This comment, or mindset actually, is so stupid that I don’t even know how to address it. I am used to, and somewhat ready to, respond to or rebut sort of high-minded arguments, but I can’t figure out how to tackle this one.
And I ordinarily wouldn’t bother with it, except that I hear it a lot.
It goes like this: I am arguing with someone about antitrust/monopolies etc, and the person will eventually claim that, between the two of us, he is the one who supports competition and a free(r) market. Why? Because, he wants the government to come in and crush monopolies so that there is more competition in that particular market.
I don’t even know where to begin with this. The last time someone tried this tack with me (just a few minutes ago) I simply said, “What is free market about one company whining to the government, asking them to crush their competitors who are providing a better service or product at a lower cost?”
His response was a lot of words with no substance and then a repitition of the original claim.
Now, let’s be clear: in one sense, this isn’t a big deal at all. Let the dumbass think he is the one who believes in free markets. On the other hand, however, since this has come up so often, I would be interested in hearing how people here would respond to this very, very, very stupid assertion.
Free Market monopolies are good, its a sign that that company is operating at peak efficiency with relation to the market as long as its monopoly persists. The bad kind of monopoly is the mafioso cartel type that is backed by force, these are what the government is and what the government creates.
I don’t argue with fools, and you might be wise to avoid them as well, but depending on the person I would be inclined to point out that if the firm is doing nothing illegal, then how can a large share of the market be worthy of smashing? Aren’t they doing something right? Surely being successful in and of itself is not a crime. Should we break Michael Jordan’s arms? Should we take away Barack’s teleprompters?
Next, I would point out that there can be no monopoly without colour of law. Without guns (violence) to back up a monopoly, competition will undermine its marketshare and bring it down. No one can charge high prices or give bad service in a bubble, without doing something aggressive to deter competitors. Again, if the firm is doing something illegal, then we are against that, but if they are more efficient, with more products, better service and better prices, then the consumer is already being well served.
A good example to suck people in on, is Standard Oil. How they progressively made oil cheaper, by improving the refining process, and thus being more environmentally responsible with waste. And then you tell them, the state did break up that monopoly with anti-trust but … Standard Oil was already losing market share and had lost its monopoly before the government stepped in. The market brought down standard oil.
The government is usually the cause of monopolies.
Negative real interest rates make it profitable for a large corporation to borrow money and buyout smaller competitors.
Large corporations can effectively lobby the State for favors. Small businesses can’t profitably bribe politicians.
Government regulations encourage consolidation of industries. The cost of regulation compliance hurts small businesses more than large businesses, because the cost is a greater percentage of sales. For example, even though the auto industry is incredibly inefficient, you don’t see car manufacturing startup businesses. The problem is not “It’s hard to build a car!” The problem is that government regulations make small car manufacturing businesses unprofitable.
Large corporations are “too big to fail”. Why would anyone bother competing with a business that gets a State bailout whenever it loses money?
There are businesses with an explicit State monopoly, like telephone companies, cable companies, electric companies, etc.
In a really free market, if you have a valuable monopoly, you’ll find yourself with competitors. Laws restriction competition and State subsidies are necessary to sustain monopolies.
The most evil monopoly is that of government itself.
Whoever said any form of competition is a good thing? It’s FREE competition that is an integral part of the FREE market. This doesn’t mean squashing monopolies should they emerge, only allowing anyone to compete with a monopoly. If the market FREELY discriminates towards one provider over all others, this is part of their FREEDOM to transact with whoever they wish.
Using coercion to promote “competition” is the same thing as taxing one group to subsidize another, under the banner of “profit”. Profits derived from FREE enterprise and FREE trade are essential pieces to a free market economy. Profits derived from coercion undermine the FREE market and its mutual benefits. Competition derived from coercion is no different - it undermines the benefits of FREE competition and FREE markets in general.
If a free market is exactly the system which produces the maximum amount of consumer and producer surplus, then I think the guy has it right (although he may be an idiot). Monopolists maximize profit by reducing quantity below the social optimum and selling at a higher price. This increases producer surplus but reduces consumer surplus by a much larger margin, resulting in deadweight loss. This is bad, so if the government can break up the monopoly with a lower DWL than the monopoly creates by virtue of its existence, it should do so.
Thanks for the great responses so far, and yes I did point out that Standard Oil never even had 90% of the market share and by the time they were prosecuted under the Sherman act their market share was down in the 60-70% range. Note: I am not positive about these approximate numbers, but I do remember hearing a lecture by Dilo or Woods wherein these assertions are made.
Amusing note: the gentleman last night who came up with this crazy nonsense also said, mockingly, that “we ‘socialists’ saved capitalism from itself with our socialist laws, and in fact saved the entire country.” I said, “When did that happen? Apart from the correct answer, which is ‘never’.” To which he replied something along the lines of “The monopolies, had they not been reined in by the Antitrust laws, would have not only destroyed capitalism, but the entire economy of the US.”
Yes, those evil monopolies, reducing the price of oil to almost 1/10th of its previous price by improving efficiency.
I can see Austrian economists are clearly above rational debate and prefer ad-hom attacks.
I’m aware that I’m quoting the obvious econ textbook answer, but I quote it for exactly that reason - it’s obvious(ly correct). What rational monopolist wouldn’t follow the simple textbook econ behavior? Do you find ideas like PS/CS misguided or offensive?
You are correct. Which is why monopolies should not be allowed to exist. And the only monopolies that exist are government created.
Yes it is. So the government should get out of the business of creating monopolies.
The government can “break up” a monopoly simply by removing the monopoly status. It should end patent/copyright/trademark protection, eliminate all regulations, and lastly, but most importantly quit enslaving the populace and get consent of the governed, because the government is a monopoly itself.
