Regarding natural monopolies

[GRIMHOGUN]

As I find myself frequently the lone supporter of Austrian Economics in debates with my friends there are two challenges I have been unable to aptly reply to. The first being, without government aid, how would we protect society from natural monopolies such as energy companies expanding its service area to such an extent that it could price gouge consumers?

Second, is always about without the income tax, how could government, assuming its newly appointed role was primarily for national defense only, raise the revenue to pay for this?

[liberty_student]

@Robert

The first being, without government aid, how would we protect society from natural monopolies such as energy companies expanding its service area to such an extent that it could price gouge consumers?

Without state licensing monopolies, there is no way for a business to raise prices (so-called gouging) above what would attract competitors. The government creates energy monopolies (and all monopolies) through regulation (higher cost of operation/entry) and licensing (monopoly titles).

Claiming to protect consumers by limiting open competition is the state’s m.o. They create the problem (monopoly licensing), then they offer the solution (regulatory policy).

@Robert

Second, is always about without the income tax, how could government, assuming its newly appointed role was primarily for national defense only, raise the revenue to pay for this?

Are you sure you want to step through the looking glass? [;)]

[MatthewWilliam]

With respect to natural monopoly, Tom DiLorenzo has a paper on it, claiming the entire natural monopoly theory is an ex-post rationale for previous interventions in otherwise competitive markets.

http://mises.org/journals/rae/pdf/R92_3.pdf

[Stranger]

Price gouging is a chimera. If you correctly understand supply and its production then you realize that gouging is impossible.

Suppose that a utility company is the lone producer of energy over a large area. The productive capacity of this energy comes at a price. Intense capital investments must be made to be able to produce and distribute energy. The only way to raise prices in order to gouge is to shrink demand for energy, in this case turning a large proportion of invested capital equipment into useless junk. This would cause the utility to suffer losses on its prior investments.

The situation is similarly impossible if you assume that the utility was underpricing energy while waiting for its competition to exit the market, in order to raise prices afterwards. It would require an investment in capital that created losses upon losses to provide subsidized energy to the market, in the slim hope that at some point competitors would stop supplying and there would be a sufficient increases in prices to erase the initial losses.

That doesn’t mean that a situation where losses are incurred on investment cannot arise. They may arise as a result of a planning error by investors. The increase in prices is not the outcome of gouging, but of the market returning to normalcy.

[GRIMHOGUN]

@Robert

Second, is always about without the income tax, how could government, assuming its newly appointed role was primarily for national defense only, raise the revenue to pay for this?

Are you sure you want to step through the looking glass?

Any type of reasonable answer or explanation of this would be greatly appreciated, because not just in my circle of highly intellectual, educated friends whom debate these concepts with me, do I fail to conincingly articulate how national defense could be funded without taxation, but I feel the general layman’s first serious question in response to the conecpt of laissez-faire or discussion about ron paul’s constant call for abolition of income tax is, well then how will government raise revenue?

[GRIMHOGUN]

@MatthewWilliam

With respect to natural monopoly, Tom DiLorenzo has a paper on it, claiming the entire natural monopoly theory is an ex-post rationale for previous interventions in otherwise competitive markets.

http://mises.org/journals/rae/pdf/R92_3.pdf

This looks awesome. Thank you very much for the link!

[GRIMHOGUN]

@Stranger

Price gouging is a chimera. If you correctly understand supply and its production then you realize that gouging is impossible.

Suppose that a utility company is the lone producer of energy over a large area. The productive capacity of this energy comes at a price. Intense capital investments must be made to be able to produce and distribute energy. The only way to raise prices in order to gouge is to shrink demand for energy, in this case turning a large proportion of invested capital equipment into useless junk. This would cause the utility to suffer losses on its prior investments.

The situation is similarly impossible if you assume that the utility was underpricing energy while waiting for its competition to exit the market, in order to raise prices afterwards. It would require an investment in capital that created losses upon losses to provide subsidized energy to the market, in the slim hope that at some point competitors would stop supplying and there would be a sufficient increases in prices to erase the initial losses.

That doesn’t mean that a situation where losses are incurred on investment cannot arise. They may arise as a result of a planning error by investors. The increase in prices is not the outcome of gouging, but of the market returning to normalcy.

Some very interesting and compelling points are made here for sure. I’m not sure I can reach the conclusion that the situation would be impossible, as you assert. Certainly seems rather unlikely, as a result of the utility company taking losses on its earlier capital investments etc, but I do not know I can conclude with certainty that such a situation is impossible, based on your otherwise seemingly very valid points. Overall, some very compelling arguments against the price gouging fear, so thank you very much for the post.

