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 LegoPower77AbecedarianPremium
join:2002-08-03
Midlothian, VA | reply to DaneJasper
Re: My response to Martin's op-ed While I disagree with your formulation, I would like to offer much praise for your saying we should “regulate/deregulate with extreme caution.” It seems so many in these pages are blindly willing to have a political board determine market structures, at least you say your cautious in both cases.
That being said, I would suggest the “monopoly” status of these companies are a result of exclusive franchise licenses given by the government rather than a natural occurrence.
First, can we agree to one thing? Sherman anti-trust law, et al. were passed long before economics developed as a science; that is to say, we know more now about how markets work than we did at the turn of the last century. I’m not asking you to agree with the interpretations of what we know, just agree that there is more knowledge.
Now, that being said, I have a hard time putting so much faith in both the legislative and legal precedence in this matter since the law as written is a no-win situation. Under Sherman, a firm can be prosecuted for raising prices (proves they’re a monopoly), lowering prices (predatory practices), or keeping the price the same as others (collusion).
In fact, economists have looked at the suits brought under Sherman, et al., and surprise, surprise, it’s just a method for one business to waylay another business. It turns out that when the company bringing the suit is the more politically-connected one, the case goes through, whereas when the company bringing the suit is not as connected as the defendant, the case does not get heard (generally speaking, of course). Example: Microsoft had just one lobbyist in Washington before they were sued.
Monopoly in the pure sense of the word cannot exist because there are always alternatives. When we do see shades of monopoly, it’s almost exclusively government created/enforced (think, the Post Office, Amtrak, the phone company . . .).
The fact of the matter is, there are always substitutes. Plastic is a substitute for metal, coal is a substitute for oil, cable is a substitute for DSL… However, we must be careful not to look at it as a black-and-white situation; the substitutability of a good is a continuum that is different for different people and goods. The point is, though, that even if there were a “monopoly,” it would still face a sloping demand curve meaning it couldn’t “just charge what it wants.” The negative slope of the demand curve proves that doing without is an alternative, N.B.: at some point, people will just not pay.
Firms that have some level of monopoly status are still constrained by costs, they still face a downward-sloping demand curve, and the only thing they do differently is instead of in a perfectly competitive market where firms produce to where marginal cost = the unchanging price, in theory, monopolies will lower production to where marginal cost = marginal revenue and try to seek out the most profitable price. Whether this is good or bad is a matter of opinion.
I say “in theory” because a large number of economic historians have found that the opposite is the case. For instance, Dominick Armentano examined the oil, steel, and tobacco industries and found that all the “monopoly” companies (Standard Oil, US Steel, and American Tobacco Co.) had a record of continually increasing output and reducing price (see The Myths of Antitrust chpts 4 & 5).
Standard Oil in 1870 sold refined oil at $26.4/bbl and had 4% market share. By 1911, they had brought the price down to $4.7/bbl and had 69% market share. Same scenario for Alcoa, in 1887 a pound of aluminum sold for $5-8, by 1941 it was down to 15¢/lb. In more recent times, Microsoft gets lashed as an eeevil monopoly while no one can argue with how much better off people are with their products—as if they’ve been coerced into buying them or something. Meanwhile, government subsidized companies flounder (the railroads in the 1880s, the shipping industry around that same time, the post office, Amtrak…. Didn’t they just need another billion dollar bail-out?)
Furthermore, Yale Brozen says that, “the few trusts that actually did attempt raising prices and reducing outputs, such as the American Sugar Refining Company in the early 1890s and the American Can Company after 1901, quickly lost market share to new entrants attracted into the market, which bid prices back down to competitive levels” (see The Attack on Concentration). Indeed, just the threat of a new entrant into the market is enough to keep the so-called monopoly from abusing it’s power.
Regulation makes people beholden to a politically connected commission and leads them down the road to serfdom. As Friedrich Hayek points out in his essay The Meaning of Competition, “Enthusiasm for perfect competition in theory and the support of monopoly in practice are indeed surprisingly often found to live together.” The reason for this is that people get so caught-up in trying to make everything “competitive” that they end up distorting the market by excessive regulation.
Whatever good the aims of regulation are, it always ends up maintaining the power of the planners themselves. A society that cedes its development to an organized commission will always be limited by what the minds of the planners can grasp
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"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." —Ronald Reagan | |
| quote:
Microsoft gets lashed as an eeevil monopoly while no one can argue with how much better off people are with their products—as if they’ve been coerced into buying them or something.
Actually, we are not better off with Microsoft's products. We are probably worse off than if we would have went with the competitors (Apple, Novell, Word Perfect, Lotus).
