The subject is monopoly and not whatever pet issue you are in a crusade against.
This is a complete confusion of profit. A monopolist has no guarantee of making a profit on his enterprise. He may be such an inefficient producer that the costs of production he undertakes exceed the final revenue from the goods he sells.
Why do you keep asking this question as if it is relevant to this discussion?
This isn’t a “pet issue” and it relates to the subject of monopoly. And the thread’s original question has to do with whether or not the transfer from state monopolies to “private” monopolies is truly “capitalism”. You seem to think so - by the very least, me and Juan don’t. So my criticisms are totally relevant.
What don’t you understand about “legally restricted competition”? Yes, that’s effectively a gaurantee that the profits will go to you if they go to anyone because there are no other people for them to go to in the given area. Logic 101. This is especially true with respect to the patent monopoly, which is nothing but a legal gaurantee of future profits.
Because you’re functioning as a vulgar libertarian, I.E. a defender of monopoly and current economic conditions through the misuse or abuse of free market theory. It is totally relevant to this discussion. You keep insisting on having this conversation in a vacuum, as if we’re not allowed to question the assumed premises or get into the justice of the matter.
That is not true. The private monopolist can charge as much as he wants and the fact that he keeps what you term ‘profits’ is a powerful incentive to do so. If a ‘private’ monopolist can provide the worst possible service at the highest price, that’s what he’ll do. That is the reason why the state, after granting a monopoly, regulates the prices of the services the monopolist provides. The first intervention causes problems wich need to be ‘fixed’ with more intervention.
Yes, and the one who is completly confused about the meaning of the word profit is you. Profit is what entrepreneurs earn in the free market, not what partners of the local mafia get as spoils.
Even once your competitors have been excluded, you have not made a penny unless you can produce a product, and producing this product is going to cost you resources, which means that you will have to take a risk, which means it is possible that you are not going to make a profit. It is basic economics of production 101.
Suppose I am a bloodthirsty monopolist and also vulgar. What difference would it make as to the economic nature of monopoly?
I think you need some more education before you get the right to be offended by economic discussion.
So can the public monopoly. In fact, defence is a brilliant example of a public monopoly that charges a maximum price for the lowest possible quality of service. However, a private monopolist still has ownership over the full capitalized value of their venture as well as full title to it so that in the event of their death they may pass it on. Which has greater incentive not to run the firm into the ground?
-Jon
I’m not at all offended by economic discussion. What really bothers me is people who think that reality changes when the word ‘private’ is used as modifier for the word ‘monopoly’. However using a bit of newspeak is not the same thing as knowing political economy.
The issue at hand is not related to the ‘law of returns’, so your link is irrelevant.
Exactly my point. I’m glad you finally see what the problem is. The ‘efficiency’ of both ‘public’ and ‘private’ monopolies is the same.
So, we are not talking about competition, but about the dynastic aspirations of oligarchs ? Anyway, both kinds of monopolist have the same incentives, or lack thereof, to invest in infrastructure, R&D, etc. I can’t recall if I said this, but just in case…
The only force that causes firms to be efficient or else die is called competition.
Yeah, both at the base face the same problems, though in the case where the firm is fully owned there is an incentive to not let it fall to ruin and only aim to pocket current receipts. Both will stagnate, charge high prices &c., only the public monopoly will be the worse of the two, as it has little to no incentives to cut costs, introduce innovations &c., whereas if it increases profits the private owner does.
-Jon
You really need to learn the law of returns because that is not true. Even Crusoe and Friday, despite having no third-party competition, have an incentive to be efficient and to achieve the optimal marginal returns.
Two people engaging in trade is just an instance of the free market. The fact that there’s no third-party competition in Crusoe’s island does not prove the efficiency of state granted monopolies.
It is true that any individual has incentives to use his or her resources efficiently (it is also true that individuals can waste their resources if they feel like). However, from the fact that economic actors try to maximize their well-being, it does not follow that private monopolies are more efficient than public ones.
Mises :
" The law of returns asserts that for the combination of economic goods of the higher orders (factors of production) there exists an optimum.
That there is such an optimum of combination is all that the law of returns, popularly called the law of diminishing returns, teaches. There are many other questions which it does not answer at all and which can only be solved a posteriori by experience."
