Question for ACers re cartels

[bunny]

In the recent enormous post on capitalism, many ACers posted that cartels were only able to form due to the presence of governments. I dont think there was ever an argument presented as to why this was true. Can someone persuade me that this is the case?

[Riddick]

Government erects unnatural and prohibitive barriers to entry (into the industry). Once the threat of newcomers is quelled, the remaining player(s) are free to set monopoly prices.

[pvn]

[ QUOTE ]
In the recent enormous post on capitalism, many ACers posted that cartels were only able to form due to the presence of governments. I dont think there was ever an argument presented as to why this was true. Can someone persuade me that this is the case?

[/ QUOTE ]

Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[Sharkey]

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Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[/ QUOTE ]

Government itself.

[Riddick]

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Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[/ QUOTE ]

Government itself.

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/images/graemlins/confused.gif

So I got out of bed this morning, but without the assistance of myself?

[Sharkey]

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So I got out of bed this morning, but without the assistance of myself?

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What self of yours was there to assist you?

[nietzreznor]

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Government itself.

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True enough.

Of course, in doing so, it clearly used coercion, aggression, and violence. Could a cartel form on a free market, if it used aggression and violence? Yeah, it could. But these are the very things that a free market and a free society want to prevent, so I'm not sure how relevant an example it is.

[bunny]

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[ QUOTE ]
In the recent enormous post on capitalism, many ACers posted that cartels were only able to form due to the presence of governments. I dont think there was ever an argument presented as to why this was true. Can someone persuade me that this is the case?

[/ QUOTE ]

Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[/ QUOTE ]
Do you mean it's self-evidently true?

I certainly cant provide an example but I am pretty ignorant of the topic - hence my questions. I dont think the fact I cant think of an example is proof government is required any more than an ACer failing to think of an AC solution to a problem is proof that there isnt one.

[bunny]

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Government erects unnatural and prohibitive barriers to entry (into the industry). Once the threat of newcomers is quelled, the remaining player(s) are free to set monopoly prices.

[/ QUOTE ]
Thanks. Is it also the case that those government imposed barriers prevent the processes which you believe would cause a cartel to disintegrate in a truly free market?

[Riddick]

[ QUOTE ]
[ QUOTE ]
Government erects unnatural and prohibitive barriers to entry (into the industry). Once the threat of newcomers is quelled, the remaining player(s) are free to set monopoly prices.

[/ QUOTE ]
Thanks. Is it also the case that those government imposed barriers prevent the processes which you believe would cause a cartel to disintegrate in a truly free market?

[/ QUOTE ]

I dont follow...this question seems to just restate what I originally said.

[Darryl_P]

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Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[/ QUOTE ]

I'd say the Microsoft monopoly was formed for reasons having little to do with government. It just happens to be advantageous for everyone to use the same operating system, browser, office-type programs, and email software.

I don't think it's a horribly bad thing, though. Sure, they can take advantage of their market position in certain instances to a certain extent, but they can't do it too severely forever, or someone will eventually be able to compete and acquire the monopoly for himself.

Besides, there's some irony in that the very thing they thrive on -- the internet -- is an efficient tool for getting around their monopoly by file-sharing.

[pvn]

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[ QUOTE ]
In the recent enormous post on capitalism, many ACers posted that cartels were only able to form due to the presence of governments. I dont think there was ever an argument presented as to why this was true. Can someone persuade me that this is the case?

[/ QUOTE ]

Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[/ QUOTE ]
Do you mean it's self-evidently true?

I certainly cant provide an example but I am pretty ignorant of the topic - hence my questions. I dont think the fact I cant think of an example is proof government is required any more than an ACer failing to think of an AC solution to a problem is proof that there isnt one.

[/ QUOTE ]

An example would *disprove* the AC contention that such monopolies cannot form without coercive force (which is generally supplied by governments). That's all.

Now let me ask you this... without coercive force, how can a "monopoly" possibly prevent others from entering a market?

[pvn]

[ QUOTE ]
[ QUOTE ]
Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[/ QUOTE ]

I'd say the Microsoft monopoly was formed for reasons having little to do with government. It just happens to be advantageous for everyone to use the same operating system, browser, office-type programs, and email software.

[/ QUOTE ]

I agree that Microsoft obtained its position without government assistance. I dispute the "monopoly" label.

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I don't think it's a horribly bad thing, though. Sure, they can take advantage of their market position in certain instances to a certain extent, but they can't do it too severely forever, or someone will eventually be able to compete

[/ QUOTE ]

Exactly!

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and acquire the monopoly for himself.

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What monopoly? If you can compete (which you just allowed), how can it be a monopoly?

