Many statists argue that many profit maximizing monopolies will exist on a free market, and therefore the government should break them up.
My argument against this is as follows: To the extent that a monopoly maximizes profits, is to the extent that there will be an incentive for other firms to enter the market… The statist then usually brings up barriers to entry, economies of scale, etc. To which I reply “The only true barriers to entry are government imposed.” And then I usually go back to the argument that if a monopoly is maxing profits, then it sends signals to other potential firms to enter the industry. High fixed costs and other barriers to entry are irrelevant because they can be recovered to the extent that the monopoly is maximizing profits.
Another point often brought up is that a monopoly can flood the market with product in order to undercut the market price and cause other firms to go out of business. I remember Rothbard saying that this is historically unfounded and that the capital used by the undercut firm doesn’t disappear and can therefore be used by another potential entrant, but is there anything else to this counterargument?
What do you think of my arguments? What would you add/clarify? People usually don’t argue against my reasoning, but rely on erroneous empirical examples of monopolies, of which I am unfamiliar. I then look them up later, and find that they were government enforced monopolies. [:@]
More fundamentally still: if a firm wants to offer you a product, what could possibly be wrong about that? If it offers you it for free or for the price of all the gold in the world, it’s still giving you more options than you otherwise had. I fail to see how giving people more options is a bad thing.
As long as there are investors interested in the long term, you can enter the market
Historical cases of flooding the market with cheap goods have resulted in disaster for the potential monopolists. Usually if there are say 3 firms in a market, they try to cartelize, and breed a 4th competitor.
The short term flooding of goods can be offset by appeals to the consumer base. For example, you could explain to people that monopolistX will just raise prices in a couple of months, so you could simply make a contract with consumers that they would buy your burgers at a fixed price for the next year. This way the consumer gaurantees themselves the overall lower price, and you stay in business.
Whatever problems they throw at you, there are rewards to creatively tackling the problems. Human beings have figured out f*cking space travel. You think they can’t figure out how to beat some fat lazy frat boys? Just because your opponents lack creativity doesn’t mean entrepreneurs do…
Also the state has no incentive to break up cartels. It is usually co-opted by them. See the AMA
The only reason these monopolies exist in the first place is b/c the state has subverted competition and in turn perverted the free market. These companies use the power of pull and with new regulations they are able to tramp on any chance of a smaller company rising up. There is no argument to be had with statists, monopolies are of their creation and will continue to be untill the state is done away with.