And people were coerced (or FORCED) into buying them. Read up on the case and you'll see a lot of illegal tactics. | |
| reply to LegoPower77
The problem has little to do with prices here. Yes, prices decrease over time in any industry. However, its how quickly and comparatively those prices decrease (accounting for inflation, of course). The issues with Standard had little to do with the prices that were being charged rather than how they were using the other companies they controlled to keep those prices low and maintain their monopoly. If private companies had maintained control of the electricity market for much longer, its safe to say they would've have prolonged distribution to rural areas even longer.
The point here isn't just price, imo, but penetration. Private companies do not go where it isn't cost effective and this has been historically true even of Monopolies who do charge low prices.
Steel and tobacco are very different from broadband and electricity. You cannot actually believe that if a company did manage to control %100 of an energy or broadband market it would continue to lower prices out of the goodness of its collective board's heart. Standard owned all sorts of different companies and used those supplemental companies to cross subsidize oil prices low and maintain monopoly. When a public utility tries to do the same. The result was cheap prices of oil, but little concern for the actual intention of some of the resources they owned (commercial and travel rails, for example). When a public utility does the same kind of cross-subsidization and exploitation of coalescing resources, their operations are penalized or shut down, why not the same case for privates? | |
| reply to LegoPower77
Also ...
Don't forget the biggest revolution of the past twenty years to absolutely BLAST all logical economic theory out of the water ... advertising.
People no longer buy the cheapest product.
They purchase the most lucrative lifestyle based on perceived value.
Frankly, I think psychological methods of advertising should be regulated, barred, destroyed, whatever, since they essentially ruin the market even in its "naturally perfect" state. Reality and theory do not always coalesce, especially in economics. | |
| reply to itguy05
If everyone would be using Apple, Linux or whatever else. We would end up with the same problems. You would have just as many viruses and worms and whatnots as you do with Microsoft products.
I'm not saying that MS didn't do anything wrong, I don't know everything about there little monopoly lawsuit. I'm just saying that the grass wouldn't nessisarly be greener on the otherside.
With the rural areas of the US not having BB. It's just the American way. Screw the little guy. As long as I can keep getting all this money out these people over here... I'm not going to bother to spend the money to give the others the same service. | |
 Titus PulloI came, I saw, I slept
join:2004-06-26
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| reply to LegoPower77
"First, can we agree to one thing? Sherman anti-trust law, et al. were passed long before economics developed as a science; that is to say, we know more now about how markets work than we did at the turn of the last century."
A science is not defined as something "we know more now about [...] than we [used to]."
Capitalist economic texts lead one to believe the "market" -- with its invisible hand -- is in effect, a self governing, self correcting, living entity best left to its own devices.
Economics is much closer to an ideology than a science. The facts bear out that capitalism is all about exchange, which leads to accumulation of wealth with little regard to much else. Economics is the tool of the ruling class. The market system is simply a tool to mask its own fallacy of naturalization; it only refers to internal claims as a way of concealing what exists outside its own claims -- The very definition of ideology.
Without the discipline/regulation provided by a government (or ruling class) having the power to implement regulation/deregulation, then there is no market discipline. Certainly no one can argue a market is self disciplining when a government can affect any number of variables that both sustain and destroy a market economy.
As an analogy: When we lead a regulated life, we are said to live in harmony by discipline. Defined within a value system, this is tantamount to stating that discipline of life is as precious as life itself, for it is out of that discipline that life derives value; forfeiting this self-regulation is akin to giving up the advantages of birth.
Modern Economics is so rife with fallacy and imbued with politics that it will never aspire to the designation of a science; and worse, it aids the powerful in their quest to destroy free enterprise.
True monopoly is a device of socialism. Our current system of monopoly capitalism has strangled free enterprise. Today 1% of the population owns close to 50% of all wealth in this country. The top 10% own 90% of all national wealth. The only disparity worse than this is socialism. We have reached another gilded age where the death of free enterprise isn't a question of if, but of when. The only apparent invisible hand is the one over the public eye.
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"The limits of tyrants are prescribed by the endurance of those whom they oppose." -- Frederick Douglass | |
 calvoiper
join:2003-03-31
Belvedere Tiburon, CA | said by Titus Pullo:A science is not defined as something "we know more now about [...] than we [used to]." ... Economics is much closer to an ideology than a science. Biology, chemistry, and physics are all SCIENCES that we know more about now than we did at the turn of the last century.
So is economics.
Claiming economics is an ideology is like saying that evolution is only an ideology and that creationism is science.
calvoiper
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VoIP--the death knell of remaining voice monopolies! | |
Titus PulloI came, I saw, I slept
join:2004-06-26
kudos:1 Reviews:
·Embarq Now Centu..
1 edit | said by calvoiper:said by Titus Pullo:A science is not defined as something "we know more now about [...] than we [used to]." ... Economics is much closer to an ideology than a science. Biology, chemistry, and physics are all SCIENCES that we know more about now than we did at the turn of the last century. So is economics. Claiming economics is an ideology is like saying that evolution is only an ideology and that creationism is science. calvoiper Then you've been brainwashed; any economist worth his or her salt will tell you that Economics is not a science in the truest sense of what constitutes a science. At best, it is a social science.