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Besides, there's some irony in that the very thing they thrive on -- the internet -- is an efficient tool for getting around their monopoly by file-sharing.

[/ QUOTE ]

What do they have a monopoly on, exactly? Besides the intellectual property monopolies they have that are granted by government?

[bunny]

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Government erects unnatural and prohibitive barriers to entry (into the industry). Once the threat of newcomers is quelled, the remaining player(s) are free to set monopoly prices.

[/ QUOTE ]
Thanks. Is it also the case that those government imposed barriers prevent the processes which you believe would cause a cartel to disintegrate in a truly free market?

[/ QUOTE ]

I dont follow...this question seems to just restate what I originally said.

[/ QUOTE ]
I was just checking I understood you correctly. You said that government barriers keep competitors from entering the market. A second requirement for cartels would be some mechanism for preventing the decay of the cartel (as I understand the AC position, you would claim that in a free market cartels will inevitably collapse, even if they did manage to form without government support).

[TomCollins]

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In the recent enormous post on capitalism, many ACers posted that cartels were only able to form due to the presence of governments. I dont think there was ever an argument presented as to why this was true. Can someone persuade me that this is the case?

[/ QUOTE ]

Can you provide a counterexample of a monopoly that formed (even "in the presence" of government) without government assistance?

[/ QUOTE ]
Do you mean it's self-evidently true?

I certainly cant provide an example but I am pretty ignorant of the topic - hence my questions. I dont think the fact I cant think of an example is proof government is required any more than an ACer failing to think of an AC solution to a problem is proof that there isnt one.

[/ QUOTE ]

An example would *disprove* the AC contention that such monopolies cannot form without coercive force (which is generally supplied by governments). That's all.

Now let me ask you this... without coercive force, how can a "monopoly" possibly prevent others from entering a market?

[/ QUOTE ]

I think you guys are using the position "it is extremely unlikely but logically possible".

You control some resource that is desired, has no replacement, and no one can create. Entirely possible logically, but unlikely. Also possible if a small group has unlimited control to a resource, and made a binding contract to collude.

[bunny]

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An example would *disprove* the AC contention that such monopolies cannot form without coercive force (which is generally supplied by governments). That's all.

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I dont know - I imagine an ACer claiming that any such monopoly came into existence in a state system and so inherently relied on a government's coercive force.

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Now let me ask you this... without coercive force, how can a "monopoly" possibly prevent others from entering a market?

[/ QUOTE ]
By having exclusive control over the supply of raw materials (or some other crucial ingredient).

[Darryl_P]

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What monopoly? If you can compete (which you just allowed), how can it be a monopoly?


[/ QUOTE ]

The implication is that the monopoly exists at present, but may not exist in the future. To hold on to it, they have to continue to work hard, provide good software, services etc.

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What do they have a monopoly on, exactly? Besides the intellectual property monopolies they have that are granted by government?

[/ QUOTE ]

PC operating system software, for example. There really isn't any reasonable choice on the market besides Windows XP and the main reason is not because of the quality vs. the competition, rather it's the fact that they were the first and the best in the early days and built a strong market position.

So now they only have to be equal (or even slightly worse) to have the whole market for all intents and purposes.

If they ever get MUCH worse they will lose the monopoly to be sure, but the nature of the market being an all-or-nothing type deal is hugely advantageous for them and affords them some laziness or complacency that players in most consumer goods sectors could not afford.

After all, the fact that my clients drink Pepsi doesn't make it any less convenient for me to drink Coke, whereas with operating software it's a different story.

I'm not advocating government as a solution to this, though, because quite frankly I don't really see a problem -- the resulting product quality and price deal offered to the consumer doesn't seem affected by the existence of the monopoly. So if it ain't broke, don't fix it.

Note: I know microsoft's market share is not exactly 100% so technically it's not a monopoly, but at roughly 95% it's a monopoly for all intents and purposes.

[pvn]

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What monopoly? If you can compete (which you just allowed), how can it be a monopoly?


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The implication is that the monopoly exists at present, but may not exist in the future. To hold on to it, they have to continue to work hard, provide good software, services etc.

[/ QUOTE ]

I'm confused. People are free to enter the market, no? Then they don't have a monopoly. Even though they are the dominant player, they aren't the sole player, and even in the case where they *are* the sole player, they have to maintain a competitive stance or new players will enter the market to take advantage of their laziness.

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What do they have a monopoly on, exactly? Besides the intellectual property monopolies they have that are granted by government?

[/ QUOTE ]

PC operating system software, for example. There really isn't any reasonable choice on the market besides Windows XP and the main reason is not because of the quality vs. the competition, rather it's the fact that they were the first and the best in the early days and built a strong market position.

