 LegoPower77AbecedarianPremium
join:2002-08-03
Midlothian, VA | reply to Kaltes
Re: Bundled services Let me ask you something, you say they rip off the consumers, are the consumers forced to buy their product? Are they? No, they contract with the ISP presumably because they want to have internet access. Both parties gain from trade otherwise rational people would not do it. You are at odds with one of the fundamental assumptions of economics here. I suggest we all back off the emotion and look at it.
ISPs do have some level of monopoly power —but by no means are they a pure monopoly. Even if they were, (funny how I have to use a plural for monopoly) they still can't just arbitrarily set their prices. It's not as if Ebenezer Scrooge can just wake up one day and say, "gee i think I'll raise prices today." No, even monopolies have to compete for resources and the effects of costs.
The only eeevil of the monopoly is that they face a sloped demand curve meaning they can set a price and have a corresponding number of people willing to buy (as opposed to the wheat farmer who faces a horizontal demand curve and can only sell what the market dictates). When the market is open, i.e., not encumbered by barriers to entry (read: regulations), firms try to set their price as close to what a perfectly competitive market would be as possible, otherwise, the windfall they make from a high price would attract others to enter the business. This is why we see things like Standard oil in 1870 selling refined oil at $26.4/bbl and having a 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. the same thing for almost any “monopoly” you want to bring up (and don’t give me the government created ones like the Bells or the Post Office, or something —the education system is a particularly egregious one). What a way to screw the consumer. Just like Microsoft did with its Virtual Machine. Now I have to go to Sun's website to get java, what a hassle.
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” (emphasis added). 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, which drives high-cost producers out and discourages would-be competitors from entering (not to mention discouraging innovation because of limiting profits). Regulation makes people beholden to a politically connected commission (eeevil lobbying) and leads them down the road to serfdom. 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.
Q.E.D.
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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 |
