Monopolies Are Caused by Government, Not Technology, and Should be Removed by the Courts

Via The Daily Bell


Monopolies Are Worse Than We Thought … Economists are increasingly turning their attention to the problem of monopoly. This doesn’t mean literal monopoly, like when one utility company provides all the power in a city. It refers to market concentration in general — when an industry goes from having 20 players to having only 10, or when the four biggest companies in an industry start taking a bigger and bigger share of sales. This sort of creeping oligopoly acts much like a literal monopoly — it raises prices, limits market size and tends to make the economy less efficient. – Bloomberg

Market concentration hurts workers according to this article. It’s true, but makes no distinction between voluntary monopolies and imposed monopolies.

In some cases, monopolies are valuable and adopted voluntarily. For instance, light bulbs are standardized. This is a form of voluntary monopoly and customers do not react against it from what we can tell.

Then there’s the Federal Reserve, which has been given the power to regulate and print money.

The Fed is a government monopoly with all the negatives we associate with this kind of monopoly. It runs money for the sake of a handful of people and not for the larger good.

Additionally, the idea that the Fed could run money and regulate banks for the larger good is suspect anyway. It is not going to turn into an eleemosynary institution just because it has the ability to exercise a monopoly.


I suspect that creeping monopoly will prove to be one of the main reasons for decreasing business dynamism. And it could even be a contributor to slow productivity growth.

In other words, many of the diseases in our economy can probably be traced, at least in part, to the problem of market concentration. In a previous post, I mentioned a couple of potential causes. The obvious culprit would be a more lax attitude toward antitrust enforcement.

If free-market fundamentalism caused the U.S. to be friendlier toward big mergers since the 1990s, this could have encouraged concentration. One problem with this story is that antitrust fines have actually been on the rise: Regulation can increase monopoly power by raising barriers to entry.

Even within a couple of grafs the author says two contradictory things. First he says the antitrust enforcement has made monopolies more common. Then he says that antitrust fines have been on the rise but that they too can encourage monopolies by creating barriers to entry.

The article says that if regulation is the main reason for monopolies than he will have to become “much more libertarian.” In fact it is already established that regulation is a main cause of monopolies.

However, the article doesn’t see it this way. Modern regulatory trends, he declares, have only been around since about 2000. Therefore blaming regulation for monopolies must not be true.

Additionally, the article mentions a recent paper claiming that a few “superstar” companies in various fields have naturally emerged as quasi-monopolies. Modern technology may simply have change the way companies relate to each other and to the market. “Those companies could simply be out-competing their rivals.”

Yet a third reason could be because technology has broadened competition and top brands are now far more ubiquitous. Big corporations can now more easily push out smaller ones.

Probably none of this is true. What builds big corporations with monopoly tendencies is what we have been saying all along: Monopoly force exercised through the court system, and by the legislature.

Remove intellectual property rights and corporate person-hood and you would go a long ways to naturally reducing the overly large size of corporations.

If technology is the culprit, then the problem will be complex indeed. But technology is not the culprit. America’s judicial system and legislature has created the problem and can solve it in large part by walking back a few of decisions.

Of course the chance of this are fairly minimal. The current system only makes thing more complicated over time.

Conclusion: But if the court at the federal level could be compelled to reexamine its decisions and then to change them, the US would become a much better place. Involuntary monopolies would become far fewer. And that would help everyone.

via Read More Here..


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s