[/ QUOTE ]

There are choices. But, again, a lack of choices is not a sufficient condition to declare that a monopoly exists.

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So now they only have to be equal (or even slightly worse) to have the whole market for all intents and purposes.

If they ever get MUCH worse they will lose the monopoly to be sure, but the nature of the market being an all-or-nothing type deal is hugely advantageous for them and affords them some laziness or complacency that players in most consumer goods sectors could not afford.

After all, the fact that my clients drink Pepsi doesn't make it any less convenient for me to drink Coke, whereas with operating software it's a different story.

I'm not advocating government as a solution to this, though, because quite frankly I don't really see a problem -- the resulting product quality and price deal offered to the consumer doesn't seem affected by the existence of the monopoly. So if it ain't broke, don't fix it.

Note: I know microsoft's market share is not exactly 100% so technically it's not a monopoly, but at roughly 95% it's a monopoly for all intents and purposes.

[/ QUOTE ]

But it's not a monopoly - not quite for the reasons you listed as it "not being broke", though those reasons are themselves results of Microsoft not being a monopoly.

Your thought processes are correct /images/graemlins/smile.gif - you've just been suckered into using a politically-manipulated definition of "monopoly" created to justify further government intervention in the form of "trust busting", which, in general, hurts consumers and benefits politically-favored "competitors" (I put that in quotes because they are invariably poor competitors) of the victim trust.

[Riddick]

Yes, you understood me correctly.

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A second requirement for cartels would be some mechanism for preventing the decay of the cartel

[/ QUOTE ]

That mechanism is the prevention of competition.

[Riddick]

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PC operating system software, for example. There really isn't any reasonable choice on the market besides Windows XP and the main reason is not because of the quality vs. the competition, rather it's the fact that they were the first and the best in the early days and built a strong market position.

[/ QUOTE ]

To shed further light, Allen and Gates did in fact use government licensing to essentially define what an "operating system" was. For a brief time, there were tons of operating system clones surfacing before they were defined out of existence.

Now whether or not such a licensing system would be formed in a free market is debatable.

[moorobot]

What about Natural monopolies?

"In some industries economies of scale are particularly pronounced. Competition in these cases is impractical, inconvienent, or simply unworkable: electric and gas companies, bus firms, water and communication facilities, roads etc.

As an illustration, it would be exceedingly wasteful if a community had several firms supplying water or electricity. Technology is such in these industries that large scale and extensive capital expenditures on generators, pumping and purification systems and equipment, water maims, and transmission lines are required. This problem is aggravated because capital equipment must be sufficent to meet peak demands which occur on hot summer days when lawns are being watered and air conditioners operated.

The point is that unit costs of production declie with the number of cubic feet of water or kilowatt hours of electricity supplied by each firm, that is, as the firm expands its size. The prescensce of several water and electricity suppliers would divide up the total market and reduce the sales of each competitior. Each firm would be pushed back up its declining long-run average cost curve. Firms would be too small to achieve minimum long run avergage costs and therefore electricity and water rates would be unnecessarily high.

In addtion, competition would be extremely inconvenient...(imagine if there were fourteen water companies in a city: fourteen different privately run sewers? How about fourteen different electric lines running through a city, or eight freeways running from SW to the NE tip of Omaha, all side by side to the exact same place???-added by MOO)

Because natural monopolies can lower their average costs by expanding output, they try to increase sales by price cutting. As a a result, cutthroat price compeitition breaks out when several firms exist in these public utilities industries. The result will be loses, bankruptcy of weaker rivals, and the eventual merger of survivors. The evolving pure monopoly will be anxious to recoup past losses and to profit fully from its new position of market dominance by charging monopoly prices for its goods or services."

"Economics" by Cambell R. Mcconnell and Stanley Brue, 12th edition, Mcgraw Hill, 1993, pgs. 467-468.

[moorobot]

A competitive market would lead to lower prices than a monopoly, oligopoly, cartel or non-cartel. The product produced by these might be better than everybody else's but it would be even better (or cheaper) if there was actual compeitition going on.

[TomCollins]

The fact that moorobot has opened an economics book was the most interesting part of this post.

[pvn]

[ QUOTE ]
What about Natural monopolies?

"In some industries economies of scale are particularly pronounced. Competition in these cases is impractical, inconvienent, or simply unworkable: electric and gas companies, bus firms, water and communication facilities, roads etc.

