Antitrust: Is there really a point?
 

I just wanted to quickly start up an antitrust debate since I have not seen one on these forums yet. In my opinion, the only way one can be in favor of antitrust regulation is if they are ignorant to or misinformed on several economic principles (and, to a smaller extent, the nature of government intervention).

Fallacies:

1) Firms can gain monopoly status without the aid of government

I am not one to claim that it is impossible for firms to attain a monopoly status which is detrimental to consumers. I will claim, however, that this is impossible without the aid of government. Take Microsoft for example; the prices of their software would be significantly lower if it were not for the state-imposed intellectual property laws. Simply put, these laws prevent other firms from entering the market -- not the efficiency of Microsoft’s production. It is ironic that the government went after Microsoft for their monopoly via antitrust, seeing how it is the entity which caused it.

2) Competition is based on the quantity of firms in the market.

This is based on popular ‘perfect competition’ models which seem to have dominated economic thought throughout the twentieth century. It is my assertion that a market can both competitive and efficient with but a single firm. How do we know this? Because the prices are low and the firm is profiting. Under these circumstances, one particular firm is able to produce and distribute their goods and services so efficiently that their competitors cannot enter the market. Prices are low, the firm is profiting, everyone is happy. The number of firms has nothing to do with the efficiency of the market.

3) Predatory pricing is profitable for businesses

I think it is clear to everyone that predatory pricing is unprofitable for the monopolist in the short-run. I contend, though, that there is no way for this to be profitable (or at least more profitable than standard pricing practices) in the long-run. For example, Wal-Mart has held a very dominant market position for well over a decade; putting many other firms out of business with their low prices. During this time, however, they have continued to offer the lowest prices in the market, failing to artificially raise them at the expense of the consumer. They are profiting, and the consumer is receiving goods at low prices. Why is this? Why wouldn’t they just sell below cost in an attempt to drive everyone else out of business, and then raise prices to artificially high levels?

The primary reason is the fact that Wal-Mart knows that it provides goods in a world of imperfect information, namely differing tastes and preferences. They realize that just because their prices are the lowest doesn’t necessarily mean that they will put all competing firms out of business. While prices are certainly important to consumer demand, there are other factors involved. This is the nature of imperfect information and differing tastes and preferences. Because they are uncertain about the future of the market, it is unsafe for them to lower prices to the level which is very likely to put other firms out of business. Why? Consumers will harbor a grudge (change in tastes and preferences) against the monopolist when they raise their prices to artificial levels. At the same time, other firms will see the opportunity to enter the market, given the high prices and the overall dissatisfaction with the monopolist. The monopolist may again try to lower prices to below cost, driving the other firms out, and the cycle will continue... Here’s the point; this predatory pricing scheme simply isn’t more profitable than offering products at a price which is reasonable in relation to their costs. It just doesn't make sense for the predatory firm to constantly manipulate prices in the face of competition, when, under normal circumstances, they would have a dominant market position regardless. This is the reason why predatory pricing is so uncommon, not antitrust legislation.

Feel free to debate.

Re: Antitrust: Is there really a point?
 

Some of my previous writings in this forum about antitrust:

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Antitrust laws invariably harm consumers.

They are not used against monopolies, because monopolies derrive their market dominance from government protection in the first place. Instead, they punish firms that achieve market dominance through successful competition. The elimination of competitors is not the same as the elimination of competition (only government itself can achieve that).

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The theory of natural monopolies was developed (by interventionist economists) well after such monopolies were granted (for political reasons). The theory was then used to retroactively justify the government intervention.

The theory's suggestions are not bourne out by historical fact, either. There is no evidence that any firm has ever achieved long-term efficiency gains by being the only player in a given market. To the contrary, deregulation consistently brings more efficiency and lower prices to consumers.

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Since monopolies only occur when government licenses them, there is no need for anti-monopoly legislation, as long as the government stops creating them.

Antitrust legislation has never, ever, ever been used against a company that "became" a monopoly on its own. They have been used as a club to bludgeon companies that competed successfully and ran a lot of competitors out of business - but a lack of competitors does not mean that competition is being hindered.

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Re: Antitrust: Is there really a point?
 

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1) Firms can gain monopoly status without the aid of government

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It is rare for firms to gain effective monopoly status without government, but it has happened at some points. The more important point to make, however, is that much anti-trust legislation is not really supposed to prevent monopolyso much as oligopoly, which has historically been quite common (though often aided by the state too).

I don't really undertand your Microsoft example. How have anti-trust laws affected the price of their software? And if the price would be lower without them, as you say, then aren't the laws actually helping other competitors because the microsoft product isn't as competitive as it could be?

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It is my assertion that a market can both competitive and efficient with but a single firm. How do we know this? Because the prices are low and the firm is profiting. Under these circumstances, one particular firm is able to produce and distribute their goods and services so efficiently that their competitors cannot enter the market.

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How can it be competitive with one firm? There is no competition by definition. Even if prices seem "low," how would you determine whether or not there were monopoly rents without a benchmark to compare with? I don't see what the firm profiting has to do with it. That's just to be expected in a monopoly situation.

Honestly, I think you are too hung up on this efficiency thing. When most markets aren't competitive, its usually because something other than the efficiency of the major player is keeping others out. There are plenty of markets in which barriers to entry are very high for a variety of reasons.

Gotta run, more later if you want to debate these things.

Re: Antitrust: Is there really a point?
 

[ QUOTE ]

1) Firms can gain monopoly status without the aid of government

I am not one to claim that it is impossible for firms to attain a monopoly status which is detrimental to consumers. I will claim, however, that this is impossible without the aid of government. Take Microsoft for example; the prices of their software would be significantly lower if it were not for the state-imposed intellectual property laws. Simply put, these laws prevent other firms from entering the market -- not the efficiency of Microsoft’s production. It is ironic that the government went after Microsoft for their monopoly via antitrust, seeing how it is the entity which caused it.