[liberty_student]

@Robert

I feel the general layman’s first serious question in response to the conecpt of laissez-faire or discussion about ron paul’s constant call for abolition of income tax is, well then how will government raise revenue?

Well, that’s the trick with Ron Paul. He wants to abolish the income tax and replace it with nothing. And he is a free trader thus opposing tariffs.

He also doesn’t want government in the business of licensing. So sounds to me like his government has no money.

[;)]

[wilderness]

@Robert

@Robert

Second, is always about without the income tax, how could government, assuming its newly appointed role was primarily for national defense only, raise the revenue to pay for this?

Are you sure you want to step through the looking glass?

Any type of reasonable answer or explanation of this would be greatly appreciated, because not just in my circle of highly intellectual, educated friends whom debate these concepts with me, do I fail to conincingly articulate how national defense could be funded without taxation, but I feel the general layman’s first serious question in response to the conecpt of laissez-faire or discussion about ron paul’s constant call for abolition of income tax is, well then how will government raise revenue?

Interesting how your friends and you came to this conclusion. True conclusion, but interesting none-the-less.

[GRIMHOGUN]

ugh. An actual reply to the question of how national defense would be provided if there is no income tax would be appreciated.

@wilderness

@Robert

@Robert

Second, is always about without the income tax, how could government, assuming its newly appointed role was primarily for national defense only, raise the revenue to pay for this?

Are you sure you want to step through the looking glass?

Any type of reasonable answer or explanation of this would be greatly appreciated, because not just in my circle of highly intellectual, educated friends whom debate these concepts with me, do I fail to conincingly articulate how national defense could be funded without taxation, but I feel the general layman’s first serious question in response to the conecpt of laissez-faire or discussion about ron paul’s constant call for abolition of income tax is, well then how will government raise revenue?

Interesting how your friends and you came to this conclusion. True conclusion, but interesting none-the-less.

My friends and I have not come to any conclusion. I am in favor or small government in an Austrian economics viewpoint where the federal government does not intervene in the free market, and it’s primary role is to provide national defense. As there would be no income tax in this world, my friends immediately ask where would funding for national defense come from? I am unable to adequately answer that. I feel like I’ve been repeating this one request over and over, as each reply merely whimsically observes I am asking something? I am a bit confused. If there are some special forum procedures I need to go through to result in replies that actually address the question I am trying to ask, please let me know.

[DanielMuffinburg]

@Robert

@Robert

Second, is always about without the income tax, how could government, assuming its newly appointed role was primarily for national defense only, raise the revenue to pay for this?

Are you sure you want to step through the looking glass?

Any type of reasonable answer or explanation of this would be greatly appreciated, because not just in my circle of highly intellectual, educated friends whom debate these concepts with me, do I fail to conincingly articulate how national defense could be funded without taxation, but I feel the general layman’s first serious question in response to the conecpt of laissez-faire or discussion about ron paul’s constant call for abolition of income tax is, well then how will government raise revenue?

Attack their premise: why do we need a “national defense”? Tell them to prove that a “national defense” is more efficient/effective/better/whatever than “private security”. Also, in the United States can have a “national defense” to protect itself fromforeigners, why can’t California have a “national defense” to protect itself from Nevada? Why can’t San Francisco have a “national defense” to protect itself from Oakland? Why can’t an Individual have “national defense” to protect itself from other individuals? Your friends gotta prove that prove that a “national defense” is better than “private security” before they can demand that YOU prove anything derived from that premise. Btw, don’t forget that value is subjective.

[wilderness]

@Robert

My friends and I have not come to any conclusion. I am in favor or small government in an Austrian economics viewpoint where the federal government does not intervene in the free market, and it’s primary role is to provide national defense. As there would be no income tax in this world, my friends immediately ask where would funding for national defense come from? I am unable to adequately answer that. I feel like I’ve been repeating this one request over and over, as each reply merely whimsically observes I am asking something? I am a bit confused. If there are some special forum procedures I need to go through to result in replies that actually address the question I am trying to ask, please let me know.

Robert. I said your correct. What would happen if the government had no taxed revenue coming in?[:)]

[GRIMHOGUN]

Thanks alot for the replies. I agree with the principle and of course I understand federal government dissipates if there is no revenue coming in. My point is that we live in this world. Let’s be realistic about that for a moment.

Daniel, your ideas are very intriguing and are ones that have made me stop for a moment and give serious pause for consideration over. It is certainly feasible that a national defense is not needed, private security is more efficient, better, etc. But the reality of it is, that unfortunately we do need to attack the status-quo, and they do not need to defend it. For it is already the way things are. So unless it is forcibly changed, no real defense is necessary. Again not on a philosphical level of which is right etc, but rather on a practical level of is this the world I want to live in, and if not how can I go about attempt to make a change in policy or people’s viewpoints in an effective manner in this world.

