books back.
The above book is published by Wiley. The digital version listed on Wiley's site is $14.95, the hardback is $27.95, while the amazon hardback is $18.27. The Kindle version is listed for $11.99.
"Delta has an 80 percent market share in Atlanta and 77 percent in Philadelphia, while in Dallas-Fort Worth it has 77 percent."
The last two are fortress hubs for American Airlines (Philadelphia used to be US Airways until they merged with American), not Delta.
Seems to me that a "moat" is most easily quantified by the share market total capitalization, and to disrupt monopolies, simply introduce a tax on total market value for a firm.
You can see this in rusia where after 1990 communism has been replaced by big money government, not democracy. In china same thing, communism has been replaced with big money government, a capitalist economic system.
And you see the same trend in the US where a democratic government has been replaced by a big money capitalistic government, only interested in serving the needs of money making.
And without a government system making rules to minimize the negative impact of the economic system, we can see all the negative aspects of capitalism. Exploitation of humans, winner takes all.
Capitalism is winning even at the level of government, and this is what it looks like.
Just like we see the need to separate state and religion, we should also separate state from the economic model. Democracy and capitalism aren't one and the same thing. Democratic governments have multiple economic models to choose from, depending on the problem they want to solve.
But, again, since the story of how capitalism is the greatest, the one and only salvation of the people (does it sound like religion?) is so pervasive, no amount of evidence can undermine its foundations. If reality proves that it doesn't work, the reason HAS to be that "it wasn't implemented right in this or that country. So we must take bolder steps to implement it right". Sounds like slaughtering goats to me. If the gods didn't favor our army in battle it surely must be that we didn't slaughter enough goats at the altar and NOT that our army was ill prepared for the task at hand.
Excellent analogy. Thank you.
Sorry to have to point out something that should be blatantly obvious, but no. The essence of capitalism is capital, the accumulation of wealth in private hands that own the means of production. And capitalism has a nasty tendency toward fewer, more powerful players as they gobble up market share, muscle out competitors, erect legislative and logistical barriers. This is what capital does. It buys the power to continue itself. What you are seeing is absolutely capitalism running its normal course.
"Capitalism is an economic system based on the private ownership of the means of production and their operation for profit."
I wish people would do some cursory research before trying to argue about it.
But, I think this is temporary. As and when credit tightening starts to happen, and it will with time, many of the companies will be hard pressed to pay what they are owed. And with time companies will start to restructure their businesses back to where things were.