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Assuming this is true, do you think that we should repeal IP laws so we can get rid of antitrust laws too?

Re: Antitrust: Is there really a point?
 

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1) Firms can gain monopoly status without the aid of government

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It is rare for firms to gain effective monopoly status without government, but it has happened at some points.

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Name two.

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The more important point to make, however, is that much anti-trust legislation is not really supposed to prevent monopoly so much as oligopoly . . .

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Why? Under what justification?

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I don't really undertand your Microsoft example. How have anti-trust laws affected the price of their software? And if the price would be lower without them, as you say, then aren't the laws actually helping other competitors because the microsoft product isn't as competitive as it could be?

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Is that supposed to be a good thing?

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It is my assertion that a market can both competitive and efficient with but a single firm. How do we know this? Because the prices are low and the firm is profiting. Under these circumstances, one particular firm is able to produce and distribute their goods and services so efficiently that their competitors cannot enter the market.

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How can it be competitive with one firm? There is no competition by definition.

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Actually, that is not true at all. This is non-competitive only under the bizarre definition of "perfect competition," one of the most useless pieces of doublethink I have ever run across. Until the early 20th century, "competition" was a behaviorial concept involving product differentiation, price advantage, etc. In the early 20th century the mathematical economists developed a mathematical model of "perfect competition," which relies on an absurd suite of assumptions such as:

a) Products are homogenoeous. This of course is absurd, as competitors in the real world will seek to differentiate their products from their competition. There are probably of order 5000 different brands of beer alone available in the "beer market," for example

b) Prices are homogeneous. Again absurd. Even given that inhomogeneous products may be expected to produce inhomogeneous prices, identical products will have inhomogeneous prices. For example, different markets may have different demands for the same products, leading to different prices. New entrants into the market may offer products at substantially lower prices (even at a loss) to enter the market (a phenomenon I call "market attack").

c) Perfect information. For perfect competition you need perfect information, which is of course absurd. All consumers cannot possibly know the details of all competitors. The whole concept of perfect information is moot in the model anyway, since the products and prices are all homogeneous!

d) Many firms. This is foolish. If by definition you are a monopoly when you provide a product that no competitor produces, every inventor or newly differentiated product would make one a monopolist. The only long running market "monopoly" that I know of was Standard Oil, who only maintained their market dominance by providing such an excellent product at such a low cost that no would-be competitors could profitably enter the market.

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Even if prices seem "low," how would you determine whether or not there were monopoly rents without a benchmark to compare with?

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You're suggesting that we should compare the "monopoly" price with some nebulous market price that would be obtained from a thousand non-existent competitors, when the actual comparison should be with no price at all--because the product would not be being produced if the "monopolist" were not providing it.

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I don't see what the firm profiting has to do with it. That's just to be expected in a monopoly situation.

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That's just the point though. The implication is that somehow, magically, a single provider will reap "monopoly profits." But of course no one is holding a gun to the heads of consumers. The monopolist does not "make" the price. The price is freely negotiated by both sides. And if the price that consumers are willing to pay is so high that the level of profit made by the provider is higher than the general level of profit in the economy, entrepeneurs and capital will be enticed to enter this new market. Only by acting competitively, even in the absence of competition, can the "monopolist" prevent others from entering the market. Unless, of course, he can use the police power of the state to simply legislate and regulate his competition away.

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Honestly, I think you are too hung up on this efficiency thing. When most markets aren't competitive, its usually because something other than the efficiency of the major player is keeping others out. There are plenty of markets in which barriers to entry are very high for a variety of reasons.

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Name two (that aren't governmental).

Re: Antitrust: Is there really a point?
 

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d) Many firms. This is foolish. If by definition you are a monopoly when you provide a product that no competitor produces, every inventor or newly differentiated product would make one a monopolist. The only long running market "monopoly" that I know of was Standard Oil, who only maintained their market dominance by providing such an excellent product at such a low cost that no would-be competitors could profitably enter the market.

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Actually, you'll be pleased to discover that standard oil actually did use government to establish their monopoly.

Once it became clear that Standard was buying up refineries, every joe schmoe decided to build one, in the hopes of getting bought out. Rockefeller quickly got tired of spending money buying up all these rinky-dink guys, so he convinced the government to enact "safety standards" which created a high barrier to entry.

Re: Antitrust: Is there really a point?
 

I'm really not well-versed enough in economic theory to debate this one at a sufficient level.

But...I would like to make a point of contention regarding your IP assertions. Are you contending that the ideas people have are free domain...ergo...nobody creates anything or makes anything they can call their own? Isn't that the point of competition? Doing things differently than the competitor, and drawing a client base who prefers your style over another?

Look...I'm most likely in agreement with you, given my libertarianism, and I don't usually like laws, but...intellectual property is indeed property, with all the same rights and privileges as a TV or a car. Otherwise, why bother creating anything, if you can't profit from your creation?

Re: Antitrust: Is there really a point?
 

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d) Many firms. This is foolish. If by definition you are a monopoly when you provide a product that no competitor produces, every inventor or newly differentiated product would make one a monopolist. The only long running market "monopoly" that I know of was Standard Oil, who only maintained their market dominance by providing such an excellent product at such a low cost that no would-be competitors could profitably enter the market.

[/ QUOTE ]

Actually, you'll be pleased to discover that standard oil actually did use government to establish their monopoly.

Once it became clear that Standard was buying up refineries, every joe schmoe decided to build one, in the hopes of getting bought out. Rockefeller quickly got tired of spending money buying up all these rinky-dink guys, so he convinced the government to enact "safety standards" which created a high barrier to entry.