So I am trying to suggest realistic potential changes both in reforming government and people’s viewpoints about government and its consequently grater impact on liberty as its size and power expands.

I think government does have a role. I agree strongly with Mises that calling government a necessary evil is false. Government is not an evil, but rather it is a means, and the only means available to make peaceful human coexistance possible. Government has its definite purposes and can be quite useful. It is certainly always the opposition of liberty but that certainly doesn’t mean it can not have massive social benefits, specifically like in the role of national defense. The idea is to limit the sphere of power government has over society at every turn and at all costs. Ok, I’m digressing a bit, but I’ve been reading alot of Mises, so it’s hard not to.

Anyways, my point again is in this world suggesting that there be no federal government at all and consequently no military and that privatization would be better and more efficient, even if its completely true, just is not going to be effective in getting people to come around. I agree with Mises, Ron Paul, and the Constitution that government has a definite role and national defense is a major component of that role. That doesn’t mean I like government. I’ll paraphrase some more Mises in saying that government is the negation of liberty. But, we live in this world. Marginal units. And in that vein, I feel the suggestion a total and complete elimination of government in all forms as well as military just is not a viable option to present for anyone to take seriously in our current policital climate.

I feel it’s important to try and win the actual battle. Not the philosophical war of who is right. Because after all, we still live in this world, for better or worse, right or wrong. So it is within this world we must try to affect change. And it is in that spirit that I have been having numerous dialogues with my friends whom are all very bright, but just conditioned to accept things as they are.

I’d like to imagine the possibilty of one day being in a situation where “national defense” was not even a concept. But I don’t see that happening anytime soon. So, to wind this ridiculously extended and superflous mini-rant down, when push came to shove as to how I would propose this newly limited in both size and power government to fund the military, I chose taxation on value of land, but am not really sure how that is any different or better than an income tax, granted one that would be drastically smaller to correspond with the decrease of the smaller federal budget, but still didn’t seem too satisfactory to me. So any alternatives or new ideas would be appreciated. Thanks for reading.

[Stranger]

@Robert

Any type of reasonable answer or explanation of this would be greatly appreciated, because not just in my circle of highly intellectual, educated friends whom debate these concepts with me, do I fail to conincingly articulate how national defense could be funded without taxation, but I feel the general layman’s first serious question in response to the conecpt of laissez-faire or discussion about ron paul’s constant call for abolition of income tax is, well then how will government raise revenue?

Once upon a time the Federal Government was a union of member states, and this was reflected by the fact that the states jointly controlled the upper chamber of congress, the Senate, with the control over budgets that this implies. Then senators became directly elected instead of appointed by state governments, and at this moment the Federal Government became an imperial government, no longer accountable to member states. With this new power it was able to directly tax the citizens of the member states through the income tax. State governments became irrelevant, and could easily be bribed with the money taxed from their citizens.

So to answer your question, where would government raise its revenues should the Federal Government return to a federation? It would raise them from the state governments, who would determine themselves how to raise the money.

[liberty_student]

@Robert

ugh. An actual reply to the question of how national defense would be provided if there is no income tax would be appreciated.

It wouldn’t. There would be no nation without taxes.

I know you don’t want to deal with anarchism, but it’s really the only answer we have to give you.

Stranger’s answer is probably as good as anything Ron Paul will offer.

[GRIMHOGUN]

@liberty student

@Robert

ugh. An actual reply to the question of how national defense would be provided if there is no income tax would be appreciated.

It wouldn’t. There would be no nation without taxes.

I know you don’t want to deal with anarchism, but it’s really the only answer we have to give you.

Stranger’s answer is probably as good as anything Ron Paul will offer.

I found ron paul’s answer right here in his own book, probably should have looked there sooner.

“What we should work toward, however, is abolishing the income tax and replacing it not with a national sales tax, but with nothing. Right now the federal government is funded by excise taxes, corporate income taxes, payroll taxes, the individual income tax, and miscellaneous other sources. Abolishing the income tax on individuals would cut government revenue by about 40 percent. In order to imagine what it would be like to live in a country with a federal budget 40 percent lower than the federal budget of 2007 we would have to go all the way back to…1997” - Congressman Ron Paul, “The Revolution”

[DanielMuffinburg]

@Robert

Thanks alot for the replies. I agree with the principle and of course I understand federal government dissipates if there is no revenue coming in. My point is that we live in this world. Let’s be realistic about that for a moment.