As an illustration, it would be exceedingly wasteful if a community had several firms supplying water or electricity. Technology is such in these industries that large scale and extensive capital expenditures on generators, pumping and purification systems and equipment, water maims, and transmission lines are required. This problem is aggravated because capital equipment must be sufficent to meet peak demands which occur on hot summer days when lawns are being watered and air conditioners operated.

[/ QUOTE ]

Providing gasoline requires large scale and extensive capital expenditures. It would be exceedingly wasteful if a community had several firms supplying gasoline.

Or automobiles.

Or water.

http://img.coxnewsweb.com/C/07/95/05/image_605957.jpg

Or food. It's so wasteful to have "hamburgers" and "pizza" and "hot dogs" and "steaks". Can't we just standardize everything into "food" so we don't have to waste so much shelf space in stores displaying all these different subvarieties?

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The point is that unit costs of production declie with the number of cubic feet of water or kilowatt hours of electricity supplied by each firm, that is, as the firm expands its size. The prescensce of several water and electricity suppliers would divide up the total market and reduce the sales of each competitior. Each firm would be pushed back up its declining long-run average cost curve. Firms would be too small to achieve minimum long run avergage costs and therefore electricity and water rates would be unnecessarily high.

[/ QUOTE ]

So perhaps you could produce an example of a market where competition actually hurt consumers, and prices dropped after competition was eliminated?

[ QUOTE ]
In addtion, competition would be extremely inconvenient...(imagine if there were fourteen water companies in a city: fourteen different privately run sewers? How about fourteen different electric lines running through a city, or eight freeways running from SW to the NE tip of Omaha, all side by side to the exact same place???-added by MOO)

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Why would fourteen sewer companies be inconvenient for me? Why are fourteen different hot dog companies not a problem? What's the correct number of sewer companies? In what size area?

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Because natural monopolies can lower their average costs by expanding output, they try to increase sales by price cutting.

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OH NO!!! LOWER PRICES!!!!!

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As a a result, cutthroat price compeitition breaks out when several firms exist in these public utilities industries. The result will be loses, bankruptcy of weaker rivals, and the eventual merger of survivors. The evolving pure monopoly will be anxious to recoup past losses and to profit fully from its new position of market dominance by charging monopoly prices for its goods or services."

[/ QUOTE ]

And why is this different than the hot dog business? Hot dog vendors can lower their costs by expanding output. Hot dog vendors will lower prices when competition breaks out. Some hot dog vendors (the poor competitors) will suffer losses and might go bankrupt. Some will merge.

Won't a pure hot dog monopoly emerge? And won't that pure hot dog monopoly be anxious to recoup past losses?

[moorobot]

No reply until you actually understand natural monopolies. Well, other than this.

[BCPVP]

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No reply until you actually understand natural monopolies. Well, other than this.

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It's you who doesn't understand. If there were 14 privately run sewers, it means that there is a demand for that many. 1 monopoly-run sewer wouldn't be enough if a demand for that many sewers existed.

More of your "government knows best" attitude on display...

[moorobot]

No, because there is not necessarily any room to build 14 privately run sewers. How can 14 privately run sewers all be in the exact same place???

[pvn]

How can 14 hot dog companies be in the same place?

[BCPVP]

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No, because there is not necessarily any room to build 14 privately run sewers. How can 14 privately run sewers all be in the exact same place???

[/ QUOTE ]
Who's saying they'd all be in the exact same place? A city's usually a pretty big area, and if that area is large enough to support 14 privately run sewers, then there would be that many. If it was not large enough to support that many, there would be fewer. Do you understand how supply and demand work? Because this is pretty simple, econ 101 supply and demand.

[TomCollins]

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No, because there is not necessarily any room to build 14 privately run sewers. How can 14 privately run sewers all be in the exact same place???

[/ QUOTE ]
Who's saying they'd all be in the exact same place? A city's usually a pretty big area, and if that area is large enough to support 14 privately run sewers, then there would be that many. If it was not large enough to support that many, there would be fewer. Do you understand how supply and demand work? Because this is pretty simple, econ 101 supply and demand.

[/ QUOTE ]

Just so I understand, there's probably only going to be one sewer company going up to any given building, right? It's just that your neighbors, or some people across the town may have a different sewer company.

[hmkpoker]

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No, because there is not necessarily any room to build 14 privately run sewers. How can 14 privately run sewers all be in the exact same place???

[/ QUOTE ]

You're assuming that sewers are the only means of waste control, much like people 150 years ago assumed the railroad was the only means of transportation on that scale.

[BCPVP]

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Just so I understand, there's probably only going to be one sewer company going up to any given building, right? It's just that your neighbors, or some people across the town may have a different sewer company.

