A quick question for AC Peeps: Market failure

[nietzreznor]

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so what’s the AC solution to private monopolies, cartels and such? Without a state the market operators would consolidate and that would prevent the markets to work in the most efficient way.

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You should read Gabriel Kolko's Triumph of Conservatism. He shows how the mid-late 19th century America--the period generally considered to be one of rampant big businesses and giant cartels--was actually one of fierce competition and decentralization.
Of course, the big businesses wanted to cartelize their respective industries, but it just wasn't possible without federal regulation. Thus Kolko shows how it was the businesses themselves that cried for the federal regulations that allowed them to stifle competition and subsequently cartelize the industries and form monopolies.

The idea that businesses will consolidate and cartelize ad infinitum without the benevolent State is, imo, largely mythical, and Kolko's work proveds an excellent historical backbone to the traditional arguments against business' ability to form cartels in an unregulated market.

[ShakeZula06]

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so what’s the AC solution to private monopolies, cartels and such? Without a state the market operators would consolidate and that would prevent the markets to work in the most efficient way.

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You should read Gabriel Kolko's Triumph of Conservatism. He shows how the mid-late 19th century America--the period generally considered to be one of rampant big businesses and giant cartels--was actually one of fierce competition and decentralization.
Of course, the big businesses wanted to cartelize their respective industries, but it just wasn't possible without federal regulation. Thus Kolko shows how it was the businesses themselves that cried for the federal regulations that allowed them to stifle competition and subsequently cartelize the industries and form monopolies.

The idea that businesses will consolidate and cartelize ad infinitum without the benevolent State is, imo, largely mythical, and Kolko's work proveds an excellent historical backbone to the traditional arguments against business' ability to form cartels in an unregulated market.

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So many people will call for regulation to limit the big businesses, but regulation is big business's best friend (to the detriment of everyone else of course).

[nietzreznor]

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So many people will call for regulation to limit the big businesses, but regulation is big business's best friend (to the detriment of everyone else of course).

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Agreed. Which is why it is so unsurprising that the big businesses themselves called for federal regulation, favored the New Deal policies, etc.
And we're supposed to believe they favored these things because they were benign, well-intentioned 'progressive' businessmen? LOL

[oe39]

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The history of environmental degradation and the destruction of natural capital and calling it a "profit" rather than a "loss" is one giant market failure which will become glaringly apparent to even the most myopic individuals over the next 50 years.

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See, this is exactly what I mean. Make sure that your monopoly courts refuse to recognize property rights that would avoid tragedies of the commons (since there can only be tragedies of the commons where there are commons) and outlaw legal actions that would act to internalize costs, and then get yahoos on the intarwebs to call it a "market failure."

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BUT WHAT IF BILL GATES BUYS UP ALL THE LAND IN THE WORLD AND SYSTEMATICALLY DESTROYS IT?!?!?

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[Propertarian]

On any sane definition of "Market Failures", they exist. Of course, on any sane definition of "Government Failures" those exist as well.

As for the "expand property rights" solution to actually existing market failures, this will work in some areas, but how is one going to establish Property Rights in things like Clean Air and Security? Who do I sue if I get cancer (sue every company that has ever polluted the air or damaged the ozone lair?) or if all my clothes are dirtied by it or my child gets asthma from it?

[Propertarian]

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Agreed. Which is why it is so unsurprising that the big businesses themselves called for federal regulation, favored the New Deal policies, etc.

[/ QUOTE ] Big Business has generally been opposed to regulation (except regulation giving there business protectionism, of course) and the New Deal; heck, FDR was called a "traitor to his class".

Many feared a violent revolution during the Great Depression in the U.S.; many of the businesses that were in favor of such policies probably were for this reason

ACist types often fail to take this factor into account: What if people aren't willing to get by via only quid pro quo market transactions, and react violently in response to such a stringent rule? More generally, people can react negatively to too much marketization, and it can and often does have bad cultural effects (e.g. increased greed and competition for status). Its strange to say the government is the problem when without government regulation and a safety net worse "unvoluntary transactions" are going to take place.

Also some businessmen, past and present, buy into the Keynesianesque logic of the appropriate policies.

[Propertarian]

In reality, the consumers lack of knowledge about certain speciality type services (e.g. electronics repair, surgery/medicine) may be a far worse (but related) problem than the problem we usually think of when we hear the term "Monopoly". Certainly, Spillovers are more important than either one.

[tolbiny]

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ACist types often fail to take this factor into account: What if people aren't willing to get by via only quid pro quo market transactions, and react violently in response to such a stringent rule? More generally, people can react negatively to too much marketization, and it can and often does have bad cultural effects (e.g. increased greed and competition for status). Its strange to say the government is the problem when without government regulation and a safety net worse "unvoluntary transactions" are going to take place.

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This isn't an argument, its a threat. Give this section of the population what they want or they will hurt you. But the argument falls entirely flat when you look at what happens under any system of government, there are people who reject it under any system. There are a few million black men sitting in jail in the states for rejecting the state sponsored poverty they grew up in, France has undergone large protests in recent years to proposed law changes, every major revolution in history has basically been started by one small group vying for power and influence who rejected the status quo as not being good for them.

Will you have us ignore these events, the safety nets you want to throw out under one class must be stolen from another and can lead to the same problems that you claim to be alleviating. The same way that FDR had to steal money from productive sections of the economy to pay for ditches to be dug and filled in, redistribution economics is a negative sum game and any mention of benefits has to be tempered with a realistic realization of costs.

[nietzreznor]

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In reality, the consumers lack of knowledge about certain speciality type services (e.g. electronics repair, surgery/medicine) may be a far worse (but related) problem than the problem we usually think of when we hear the term "Monopoly". Certainly, Spillovers are more important than either one.

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Well, like anything else, this could be a problem if no one took steps to educate each other about these services.
But I don't see how this could be an argument for government intervention--surely such information could be disseminated in a variety of ways (consumer reports, intraweb) and businesses who tried to 'trick' consumers can be combatted easily with strong decentralized communities, fierce competition, and the threat of boycott.

[nietzreznor]

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Big Business has generally been opposed to regulation (except regulation giving there business protectionism, of course) and the New Deal; heck, FDR was called a "traitor to his class".

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I think you would be surprised at how many large business interests responded favorably to the early federal regulation of the early 20th century as well as the New Deal policies.

I'm not saying that businesses 'like' regulation per se--big corporate interests would rather (like most people) do whatever they want all the time. But seeing as regulation stifles competition and allows for industries to consolidate, raise prices, etc.--well, regulation is a small price to pay to avoid the pitfalls and uncertainties of truly free competition.