Being “realistic” is what got us here. Why do you bother to ask the questions you asked in the OP? Afterall, going back to minarchism is unrealistic.

@Robert

… But the reality of it is, that unfortunately we do need to attack the status-quo, and they do not need to defend it. For it is already the way things are. So unless it is forcibly changed, no real defense is necessary. Again not on a philosphical level of which is right etc, but rather on a practical level of is this the world I want to live in, and if not how can I go about attempt to make a change in policy or people’s viewpoints in an effective manner in this world.

Sure, but your defense of minarchism will be destroyed by the greater statists. Just letting you know. They’re gonna find all the contradictions and fallacies in your defense of minarchism and point them out to you.

@Robert

So I am trying to suggest realistic potential changes both in reforming government and people’s viewpoints about government and its consequently grater impact on liberty as its size and power expands.

Eliminating the income tax is not a realistic potential change. Philosophically, sure, but not in reality. Just saying.

@Robert

I think government does have a role. I agree strongly with Mises that calling government a necessary evil is false. Government is not an evil, but rather it is a means, and the only means available to make peaceful human coexistance possible. Government has its definite purposes and can be quite useful. It is certainly always the opposition of liberty but that certainly doesn’t mean it can not have massive social benefits, specifically like in the role of national defense. The idea is to limit the sphere of power government has over society at every turn and at all costs. Ok, I’m digressing a bit, but I’ve been reading alot of Mises, so it’s hard not to.

The State is evil by definition. So you wanna coerce people to live with each other in peace? Do you see the contradiction? Why don’t we put each other in jail, that way we can be free from each other’s potential threats?

@Robert

Anyways, my point again is in this world suggesting that there be no federal government at all and consequently no military and that privatization would be better and more efficient, even if its completely true, just is not going to be effective in getting people to come around.

Why not? It got me to come around.

@Robert

I agree with Mises, Ron Paul, and the Constitution that government has a definite role and national defense is a major component of that role. That doesn’t mean I like government. I’ll paraphrase some more Mises in saying that government is the negation of liberty. But, we live in this world. Marginal units. And in that vein, I feel the suggestion a total and complete elimination of government in all forms as well as military just is not a viable option to present for anyone to take seriously in our current policital climate.

It worked on me.

@Robert

I feel it’s important to try and win the actual battle. Not the philosophical war of who is right. Because after all, we still live in this world, for better or worse, right or wrong. So it is within this world we must try to affect change. And it is in that spirit that I have been having numerous dialogues with my friends whom are all very bright, but just conditioned to accept things as they are.

We gotta win the philosophical battle.

@Robert

I’d like to imagine the possibilty of one day being in a situation where “national defense” was not even a concept. But I don’t see that happening anytime soon. So, to wind this ridiculously extended and superflous mini-rant down, when push came to shove as to how I would propose this newly limited in both size and power government to fund the military, I chose taxation on value of land, but am not really sure how that is any different or better than an income tax, granted one that would be drastically smaller to correspond with the decrease of the smaller federal budget, but still didn’t seem too satisfactory to me. So any alternatives or new ideas would be appreciated. Thanks for reading.

I wish “national defense” was only a concept and not a “reality”. Your hopeless; we get it, but you’re gonna get destroyed by the fullblowned statist on your position of minarchy. We’ve gotten to statism because of the justification, “if we can do this, why can’t we do that?”

Also, I don’t want to put words in your mouth, but you seem to believe that an-caps don’t believe in any government. A voluntary government is A-ok, just like Disneyland has its own “police” force. If in a minarchy we are going to have a police force to protect us, why should individuals have the right to defend themselves?

[whipitgood]

I think you’re having the same problem that a lot of people have when running into serious anarchists for the first time. You’re talking in terms of what works, and we’re talking in terms of what’s right. We are anarchists, as I’ve said before, not because we have a perfect system. We don’t. We’re anarchists because we do not believe that problems should be solved through coercion. The state is a coercive entity, so we automatically rule it out as the grand solution to any problems that we encounter.

Generally speaking, for most an-caps, we would support steps towards liberty; we just push to take it further. And we never cede moral ground to statists (e.g. the vast majority of an-caps would aggree that minimal taxation is better than what we have now, but all taxation is unjust.)

I don’t presume to speak for anyone else, of course. [:D]

[liberty_student]

@whipitgood

I don’t presume to speak for anyone else, of course.

Of course not, but that was pretty good.

I try to remember what a big leap it was from minarchism to anarchism but it’s not easy.

[GRIMHOGUN]

my apolgies, I was looking for insights along the lines that are outlined in the austrian school of economics. Specifically, in following with Ludwig Von Mises, I was never looking to address anarchists. Thanks for the responses anyway.