Look it up for yourself.
»en.wikipedia.org/wiki/Science
EDIT: Better stated, what I'm saying is that Capitalism (an ideology) is one approach to economics. There are several economic systems, each with variance and theories; however, theory is not science. IMHO, our economic system has become a hybrid of junk science and ideology. Do a search and read various opinions on why economics is often referred to as the "pseudo science."
But you are correct in that I should not have referred to all economics as ideology. Only when broken down and polluted by greed and politics does the language of the system become the playground of ideologues.
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"The limits of tyrants are prescribed by the endurance of those whom they oppose." -- Frederick Douglass | |
LegoPower77AbecedarianPremium
join:2002-08-03
Midlothian, VA | Sorry for the late response. Summer vacations and work, these days. I hope you two will indulge me.
said by Titus Pullo:said by calvoiper:said by Titus Pullo:A science is not defined as something "we know more now about [...] than we [used to]." ... Economics is much closer to an ideology than a science. Biology, chemistry, and physics are all SCIENCES that we know more about now than we did at the turn of the last century. So is economics. Claiming economics is an ideology is like saying that evolution is only an ideology and that creationism is science. calvoiper Then you've been brainwashed; any economist worth his or her salt will tell you that Economics is not a science in the truest sense of what constitutes a science. At best, it is a social science. An sneaky technique, WMH, what you're doing is taking everything I would have to prove the merits of deregulation off the table a priori.
Any clown can post something on Wikipedia, but what is the nature of science? Indeed, at its roots, science is philosophy. Why do you think it's called a PhD? Literally: a doctorate in philosophy.
Now, that being said, is economics the bastard child? Consider the field of quantum physics, the study of nature within the very atoms themselves. Many times in the tests scientists perform, they have to build a model, (such as in a particle accelerator) and then they test it with statistics. (Brian Greene’s 1999 book, the elegant universe mentioned how this is done as a matter of course in cutting-edge research.)
So, what do doctors of philosophy do in the field of economics?
They develop a theory of a natural phenomenon (in this case, human interaction), build a mathematical model (much like in the physics case) and then test it by trying to prove the null hypothesis,* (in many cases the same way psychologists test their theories in labs with people).
Of course, on many other hands, there need be no testing; the differences between Russia and the US were contrapositions amongst countries on a continuum of government intervention and regulation. And even now, America, the most laisser-fair of them all remains on the cutting edge of technological development (as distinguished from deployment, I'll grant you).
I think your insistence in vilifying economics is because there’s near unanimity, in most cases, on the proper level of government action. Back to the testing part, Vernon Smith won the Nobel in 2003 because of his work developing clinical tests of people engaged market/economic action. It's no coincidence that he is huge proponent for deregulation in many areas.
Likewise, the economic philosophers of the 1800s in Austria took an entirely different approach yet arrived at the same conclusion: human invention, human discovery does not come from regimented governmental action, but through the experimentation of individuals in the marketplace. N.B.: money was first used privately before government co-opted it and eventually monopolized it.
As mentioned in this post another Economic Nobel Laureate Thomas Sowell (we all know what "leftists" the Nobel committee is, man) says the same thing in one of his recent Random Thoughts columns: Some ideas seem so plausible that they can fail nine times in a row and still be believed the tenth time. Other ideas seem so implausible that they can succeed nine times in a row and still not be believed the tenth time. Government controls in the economy are among the first kinds of ideas and the operation of a free market is among the second kinds of ideas.
*Not to put too fine a point on it. It's interesting that creationism and evolution are mentioned here. Manifestly neither are science. Scientific testing requires a null hypothesis, i.e. something that, if proven, ruins the theory, e.g., if I drop this glass, and it doesn't fall, the law (which started out as a theory) of gravity would be disproven.
Of course, "evolution" (needs to be defined) is an ever-shifting theory. Every time the latest missing link (that was actually a projection based on as little as a single tooth) is found to be a fraud, another explanation pops up).
Frankly I find it would take much more faith to believe in evolution than the God of Abraham and Mary.
Look, we have in these very pages people who contribute to SITI. This is a search for extraterrestrial life by inter alia listening to wave patterns from outer space.
If so much as a random pattern of prime numbers is found, it will be said that intelligent life is likely the source. We look at the statues erected on Easter Island and assume that it was human intelligence that built it.
But yet we are unlocking all the information, volumes and volumes, contained in DNA and we're blindly willing to say that that happened by chance; odds that are a bajillion-kajillion smaller than winning the mega-jackpot.
Any statistician that wasn't a pillar of salt would tell you those are bad numbers. The God of Abraham says in Deuteronomy 30:15 "See, I have set before thee this day life and good, and death and evil."
Ante up, gentlemen.
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"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." —Ronald Reagan
It's right, it's free. | |
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