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Damn. You learn something new every day. Thanks!

Re: Antitrust: Is there really a point?
 

I'm no expert on the issue, but here are some ideas that may add a bit to the discussion.
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Fallacies:

1) Firms can gain monopoly status without the aid of government

I am not one to claim that it is impossible for firms to attain a monopoly status which is detrimental to consumers. I will claim, however, that this is impossible without the aid of government. Take Microsoft for example; the prices of their software would be significantly lower if it were not for the state-imposed intellectual property laws. Simply put, these laws prevent other firms from entering the market -- not the efficiency of Microsoft’s production. It is ironic that the government went after Microsoft for their monopoly via antitrust, seeing how it is the entity which caused it.

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Power is power is power. The primary reason why microsoft was able to acquire and then maintain its dominance was that it was able to leverage it's power in the pc industry. But, more to the point, if a person or business has an emerging monopoly (the standard oil example that has been discussed) that business has the power of politics and the power to become more exploitative, so the two things, the power of dominant business and the government power are usually walking in lockstep and are therefore, not entirely distinguishable.

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3) Predatory pricing is profitable for businesses

I think it is clear to everyone that predatory pricing is unprofitable for the monopolist in the short-run. I contend, though, that there is no way for this to be profitable (or at least more profitable than standard pricing practices) in the long-run. For example, Wal-Mart has held a very dominant market position for well over a decade; putting many other firms out of business with their low prices. During this time, however, they have continued to offer the lowest prices in the market, failing to artificially raise them at the expense of the consumer. They are profiting, and the consumer is receiving goods at low prices. Why is this? Why wouldn’t they just sell below cost in an attempt to drive everyone else out of business, and then raise prices to artificially high levels?

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I think predatory pricing is profitable for business in the short run. That may be what you meant to say... I was anticipating the statement that predatory pricing is profitable in the short run but not the long run. But, as far as it not being profitable in the long run, capital is pretty fluid, and once the party is over it can easily be moved elsewhere, and usually is. But, depending on how much power is wielded by the monopoly, it may not matter how predatory the prices are if no one can do anything about it, for example, no one is really able to contest microsoft windows as the dominant OS (the extreme, imaginary example is the company that provided air on mars in Total Recall, it took a revolution and the ruins of alien technology to free the people from its control.)

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Because they are uncertain about the future of the market, it is unsafe for them to lower prices to the level which is very likely to put other firms out of business.

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This is exactly what they do. And uncertainty has never been a reason not to grab power.

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Why? Consumers will harbor a grudge (change in tastes and preferences) against the monopolist when they raise their prices to artificial levels. At the same time, other firms will see the opportunity to enter the market, given the high prices and the overall dissatisfaction with the monopolist. The monopolist may again try to lower prices to below cost, driving the other firms out, and the cycle will continue...

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This seems to me to be a reason why monopolies are usually quite unstable, but not why they won't happen. The type of industry (which, in a sense means the quantity of power wielded) has a big impact on how possible it is for a monoply to be stable. When there was only one company in the country that could provide telephone service and the notion of putting up a parallel infrastructure was all but unthinkable, that was quite stable, anti-competitive and very exploitable. When a company is the only one able to supply a region with coal(the robber barons) and that was the only way for people to survive a winter, the people had to concede and had to allow themselves to be exploited, and there was nothing anyone or competitive buisiness could do about it, at least for the short term.

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Here’s the point; this predatory pricing scheme simply isn’t more profitable than offering products at a price which is reasonable in relation to their costs. It just doesn't make sense for the predatory firm to constantly manipulate prices in the face of competition, when, under normal circumstances, they would have a dominant market position regardless.

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I think there is a hidden assumption here that is not entirely true, namely that a company is a thing that provides a product or service, competing in an industry. While, there is a sense that this is true, a better definition would be a company is a thing that uses capital to generate capital. In a capitalist economy companies look at their service or their product as an expense. Put another way, it is the incovenience associated with acquisition. But acquisition is all there is. So anytime that a company feels it is worth it in the short term to enact predatory pricing it will. That company can always move its capital to other industries where better opportunities to acquire capital exist once the party is over, and they do this.

Now, in my view, a monopoly is only one example of where power is leveraged over people to attain more capital than a more free market would have allowed. Another form is the collusion of companies. The entire health insurance industry is an example of this and it doesn't seem like it is going to end anytime soon, since it is way way way more profitable not to break ranks and the people don't have the will to call for legislation to end it.

Re: Antitrust: Is there really a point?
 

[ QUOTE ]
1) Firms can gain monopoly status without the aid of government

I am not one to claim that it is impossible for firms to attain a monopoly status which is detrimental to consumers. I will claim, however, that this is impossible without the aid of government. Take Microsoft for example; the prices of their software would be significantly lower if it were not for the state-imposed intellectual property laws. Simply put, these laws prevent other firms from entering the market -- not the efficiency of Microsoft’s production. It is ironic that the government went after Microsoft for their monopoly via antitrust, seeing how it is the entity which caused it.

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I don't think you know your Microsoft history very well. In every product that they sell except maybe Flight Simulator they were not the leading vendor. Ever hear of Ashton-Tate, Lotus, Word Perfect, Netscape and Digital Research? Maybe you've heard of IBM or Apple? Anyway Microsoft didn't reach it's position of market dominance due to intellectual property laws. The notion that they did is pure nonesense. The truth of the matter is that software is more or less not that protected by IP laws.

Re: Antitrust: Is there really a point?
 

