Antitrust: Is there really a point?

[The Don]

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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.

[coffeecrazy1]

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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.

[The Don]

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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.

[coffeecrazy1]

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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?

[peritonlogon]

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.

[The Don]

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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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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.

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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.

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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.

[peritonlogon]

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.

[tylerdurden]

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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.

[Borodog]

pvn,

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

[peritonlogon]

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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.