LS: This is a thread split off from another discussion on IP.
Um, an owner of a monopoly will always make more money by having the monopoly than not having the monopoly…
No. You’re missing the point. That’s the notion behind mercantilism and economic exploitation.
Traditional corporatist/mercantilists see monopoly (lack of competition) as the path to success. Free marketers know that success comes with healthy competition and the increased trade it brings.
A second user of an idea might have ideas to expand the market, refine the process, increase productivity, find alternate uses. His competition by it’s very existence will increase efficiency.
Trade is not a zero sum game.
I am not talking about the economy, and you seem to be. I am talking about the individual. Yes, I know that monopolies are detrimental to the economy, because they reduce innovation and costs for the consumer. But for the individual, a monopoly is advantageous. An individual or company will make more money by having a monopoly than by not having a monopoly. If an electrical energy company is given a monopoly over an area, they will make more profit than if others are allowed to build electrical power plants to supply the same customers. It all has to do with supply and demand. I know you know this. So, yes for an individual, a monopoly is preferrable. For society in general, however, a monopoly is detrimental.
So, back to my original point, IP laws are no more than monopolies, and the only thing being “stolen” from the owner of such “property” if someone copies the idea is profits, because now the production company cannot make as much money, since someone else is selling the exact same product. Just like if someone has a monopoly on providing energy to a certain population, if another energy company is built to supply the same population, the original electrical comopany still has all its electricity, no electricity was stolen from it, but now its profits have been “stolen”. And no, I do not think anything is being stolen. Their profits have simply been reduced.
I really hope I made myself understandable.
Gentlemen,
do I grok that right that the debate is about contractualist ethics vs. ethically-neutral economic efficiency here?
I understood what you were saying. I believe you are wrong.
You’re saying as a rule, that competition reduces profits. I am saying that there are exceptions.
This is about a deeper, less conventional understanding of markets. It’s about understanding that the monopoly company doesn’t have the creative incentives to expand it’s market as aggressively as it would under competition. That competition adds more customers, more markets, increases visibility and trade opportunities, and also creates product differentiation and diversity.
A market, and a product, are not a zero sum game because demand is infinite. But supply is finite, and made much more so under monopoly than under competition which limits the growth of markets.
Imagine coke and pepsi fighting over 95% of the cola market. Now one goes out and comes up with Diet Pepsi. Suddenly, you have some people switch from coke to diet coke, but you also have people who did not drink coke at all because it had sugar, drinking diet coke. This group might include diabetics. So now the market has expanded as the product was differentiated by one party. Naturally, the other party responds, so they likely keep 100% of the coke drinkers (who now drink coke or diet coke) and picked up a bunch of non-coke drinkers to drink diet coke.
Competition serves niches, and with more service to niches, markets expand. Big players who concentrate on filling niches, will constantly expanding their opportunities for profit. It’s why McDonald’s menu today is almost 75% different than it was 20 years ago.
I don’t know if we’re talking past one another, or this idea is simply too unconventional.
I’m going to try to fork this conversation into a new thread. I’ve never done that before, so I hope I don’t break anything.
Demand is not infitinite. Needs and wants are infinite, but demand is not. Demand takes into accounts ones ability to purchase a product.
“…Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price;…” (http://www.investopedia.com/university/economics/economics3.asp).
In other words, demand includes the value of time. People do not have enough time to produce an infinite amount of goods and services to exchange for other goods and services. People can only “demand” another good or service if they have taken the time to produce something to exchange for that good or service.
Right but the market is potentially infinite because they are an infinite amount of needs/desires that can be fulfilled with a product. So it is possible that some action involving losing a monopoly could expand the market enough that it would increase profits.
Sorry, my sloppy usage. I meant needs and wants.
Thanks for explaining that better than I was.
@Spidey, I’m not saying that monopolies always have lower profits, I am saying that monopolies do not always have higher profits.
I don’t get what you are saying. A banana is not going to satisfy an infinite amout of needs/desires for me. It will just satisfy my hunger.
Each banana will have some value to you. You basically have unlimited hunger, so you could store them for later. You could use bananas as door stops, use the peels to play pranks, trade them, give them to the poor to make yourself feel better, etc.
Given the price and the alternatives, and the amount that you value the satisfaction of any specific want, then of course you wont want to buy an unlimited amount of bananas. But the point is that in any given market, the sellers are not selling the maximum amount of the product that could ever be used to satisfy any want of all consumers. Thus, there is room for the market to grow.
While I find discussion on monopolies very interesting, I’m having trouble finding the point to this thread to even partake in this discussion. What are we even talking about here?
Generally, it can be conceived that a monopolist gains the immediate boon of exclusive profits sans competition, but this comes at the price of long term exclusion from other markets. Meaning, if X can monpolize market-1, then Y can monopolize market-2, thus excluding X from market-2 entirely. And regardless of how profitable market-1 is, the fact that the monopolist is always locked in to market-1 and cannot branch off to other markets means his profits will never grow. In essence, his boost of profits will be more like a logrithmic curve where the majority of growth is early, and in late stage the grow flattens out.
Assertion: an owner of a monopoly will always make more money by having the monopoly than not having the monopoly
I argue that is false. Spidey argues it is true. Bob is dropping knowledge bombs.
ladyattis, I agree.
That’s a pretty big “always.”
Its possible that in a market full of competitors, a firm could generate more total money, than if that firm were a monopoly. As competition will increase quality, etc… attracting more new consumers. Whereas a monopoly status could simply turn some consumers off to the entire line of products produced by the firm completely.
Does anyone here believe that Rockefeller would have been able to do what he did, in a totally free market?
What is it that he did?
Owned about 90% of the kerosene market and most of the oil refinaries in the United States.
The problem is not monopolies per se, but the monopolising of industries by government. Ordinarily, some businesses enjoy greater freedom than others to raise their prices. For all kinds of innocuous reasons, businesses may not need to worry about competition like others. There is spectrum, and some businesses, often monopolies will exist at its far end. But there is nothing inherently wrong with a monopoly. What we should be more concerned with is the monopolising of an industry, that is, political interference which pushes it further toward the far end of the spectrum.
I fail to see how a “monopoly” is an inherently a bad thing. It could just mean someone is just very very excellent at providing people what they need. And even on the theroretical level if Dr. Doom or Brainiac happened to aquire a “monopoly” on, let’s pretend, an invaluable item such as water as posing as a benovelant person and turned into “an evil capitalist” and then made people die of thirst, just for evil’s sake, you would have to expect a very violent revolution due to such an asinine policy on such a precious commodity.