[ QUOTE ]
[ QUOTE ]
1) Firms can gain monopoly status without the aid of government

I am not one to claim that it is impossible for firms to attain a monopoly status which is detrimental to consumers. I will claim, however, that this is impossible without the aid of government. Take Microsoft for example; the prices of their software would be significantly lower if it were not for the state-imposed intellectual property laws. Simply put, these laws prevent other firms from entering the market -- not the efficiency of Microsoft’s production. It is ironic that the government went after Microsoft for their monopoly via antitrust, seeing how it is the entity which caused it.

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I don't think you know your Microsoft history very well. In every product that they sell except maybe Flight Simulator they were not the leading vendor. Ever hear of Ashton-Tate, Lotus, Word Perfect, Netscape and Digital Research? Maybe you've heard of IBM or Apple? Anyway Microsoft didn't reach it's position of market dominance due to intellectual property laws. The notion that they did is pure nonesense. The truth of the matter is that software is more or less not that protected by IP laws.

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Link me to a place where I can buy another firm's version of Windows XP for a price which is actually related to its cost of production.

Think about it, without intellectual property laws wouldn't some Microsoft programmer (or anyone with the ability) start up a competing software company which sold something very similar to Windows, for much lower cost. There is a reason this hasn't happened, and it has nothing to do with Microsoft's efficiency and low prices.

Re: Antitrust: Is there really a point?
 

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I'm really not well-versed enough in economic theory to debate this one at a sufficient level.

But...I would like to make a point of contention regarding your IP assertions. Are you contending that the ideas people have are free domain...ergo...nobody creates anything or makes anything they can call their own? Isn't that the point of competition? Doing things differently than the competitor, and drawing a client base who prefers your style over another?

Look...I'm most likely in agreement with you, given my libertarianism, and I don't usually like laws, but...intellectual property is indeed property, with all the same rights and privileges as a TV or a car. Otherwise, why bother creating anything, if you can't profit from your creation?

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Who said that you can't profit from your creation without IP laws? I am just saying that it is unjust to use governmental force as a means of shielding firms from competitors. People have every right to keep their ideas private. If they choose to enter the market with them, however, they should be prepared for competition.

Also, there are numerous advantages to coming up with the idea. Providing the best product, being the first to enter the market, etc... It is called entrepreneurship. You see profit opportunity, acquire capital, produce and profit.

Re: Antitrust: Is there really a point?
 

[ QUOTE ]
Power is power is power. The primary reason why microsoft was able to acquire and then maintain its dominance was that it was able to leverage it's power in the pc industry. But, more to the point, if a person or business has an emerging monopoly (the standard oil example that has been discussed) that business has the power of politics and the power to become more exploitative, so the two things, the power of dominant business and the government power are usually walking in lockstep and are therefore, not entirely distinguishable.

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I have no problem with “power,” so long as it is gained without the aid of government.

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I think predatory pricing is profitable for business in the short run. That may be what you meant to say... I was anticipating the statement that predatory pricing is profitable in the short run but not the long run. But, as far as it not being profitable in the long run, capital is pretty fluid, and once the party is over it can easily be moved elsewhere, and usually is. But, depending on how much power is wielded by the monopoly, it may not matter how predatory the prices are if no one can do anything about it, for example, no one is really able to contest microsoft windows as the dominant OS (the extreme, imaginary example is the company that provided air on mars in Total Recall, it took a revolution and the ruins of alien technology to free the people from its control.)

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Ha, well it depends on how short of a run. I was referring to the period where the business sells at below cost to drive out competitors. If you are talking about the period afterward, where they inflate prices far above costs, then I also don’t think this is profitable because of the losses suffered in the previous period. This also won’t last long because competitors will see a profit opportunity and seek to enter the market.

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Because they are uncertain about the future of the market, it is unsafe for them to lower prices to the level which is very likely to put other firms out of business.

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This is exactly what they do. And uncertainty has never been a reason not to grab power.

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I was referring to them lowering prices below costs. Historically, this is very rare. If firms do choose to do this, however, I am not against it as I will benefit from the low prices. The firm is essentially shooting itself in the foot... this is why you don't see predatory pricing, not antitrust.


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This seems to me to be a reason why monopolies are usually quite unstable, but not why they won't happen. The type of industry (which, in a sense means the quantity of power wielded) has a big impact on how possible it is for a monoply to be stable. When there was only one company in the country that could provide telephone service and the notion of putting up a parallel infrastructure was all but unthinkable, that was quite stable, anti-competitive and very exploitable. When a company is the only one able to supply a region with coal(the robber barons) and that was the only way for people to survive a winter, the people had to concede and had to allow themselves to be exploited, and there was nothing anyone or competitive buisiness could do about it, at least for the short term.

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Again, I have no problem with “monopolies.” If they are providing goods/services at low prices then I am happy. The point is that monopolies typically don’t “exploit” people because they realize that it is bad for business. Theoretically, if they did, there would be bad short-term consequences for consumers. Historically, however, the only monopolies which have exploited people have achieved “power” with the aid of government.

[ QUOTE ]
I think there is a hidden assumption here that is not entirely true, namely that a company is a thing that provides a product or service, competing in an industry. While, there is a sense that this is true, a better definition would be a company is a thing that uses capital to generate capital. In a capitalist economy companies look at their service or their product as an expense. Put another way, it is the incovenience associated with acquisition. But acquisition is all there is. So anytime that a company feels it is worth it in the short term to enact predatory pricing it will. That company can always move its capital to other industries where better opportunities to acquire capital exist once the party is over, and they do this.

[/ QUOTE ]

Firms which have a dominant position in the market don’t enact predatory pricing schemes because they realize it is unprofitable. Firms which have power through government protection, however, are free to because they realize that their position cannot be compromised.

Re: Antitrust: Is there really a point?
 

