Jon Irenicus:I don't give a damn what Smith thought about monopolies, BTW
Didn't Adam Smith tackle monopolies as in the mercantile system. That guy can't be serious, saying Venezuela and Argentina have ever been representatives of freedom. A free market disperses wealth, government concentrates it.
Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty
I haven't read Smith. But if he does maintain that monopolies are the inevitable outcome of free markets, he's dead wrong, as is any other economist who maintains so.
-Jon
To darkness I condemn you...
Jon Irenicus:But if he does maintain that monopolies are the inevitable outcome of free markets, he's dead wrong, as is any other economist who maintains so.
Yeah, nobody says they are an inevitable outcome, and much less likely scenarios. What for instance my microeconomics textbook does say is «Not all markets approach the idealization described by perfect competition. Monopolies, imperfect information, and host of other "abnormalities" can and do occur in real markets.»
I think this is mostly bogus however. The author is obviously catering for those "market is a tool" types (which are in reality saying that people are tools). Information can be completed in other ways (like garantees), and I don't see how government can provide such information that no other civil organization could. With regard to monopolies, they are only possible when entrance is restricted, as with government or some mafia group help, but also because of limited physical space or resources. (limited physical space like sewage where house associations or city government has to have a plan for; resources can be the fact only one country is left with oil or something -- government can't really help here and shouldn't; the monopoly will rationalize the resources and offer the incentives for others to invest on looking for more or on alternatives). The biggest problem markets can have are externalities that can result in stuff being underproduced or overproduced, but, for most cases, government intervention isn't really desirable because they are not able to target solely the producers and consumers.
I believe in the times of Adam Smith, monopolies were assumed as being government grants, not the more generic "single sellers" definition we now use.
What is a monopoly anwyay? It is a very arbitrary definition to some people. There is only one Seven eleven in my town, that makes it a monopoly to some extent. Regardless the only genuine monopolies that have ever been real have been due to mercantilism and state support.
BlackSheep: I believe in the times of Adam Smith, monopolies were assumed as being government grants, not the more generic "single sellers" definition we now use.
True he was attacking mercantilism but he did have some serious flaws in his economic system that the Austrian school worked out.
Monopolies tend to occur in an totally unrestricted free market, I believe that is what you believe by market anarchy. You have only to look upon the the telecommunications sector, railways and oil before they were broken by the admirable Anti Trust laws of the early 1900's. Today we have a similar problem with Microsoft. A virtual monopoly leading to substandard, inefficient and vastly expensive products.
I am for very light regulation if any but Rule of Law in independent courts to uphold contracts as well as Anti Trust laws is the absolute bare minimum.
The difference between me an you is that I live in the real business world, in practice. I do not live in an ivory tower, looking over ideas in my microscope and being a ideological purist.
The market is most definitely a tool, what is it else? It is not the end but the means to an end. In my opinion the only means. Ayn Rands philosophy Objectivism is a non sustainable theory. Or as Micheal Shermer, editor of Skeptic Magazine, wrote in his book Why People Believe In Weird Things "Objectivism is the most unlikely of cults"
The world is an imperfect place and there are no absolutes, no objective facts! But then again people believe in a personal god.
Read the history of some of those classic monopolies you mentioned. The railways had massive government support and in some states (California) there was legislation restricting entry for new railroad companies.
The utility companies had small area units that did allow for market competition until the progressives started regulating them by restricting market competition so they could get their government managed monopoly. Here is a link:
http://www.cato.org/pubs/regulation/reg19n3f.html
As for oil, well standard oil had alread started to lose it's market share before the anti trust case because it got so big and was not as efficently managed. Also before it's loss of market share it had effectively lowered the price of oil a ton by it's economy of scale and their was nothing preventing the introduction of other oil companies (though as stated they started nibbiling away before the case was even heard). Overall Standard Oil did good things for the consumer.
Just because a company is dominant it usually is because they are preventing potential competition by being hyper efficent so they are essentially trying to prevent the introduction of someone who might out compete them for the consumer and this is due to that fact there is not some law preventing market entry.