I don’t see the connection between the law of diminishing returns and the problems caused by monopoly, either ‘public’ or ‘private’.
Why do you think that’s necessarily true ? I can easily provide a counter example : the owner of the monopoly has quarreled with his family - he’d like to see his heirs flipping hamburgers at McDonalds.
Let’s compare a public and a private monopoly. Let’s imagine that both charge the same amount and both provide the same quality of service. Now, the owner of the private monopoly does indeed cut costs more than the managers of the public monopoly, but from the point of view of the customers this is wholly irrelevant.
We can also compare a public monopoly in a rich country vs. a private monopoly in a poor country. It seems likely that the public monopoly will provide a better service.
And I’m still wondering why, when the person who started this thread asks whether monopoly is ‘true capitalism’, he doesn’t get a straight answer but instead a muddled defense of ‘private’ monopoly.
Yes there is no deterministic necessity in human action, hence I spoke of incentives, not iron laws. That does not invalidate the general point. Given that it’s if ceteris are paribus that it’s true, it’s a bit odd to assume ceteris are imparibus (e.g. rich vs poor country.)
-Jon
Simple enough, a private monopoly will optimize the capital value of his monopoly by supplying his monopoly good at the point where the marginal revenue is equivalent to the marginal cost. A public monopoly, being owned by nobody, will be the subject of power struggles to use up the capital. A private monopoly is therefore economic while a public monopoly is not. This is also why monarchy is preferable to democracy.
Do you consider monarchy to truly be “private”?
So long as the monarch determines who will inherit his state, then yes, he can be said to have exclusive control of it.
Do you think that monarchy is justified because it’s allegedly “private”? If you view monarchies as truly being “private property”, and assuming the obvious that you think that private property is legitimate, then you’re basically legitimizing the state so long as it’s not democratic. The state is henceforth legitimate - as arising from “private property”. This hands a huge bone to the collectivist anarchists who claim that private property inevitably gives rise to the state and argue that market anarchism is essentially the same thing as monarchy. It pretty much concedes the argument to them.
Also a problem I see with what you’re saying is that political democracies would actually also fall under your definition of “private”. An oligarchy has exclusive control over it. The only difference between monarchy and democracy based on these definitions is merely a matter of how many people have exclusive control over it, where in a monarchy it’s a single person or family and in a democracy it’s more of an aristocracy. The democracy nonetheless is still exclusively controled, as from the standpoint of most people they don’t really control it at all in any real sense. They are subject to it.
Wrong. A public monopoly is owned by politicians, just as ´private´ monopolies are. All political systems share the very same nature, i. e. a group of oligarchs enslaves their fellows. Besides, there’s never been such thing as monarchy. The political systems always have been oligarchies. The fact that one clown is regarded as ‘monarch’ and claims that god has given him the right to own his subjects is of course nonsense and a smoke screen.
It should be obvious that it’s impossible for one person (‘monarch’) to enslave anybody unless he relies on other criminals like the military, the priests, and the rest of parasites that live off productive people.
That’s a good point that there never really has been a “pure” monarchy. There is always some kind of oligarchy involved. All democracy really does is expand the oligarchy. Likewise, as I’ve tried to point out, there never really has been a “pure” political democracy, as democracies are still oligarchies. A “pure” political democracy is a logical impossibility, since it would require everyone to be state agents.
With that clarified, I also fail to see how monarchies don’t involve power struggles to use up the “capital”. There is always some degree of factionalism internal to the political oligarchy.
And that is, after all, the logical conclusion of monarchy (tyranny actually). More and more people realize that honest work doesn’t really pay so they choose to join the ranks of the exploiters. Monarchy and monopoly actually provide the incentives for the system to sooner or later collapse. The idea that a few can enjoy privileges for long is naive.
Monarchy is private ownership of the state, and in that sense is preferable to public ownership of the state, but that doesn’t mean it is just, since only one man is allowed this right and not all men.
However, public ownership of the state does not correct this injustice, it simply compounds its mistakes.
That is, once again, grave economic error and I can only suggest that you continue your studies before you post anything but a question on this forum.