The primary reason for my reply was to add a sociological perspective to something which, on the serface, seems to be a wholly economic issue. Economics, which, generally speaking, deals with incentives and disincentives is not, in itself sufficient to analyze something as complex as anti-trust laws and monopolies. An understanding of the power structures and social capital and how they're used for exploitation is also important. The statement that no monopoly has emerged or practiced predatory pricing without the aid of the government I find to be, not only a claim that monopolies and predatory pricing don't happen without the government's support, but also (and perhaps more revealingly) an indication that those who have power and influence use it wherever they can use it effectively. Or, put another way, the power that dominant firms have in the marketplace is not entirely distinct from the power they wield politically.

Re: Antitrust: Is there really a point?
 

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The statement that no monopoly has emerged or practiced predatory pricing without the aid of the government I find to be, not only a claim that monopolies and predatory pricing don't happen without the government's support...

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Care to name one "monopoly" that got it's position without government support?

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, but also (and perhaps more revealingly) an indication that those who have power and influence use it wherever they can use it effectively. Or, put another way, the power that dominant firms have in the marketplace is not entirely distinct from the power they wield politically.

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There's a difference between market power and coercive, violent power.

Re: Antitrust: Is there really a point?
 

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Or, put another way, the power that dominant firms have in the marketplace is not entirely distinct from the power they wield politically.


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Agreed. I don't think that there is a debate on this subject. The larger firms can spend more money on lobbyists and other means of manipulating the system.

My problem is with "the system."

Re: Antitrust: Is there really a point?
 

pvn,

I don't believe he was claiming there were any?

Re: Antitrust: Is there really a point?
 

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There's a difference between market power and coercive, violent power.

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There may be a difference between violent power and nonviolent power insofar as one is violent, but the difference between market power and political power (I assume what you mean by coercive power) is not all that distinct. Market power can be coercive, dollars can buy votes in congress, politcal favors can buy money. There is another form of currency, it's usually called social capital.

Re: Antitrust: Is there really a point?
 

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1) Firms can gain monopoly status without the aid of government



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It is rare for firms to gain effective monopoly status without government, but it has happened at some points.



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Name two.

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I should add a bit of nuance to my statement. A pure free market capitalism has never existed, and so it is unthinkable that a major firm, would be monopoly or not, would ever exist that was unregulated in its sector. The question is whether any firms that ever achieved effective monopolies (and I said there were few) did so largely for reasons unrelated to government regulation. I would submit that Standard Oil and Microsoft both fall into this category, but again, may point was that there are very few of these examples historically.

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The more important point to make, however, is that much anti-trust legislation is not really supposed to prevent monopoly so much as oligopoly . . .



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Why? Under what justification?

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I was simply responding to the original poster, correcting him on the intent of anti-trust laws. What is your issue with that response? The justification usually raised by those supporting these laws is obviously that cartels are bad for consumers.

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I don't really undertand your Microsoft example. How have anti-trust laws affected the price of their software? And if the price would be lower without them, as you say, then aren't the laws actually helping other competitors because the microsoft product isn't as competitive as it could be?



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Is that supposed to be a good thing?


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What is your problem? I was asking the OP a question. When did I say this was a good thing?

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It is my assertion that a market can both competitive and efficient with but a single firm. How do we know this? Because the prices are low and the firm is profiting. Under these circumstances, one particular firm is able to produce and distribute their goods and services so efficiently that their competitors cannot enter the market.


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How can it be competitive with one firm? There is no competition by definition.

[/ QUOTE ]

Actually, that is not true at all. This is non-competitive only under the bizarre definition of "perfect competition," one of the most useless pieces of doublethink I have ever run across. Until the early 20th century, "competition" was a behaviorial concept involving product differentiation, price advantage, etc. In the early 20th century the mathematical economists developed a mathematical model of "perfect competition," which relies on an absurd suite of assumptions such as...

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Empirical reality never meets the standards of perfect competition. That's not a big secret. It is just a set of modeling assumptions.

But in the ordinary language of the business world nobody cares about modeling assumptions. When people talk about competition, they are talking about actual firms in the sector. Of course there is always potential competition if others move in. But if you are the only player, nobody is going to say that you face stiff competition. And if you are the only player, generally you will not continually innovate, improve, and fight for market share with the same vigor just because of potential competition.

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Even if prices seem "low," how would you determine whether or not there were monopoly rents without a benchmark to compare with?



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You're suggesting that we should compare the "monopoly" price with some nebulous market price that would be obtained from a thousand non-existent competitors, when the actual comparison should be with no price at all--because the product would not be being produced if the "monopolist" were not providing it.

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The comparison I suggested, in which you compare the world as is with a hypothetical model in which other conditions hold, is the basic intuition behind a lot of economic models that approach these subject. That is the whole idea behind the concept of a rent, whether it is a monopoly rent or a rent from government intervention. Say what one will about the discipline of economics, but that is the approach. My point to the original poster was simply that you cannot tell whether the absence of other firms is hurting the efficiency of the sector without some counterfactual, which is logically obvious. In the absence of an empirical counterfactual, economics supplies a hyothetical one for better or for worse. Your counterfactual of the product not being produced at all makes no sense to me given the questions that are being debated.

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I don't see what the firm profiting has to do with it. That's just to be expected in a monopoly situation.



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That's just the point though. The implication is that somehow, magically, a single provider will reap "monopoly profits." But of course no one is holding a gun to the heads of consumers. The monopolist does not "make" the price. The price is freely negotiated by both sides. And if the price that consumers are willing to pay is so high that the level of profit made by the provider is higher than the general level of profit in the economy, entrepeneurs and capital will be enticed to enter this new market. Only by acting competitively, even in the absence of competition, can the "monopolist" prevent others from entering the market. Unless, of course, he can use the police power of the state to simply legislate and regulate his competition away.