[/ QUOTE ]
Possibly. Of course I don't know exactly how it would work.

[pvn]

I'm pretty sure I wouldn't need more than one sewer company. I mean, I can pick from about 400 different lawn-mowing companies, but I only have one on my property at any given time.

[Riddick]

I saw a natural monopoly once.

http://www.heavenandearthdesigns.com/Unicorn%20Misty%20HillsTIF.jpg

[TomCollins]

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Just so I understand, there's probably only going to be one sewer company going up to any given building, right? It's just that your neighbors, or some people across the town may have a different sewer company.

[/ QUOTE ]
Possibly. Of course I don't know exactly how it would work.

[/ QUOTE ]

Of course there are septic tanks too. I bet there isn't a monopoly on septic truck delivery, and septic tank manufacturing.

[BCPVP]

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Just so I understand, there's probably only going to be one sewer company going up to any given building, right? It's just that your neighbors, or some people across the town may have a different sewer company.

[/ QUOTE ]
Possibly. Of course I don't know exactly how it would work.

[/ QUOTE ]

Of course there are septic tanks too. I bet there isn't a monopoly on septic truck delivery, and septic tank manufacturing.

[/ QUOTE ]
Indeed. It goes to show why the idea of natural monopolies is false.

[TomCollins]

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Just so I understand, there's probably only going to be one sewer company going up to any given building, right? It's just that your neighbors, or some people across the town may have a different sewer company.

[/ QUOTE ]
Possibly. Of course I don't know exactly how it would work.

[/ QUOTE ]

Of course there are septic tanks too. I bet there isn't a monopoly on septic truck delivery, and septic tank manufacturing.

[/ QUOTE ]
Indeed. It goes to show why the idea of natural monopolies is false.

[/ QUOTE ]

As technology improves, every natural monopoly is slowly disappearing. Cable? See Satelite dishes. Telephone? See cell phones. There are all sorts of creative solutions.

[pvn]

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As technology improves, every natural monopoly is slowly disappearing. Cable? See Satelite dishes. Telephone? See cell phones. There are all sorts of creative solutions.

[/ QUOTE ]

Of course, those aren't natural monopolies in the first place. What you're actually observing is artificial monopolies getting routed around.

[moorobot]

Tom is talking about what I am talking about here. One company comes in and creates a sewer under an entire city here. How is anyone else going to create a sewer in that city? There is no place to put one. Supply and demand only work under certain conditions, and only work optimally under even more restricted conditions. That is econ 101.

[madnak]

How is he going to create a sewer system through the entire city? Unless he happens to own the entire city?

[TomCollins]

[ QUOTE ]
Supply and demand only work under certain conditions, and only work optimally under even more restricted conditions. That is econ 101.

[/ QUOTE ]

You really misunderstood my thoughts. And can you explain how "supply and demand only work under certain circumstances? Are you redefining the word work? Does it mean "produce the result that you prefer?"

[theweatherman]

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How is he going to create a sewer system through the entire city? Unless he happens to own the entire city?

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So in an AC world you can buy things that are under my property? How about the air above my property? Can you buy that too?

[Riddick]

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So in an AC world you can buy things that are under my property? How about the air above my property? Can you buy that too?

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Provided you wish to sell, then why not?

[theweatherman]

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So in an AC world you can buy things that are under my property? How about the air above my property? Can you buy that too?

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Provided you wish to sell, then why not?

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Can you even own air? The government owns insofar as they can shoot down whoever they dont like thats in it. Not a very AC idea

[pvn]

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So in an AC world you can buy things that are under my property? How about the air above my property? Can you buy that too?

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Provided you wish to sell, then why not?

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Can you even own air?

[/ QUOTE ]

Of course you can!

http://www.fda.gov/cder/dmpq/medgas_mixup/canister.jpg

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The government owns insofar as they can shoot down whoever they dont like thats in it. Not a very AC idea

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Ah. That's airspace, which is slightly different. Ad coelum is a flawed concept, but clearly you do homestead *some* airspace when you (e.g.) build a house. A jet airliner flying 50 feet above your house is likely to cause you damages; a plane flying 50,000 feet above is not. That's not to say that one always will or the other never will. If an airline had been flying 50 feet above wilderness for years, and you suddenly decide to build a house there, you don't have much of a claim to have that airspace to yourself.

[BCPVP]

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Tom is talking about what I am talking about here. One company comes in and creates a sewer under an entire city here. How is anyone else going to create a sewer in that city? There is no place to put one. Supply and demand only work under certain conditions, and only work optimally under even more restricted conditions. That is econ 101.

[/ QUOTE ]
A sewer system takes up ALL the space under a city?