Anti trust is code for suppression of efficent and consumer oriented competition by less efficent companies. Look at the case history and you will find it is other companies and not consumers who bring these suits to court.
libertarianpaternalist:The market is most definitely a tool, what is it else? It is not the end but the means to an end. In my opinion the only means. Ayn Rands philosophy Objectivism is a non sustainable theory.
Of course it is a means to and end it is the process of how that end is achieved and like any tool it needs to function in a proper manner.
libertarianpaternalist:Or as Micheal Shermer, editor of Skeptic Magazine, wrote in his book Why People Believe In Weird Things "Objectivism is the most unlikely of cults"
I am not an objectivist and there are many here who are not. Regardless that is just an insult and not any sort of point was made by that remark.
libertarianpaternalist: Monopolies tend to occur in an totally unrestricted free market, I believe that is what you believe by market anarchy. You have only to look upon the the telecommunications sector, railways and oil before they were broken by the admirable Anti Trust laws of the early 1900's. Today we have a similar problem with Microsoft. A virtual monopoly leading to substandard, inefficient and vastly expensive products. I am for very light regulation if any but Rule of Law in independent courts to uphold contracts as well as Anti Trust laws is the absolute bare minimum. The difference between me an you is that I live in the real business world, in practice. I do not live in an ivory tower, looking over ideas in my microscope and being a ideological purist. The market is most definitely a tool, what is it else? It is not the end but the means to an end. In my opinion the only means. Ayn Rands philosophy Objectivism is a non sustainable theory. Or as Micheal Shermer, editor of Skeptic Magazine, wrote in his book Why People Believe In Weird Things "Objectivism is the most unlikely of cults" The world is an imperfect place and there are no absolutes, no objective facts! But then again people believe in a personal god.
Are you going to back up your assertions?
Besides, you should read some history. Telecom, rail, and oil were not (and never have been) free market. They were government-granted monopolies, beneficiaries of state privilege. Using them to show how free markets don't work is just poor logic. Also, what brought you to bring up Objectivism? Many here aren't Objectivists, and those that are (including myself) often differ with Rand in several key areas.
Read some Austrian economics before you post on an Austrian forum.
Market anarchist, Linux geek, aspiring Perl hacker, and student of the neo-Aristotelians, the classical individualist anarchists, and the Austrian school.
libertarianpaternalist:The difference between me an you is that I live in the real business world, in practice. I do not live in an ivory tower, looking over ideas in my microscope and being a ideological purist.
For the record, just so you cannot feel so haughty about your real world experience, I also work in the real business world and take part in the finances and various other aspects of the company I work for. I also see the effect that regulation has on how this firm operates not to mention the clients.
I sure hope you dont think zoning regulations are nice.
Jon Irenicus: I haven't read Smith. But if he does maintain that monopolies are the inevitable outcome of free markets, he's dead wrong, as is any other economist who maintains so. -Jon
Smith believed in a primitive form of the labor theory of value. Marx took his analysis and ran with it - in a notably different direction, to be fair to Smith.
It was not intended as a sarcasm but was intended to point out that if you live in a world where you could start over on a clean slate, Tabula Rasa ( erase all memory of and all institutions economic and political, corporations, legislations, nations etc.) we might be able to discern if market anarchism works or if monopolies are "benevolent".
But we live in an imperfect world. Monopolies tend to as the other writers justly pointed out been the outcome of earlier government intervention, railways, telecommunications, utilities etc. These are investments that are extremely difficult for individuals or corporations to make by themselves. The profits are huge, once the investments are made there is little cost in running the systems. The risk and amount of investment needed is virtually impossible to achieve without some form of government intervention. The old monopolies have for the most part become oligopolies, few actors and very limited competition.
So my post was not to be meant as sarcasm but more to get the debate to where I am at. How do we get to where we want? How can this be achieved in real life?