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As I said in my original post, I don't think these kind of effective monopolies occur very often at all. When they do occur, however, then it is silly to say that nobody is forcing the consumer to enter the transaction. That's technically true, but if you want to buy a PC, then you don't have much of a choice but to pay the price for Windows. Most people will never actually even know how much it costs, since the price is just built-in to whatever they happen to be buying from Dell or whoever. Do you really think the price of Windows is determined in the market, the result of some equilibrium between supply and demand? Of course Microsoft "makes" the price to a significant degree.

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Honestly, I think you are too hung up on this efficiency thing. When most markets aren't competitive, its usually because something other than the efficiency of the major player is keeping others out. There are plenty of markets in which barriers to entry are very high for a variety of reasons.


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Name two (that aren't governmental).


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Name two sectors with high barriers to entry for non-regulatory reasons? Historically, this has been the case in most countries for almost any sector that is capital intensive. Right now some obvious ones are utilities like gas and electricity. Others might have high barriers to entry because of the nature of the sector. Maybe it is conducive to network effects, like on-line auctioning, or maybe it depends upon ownership of resources that are scarce, like diamond production.

Re: Antitrust: Is there really a point?
 

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There may be a difference between violent power and nonviolent power insofar as one is violent, but the difference between market power and political power (I assume what you mean by coercive power) is not all that distinct. Market power can be coercive, dollars can buy votes in congress, politcal favors can buy money. There is another form of currency, it's usually called social capital.

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This is like saying hot dogs and ice cream cones are the same thing because you can trade one for the other.

You recognize that political power is the problem, but seek to limit market power instead?

Re: Antitrust: Is there really a point?
 

Sam,

My apologies if my questions came off as terse or combative. I was just looking for clarification.

Re: Antitrust: Is there really a point?
 

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Why is this? Why wouldn’t they just sell below cost in an attempt to drive everyone else out of business, and then raise prices to artificially high levels?

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if they sell below cost and drive everyone out of business then everyone has to shop at walmart

Re: Antitrust: Is there really a point?
 

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There may be a difference between violent power and nonviolent power insofar as one is violent, but the difference between market power and political power (I assume what you mean by coercive power) is not all that distinct. Market power can be coercive, dollars can buy votes in congress, politcal favors can buy money. There is another form of currency, it's usually called social capital.

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This is like saying hot dogs and ice cream cones are the same thing because you can trade one for the other.

You recognize that political power is the problem, but seek to limit market power instead?

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I haven't expressed an opinion as to what should be limited, but, since we're using analogies without too much weight to make points, saying there different is more like saying electricity and magnetism are two seperate forces because they run along different axis.

Re: Antitrust: Is there really a point?
 

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I haven't expressed an opinion as to what should be limited, but, since we're using analogies without too much weight to make points, saying there different is more like saying electricity and magnetism are two seperate forces because they run along different axis.

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OK, let's just dispense with the BS analogies, then. The difference is that market power is obtained through voluntary, mutually-beneficial transactions and coercive power is obtained through violence (or the threat thereof). Power is not the problem. Coercion is.

If you dislike the fact that people often trade market power for political power, the solution should be obvious. If you discovered that people often trade shiny metal disks for violent favors, would you believe that banning shiny metal disks (or limiting people's ability to use them for trade) will stop the sale of violent favors?

Re: Antitrust: Is there really a point?
 

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Who said that you can't profit from your creation without IP laws? I am just saying that it is unjust to use governmental force as a means of shielding firms from competitors. People have every right to keep their ideas private. If they choose to enter the market with them, however, they should be prepared for competition.

Also, there are numerous advantages to coming up with the idea. Providing the best product, being the first to enter the market, etc... It is called entrepreneurship. You see profit opportunity, acquire capital, produce and profit.


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Hmm...so the market dissolves property rights? I'm not sure I see the reason of your thinking. I agree that companies should not use governments to shield themselves from competitors, such as using government safety standards to create high barriers of entry. But, I'm confused...are you arguing that corporate espionage is ethical due to a company being in the market? Are you arguing that a company has no right to defend its own ideas and keep others from using them? That doesn't jibe with your argument against using the government...it seems as though you are advocating an expanded public domain. Please explain.

Re: Antitrust: Is there really a point?
 

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Why is this? Why wouldn’t they just sell below cost in an attempt to drive everyone else out of business, and then raise prices to artificially high levels?

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if they sell below cost and drive everyone out of business then everyone has to shop at walmart

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I have no problem with that, as long as Wal-Mart continues with their low prices. Read point #2 in the OP.

Re: Antitrust: Is there really a point?
 

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Who said that you can't profit from your creation without IP laws? I am just saying that it is unjust to use governmental force as a means of shielding firms from competitors. People have every right to keep their ideas private. If they choose to enter the market with them, however, they should be prepared for competition.

Also, there are numerous advantages to coming up with the idea. Providing the best product, being the first to enter the market, etc... It is called entrepreneurship. You see profit opportunity, acquire capital, produce and profit.


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Hmm...so the market dissolves property rights? I'm not sure I see the reason of your thinking. I agree that companies should not use governments to shield themselves from competitors, such as using government safety standards to create high barriers of entry. But, I'm confused...are you arguing that corporate espionage is ethical due to a company being in the market? Are you arguing that a company has no right to defend its own ideas and keep others from using them? That doesn't jibe with your argument against using the government...it seems as though you are advocating an expanded public domain. Please explain.

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Ideas are not tangible, therefore they are not property. It is quite simple. I realize that producers lose some incentive to create without IP laws. This is merely because they aren't guaranteed a government-aided monopoly. They will, however, have a greater incentive to produce efficiently, as this is where profits will come from.

Re: Antitrust: Is there really a point?
 

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OK, let's just dispense with the BS analogies, then. The difference is that market power is obtained through voluntary, mutually-beneficial transactions and coercive power is obtained through violence (or the threat thereof). Power is not the problem. Coercion is.

If you dislike the fact that people often trade market power for political power, the solution should be obvious. If you discovered that people often trade shiny metal disks for violent favors, would you believe that banning shiny metal disks (or limiting people's ability to use them for trade) will stop the sale of violent favors?

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as I said before, I haven't expressed an opinion as to what should be limited... frankly I don't think limiting either would matter much. The purpose of my comments was expansive not argumentative. "Mutually- beneficial transactions" does indeed sound nice. But, this is really where Economic theory shows itself to be an idealization, and quite incomplete. For some reason Economics has received the credibility of a hard science where it really doesn't deserve it. It ought to be considered, just like all of its fellow social sciences, as a young science that deals with a small part of man's manifold nature.

"Governement" "Business" "Not-for Profit Organizations" are the 3 most common means of allocating resources and power. Government and Business cannot opperate without one another. When Businesses opperate without a strong Govenment to hold them in check, you have things like US steal in Gary Indiana or Walmart's exploitation of US workers and the US Federal Government's entitlement programs, or less frequently, the consolidation of power through monopolies. When Governments run amuck you have eastern Europe for most of this past century. Whether you blame the monopolies on the government or on the businesses is largely irrelevant since, either way it is the government not doing it's job, which, in this case, is to limit the power of business. There is a collusion, and both sides are colluding. And the fact that no poster has yet come up with a Monopoly that became a monopoly without the help of a Government doesn't imply that they are the product of governments at all, only that those who have built monopolies know how to use both hands.

The solution to the abuses of business and government in all their kind is not less governemt or less business. It is more transparency and a bigger democratic will. Information + people giving a crap + a willinginess to take action will have the biggest affect on these abuses.

To think that market power, and the private sector in general is based on "voluntary, mutually-benefical transactions" is naive. Read about US Steal and the developement of the EPA.

Re: Antitrust: Is there really a point?
 

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Ideas are not tangible, therefore they are not property. It is quite simple. I realize that producers lose some incentive to create without IP laws. This is merely because they aren't guaranteed a government-aided monopoly. They will, however, have a greater incentive to produce efficiently, as this is where profits will come from.

[/ QUOTE ] Again, I'm confused. Forgive me, but I find it ridiculous to suggest that producers will create ANYTHING due to a desire to produce efficiently. The fact is, people who create things want to be compensated for the fact that they created it. I'm not saying others can't study, from an outsider's point of view, the ideas of the producer...that's how competitors form a lot of the time. But, from your point of view, no idea, theory, or anything else from the mind is anything but public domain.

From that point of view, what's to stop me from doing a note-for-note reconstruction of famous rock songs, recording them, performing them, and calling them my own? After all, there are no IP laws...so who's to say that the original artist wrote it, anyway...and who cares if he did? The song became everyone's when he introduced it to the market.

It seems fun to believe that artists and producers would continue to produce sheerly for the joy of it...and they might...but we would never have any new ideas...because what fool would ever be so stupid as to share one of these ideas?

Re: Antitrust: Is there really a point?
 

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Government and Business cannot opperate without one another. When Businesses opperate without a strong Govenment to hold them in check, you have things like US steal in Gary Indiana or Walmart's exploitation of US workers and the US Federal Government's entitlement programs, or less frequently, the consolidation of power through monopolies.

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Wrong. Monopolies can only be achieved WITH coercive government power.

Re: Antitrust: Is there really a point?
 

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Government and Business cannot opperate without one another. When Businesses opperate without a strong Govenment to hold them in check, you have things like US steal in Gary Indiana or Walmart's exploitation of US workers and the US Federal Government's entitlement programs, or less frequently, the consolidation of power through monopolies.

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Wrong. Monopolies can only be achieved WITH coercive government power.

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Well, I must be wrong... after all, you did assert that I was.

Re: Antitrust: Is there really a point?
 

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Well, I must be wrong... after all, you did assert that I was.

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Hey, I'm open to counterexamples. Bring it.

Re: Antitrust: Is there really a point?
 

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Again, I'm confused. Forgive me, but I find it ridiculous to suggest that producers will create ANYTHING due to a desire to produce efficiently.

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This is how they make money. I, on the other hand, find it hard to believe that people will have the desire to innovate on their creations once the are protected by a guaranteed 20 monopoly.


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The fact is, people who create things want to be compensated for the fact that they created it.

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Who said they can’t be compensated? There is just no government-aided monopoly to help them do it.


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I'm not saying others can't study, from an outsider's point of view, the ideas of the producer...that's how competitors form a lot of the time. But, from your point of view, no idea, theory, or anything else from the mind is anything but public domain.

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How are we supposed to draw the line when we are talking about ideas? Ideas are not scarce like tangible property is. If I create a song, and someone copies it, they have not taken anything from me. I still have my song. Knowing this, how is it possible to consider an idea property? By making ideas property you are creating scarcity where there was once infinity. Anyone who knows anything about economics knows that this is a bad thing.

“He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”

-Thomas Jefferson – First US Patent Examiner

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From that point of view, what's to stop me from doing a note-for-note reconstruction of famous rock songs, recording them, performing them, and calling them my own?

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Nothing, if people like your version and decide to buy your album and see you on tour, that’s good for you and good for them. It is not likely that they will think it is yours though considering that people tend to attribute songs to the first person they heard it from (I am only citing your specific example of course).

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After all, there are no IP laws...so who's to say that the original artist wrote it, anyway...and who cares if he did? The song became everyone's when he introduced it to the market.

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Agreed. People are not stupid though. Just because there are no IP laws doesn’t mean that everyone will start stealing everyone else’s ideas and get away with it (the credit that is).

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It seems fun to believe that artists and producers would continue to produce sheerly for the joy of it...and they might...but we would never have any new ideas...because what fool would ever be so stupid as to share one of these ideas?

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Again, I realize that the artists/inventors will be losing out because they will lose their precious right to an idea which is backed by governmental force. The problem is the arbitrary nature of IP laws. If one idea can be protected by force, who’s to say that ANY idea can’t be protected by force. Also, should the protection expire or should it be perpetual? All of it is very arbitrary and impossible to categorize.


Read this article. It's a bit arduous, but it goes over all of points pretty well (although, admittedly, the author does agree with my perspective).

IP Reading

Re: Antitrust: Is there really a point?
 

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Hey, I'm open to counterexamples. Bring it.

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An Example won't cut it. Reread the whole thread and you should have a better idea of what I think.

And "bring it"? I'm not here to debate or for some sort of competition..... discussion... that's why I'm here. That's where I try to understand all that you have to say, you try to understand all I have to say, any correction in the course is to aid in understanding one's own reasons and those of the other.

And BTW if you hold that Government does little but harm the private sector, the consumers and the Economy as a whole as an immutable founding principle, then we probably don't have much to say to each other, rather, only past each other.

Re: Antitrust: Is there really a point?
 

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Who said they can’t be compensated? There is just no government-aided monopoly to help them do it.

[/ QUOTE ] Okay...I'm willing to hear non-government options. I'm a libertarian...I have no problem with those. But my question then becomes...why would they be compensated, if all of their ideas belong in the public domain?

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If I create a song, and someone copies it, they have not taken anything from me. I still have my song.

[/ QUOTE ] Okay...but then, how would we have professional musicians? If they are not being compensated for their creation, then how could they live?

Plus, you are making a fundamental mistake in attributing equal value from one idea to the next...when ideas are anything but equally valued.

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Nothing, if people like your version and decide to buy your album and see you on tour, that’s good for you and good for them. It is not likely that they will think it is yours though considering that people tend to attribute songs to the first person they heard it from (I am only citing your specific example of course).


[/ QUOTE ] So you would see no problem if someone else performed your song, that you wrote, and got rich from it, and never paid you for your composition?

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Agreed. People are not stupid though. Just because there are no IP laws doesn’t mean that everyone will start stealing everyone else’s ideas and get away with it (the credit that is).

[/ QUOTE ] I was not agreeing with you. I was continuing the line of your thought. I don't agree, because we HAVE IP laws, and people still try to steal everyone else's ideas and get away with it(hip-hop sampling, corporate spying, etc.) Again, I'm not saying that we have to have laws, but just having no laws provides no incentive for someone to ever come public with their ideas, so they need recourse if the theft of ideas does occur.

I appreciate the link to the article. I am glad I'm not completely off the libertarian reservation with this one. As I said, I am certainly willing to entertain alternatives to IP laws(or almost any laws, for that matter), but their outright abolition would almost certainly lead to the demise of the professional artist and innovator, at least in my estimation.

Re: Antitrust: Is there really a point?
 

I am going to be lazy. Here is my response:

Beethoven wrote his symphonies, Newton developed the theory of gravity, Homer wrote the Iliad... all before IP laws.

Creators will create, and they will get credit in the absense of government interference. What they may not get is overly compensated (at the expense of the consumer) in the absence of force.

Re: Antitrust: Is there really a point?
 

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Hey, I'm open to counterexamples. Bring it.

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An Example won't cut it. Reread the whole thread and you should have a better idea of what I think.

And "bring it"?

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Yes, "bring it." I'm sick and tired of hearing the "without government, monopolies will form" line. It's routinely spouted in this forum, but nobody will back it up. One example WILL cut it, because I'm saying, absolutely, that a monopoly CANNOT form without some sort of coercive power behind it. ANY counterexample will suffice.

Re: Antitrust: Is there really a point?
 

On the IP debate, it seems that lumping patent and copyright together is a mistake.

First, note the difference in their enforcement.

To enforce a copyright, the rightholder must prove that the alleged infringer had access to the rightholder's work. If the alleged infringer came up with the work independently, there is no infringement. Intent to commit theft is necessary for there to be damages.

With patents, proving such access to previous work is not necessary. Intent isn't necessary. If you develop something independently, you're still in violation.

In a free market, theft is outlawed. Copyright does fit logically into a free property market, while patents do not.

Cf. Rothbard:

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The crucial distinction between patents and copyrights, then, is not that one is mechanical and the other literary. The fact that they have been applied that way is an historical accident and does not reveal the critical difference between them. The cru*cial difference is that copyright is a logical attribute of property right on the free market, while patent is a monopoly invasion of that right.

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[Man, Economy, and State, chapter 10]

Re: Antitrust: Is there really a point?
 

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Hey, I'm open to counterexamples. Bring it.

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An Example won't cut it. Reread the whole thread and you should have a better idea of what I think.

And "bring it"?

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Yes, "bring it." I'm sick and tired of hearing the "without government, monopolies will form" line. It's routinely spouted in this forum, but nobody will back it up. One example WILL cut it, because I'm saying, absolutely, that a monopoly CANNOT form without some sort of coercive power behind it. ANY counterexample will suffice.

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Reread the thread, I am not going to to come up with a "counterexample" or, for that matter, in any way defend a position I have not even put forth. "bring it?" reread the thread.

Re: Antitrust: Is there really a point?
 

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Reread the thread, I am not going to to come up with a "counterexample" or, for that matter, in any way defend a position I have not even put forth. "bring it?" reread the thread.

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Earlier:

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When Businesses opperate without a strong Govenment to hold them in check, you have things like . . . the consolidation of power through monopolies.

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