If you ask the ordinary voter for deregulation and abolishing of all government authority, you will not even get percentage points of the vote. In Europe in particular the tradition of extremely strong central governments, extreme regulations and State intervention; in the most minuscule part of your personal and economic life are legion. Especially so in my country of birth Sweden as near as you can come to a voluntary socialist state. We Swedish libertarians joke that "Sweden has not socialized its economy but its people". Swedes have become slaves under the welfare system, 60 % of the population are totally dependent on subsidies, grants and salaries to live. The Welfare interventionist state has now become self perpetuating until it collapses under its own weight.
In Sweden I am considered on the lunatic fringe of the political spectrum when it comes to economic freedom. It is even the case it comes to personal freedom. On this site I seem to be looked upon some kind of John Maynard Keynes follower.
I do not believe in revolution, anarchy but in slow steps of progression. I have also a very difficult time in understanding how you can hold the tenet that a totally unrestrained market could work in reality in today’s world..
My father’s country of birth Estonia has become one of the freest market economies on the planet, it has as a result one of the strongest economies. It went from a totally regulated socialist economy, to chaos and within the span of 10 years to a virtually perfect market economy. Estonia applied Friedman and Hayek. So chaos can produce change but it does not operate in a vacuum.
Once again I apologize to you all, I did not intend to be sarcastic. I was only frustrated since I wanted a practical discussion not a theoretical, ideological one.
libertarianpaternalist: Tell me where anarchy has led to a free liberal democratic society? Please tell me how anarchy can work in practice?
Tell us where a state has consistently safeguarded individual rights, or for that matter, where a state has not devolved into despotism in one form or another. Hmm, maybe it's the state that's utopian.
As has been stated and repeated ad nauseum, making evidentialist arguments for the basis of a political-economic theory is pointless: if all factors in an experiment cannot be controlled then the scientific method does not apply. Economic verities must be found via deduction beginning with necessary or self-evident truths (e.g. the reality of human action).
If you're going to participate in this forum I humbly recommend that you familiarize yourself with some of the articles and books in the literature section to see what we're "about". I suggest you start with David Gordon's critique of that book you were advertising.
http://mises.org/story/2965
Diminishing Marginal Utility - IT'S THE LAW!
I wrote:
The oxymoron Libertarian Paternalist is an alias I use …A better alias might be Libertarian Pragmatist since I am not interested in libertarian theory but making society more freer both on a social and economic level.
The state never safeguards individuals rights, it guards the rights of the state and its cronies.
I am also a firm believer that you must start out finding what you call “Economic verities” trough deduction beginning and from human behavior. I am a firm believer in the theories of Pavlov, Skinner and evolutionary psychology.
For me capitalism as an economic system is based on evolutionary principles and are in my opinion also based on behavior psychology. It is from this position I hold that anarchy does not work, it is against human nature to live in anarchy. Socialism, Marx and Freud, psychoanalysis is in my opinion totally against human nature, human behavior. There is no subconscious nor does a clean slate exist, Tabula Rasa.
As regards to Nugde by Tahler/Sunstein I am not an adherent to their ideas. They are Behavior Economists, a sneak attack against capitalism now that socialism, strong paternalism is no longer a viable option. I conform to professor Becker’s rational economics. He has now managed to disprove some of the Behavior Economist thesis’s that rational economics cannot explain everything.
You might read with interest read Michael Shermers latest book is called The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics and it tries to answer questions about irrationality and why capitalism is an evolutionary consequence.
You can view a Podcast from Cato Institute’s homepage Cato Institute: The Mind of the Market: The Case for ...
In his new book, The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics, Michael Shermer examines such questions as:
How did we evolve from ancient hunter-gatherers to modern consumer-traders? Why are people so irrational when it comes to money and business?
He argues that the new science of evolutionary economics provides an answer to both of those questions. Shermer shows how evolution and economics are both examples of a larger phenomenon of complex adaptive systems. Along the way, he answers such provocative questions as, Do our tribal roots mean that we will always be a sucker for brands? How is the biochemical joy of sex similar to the rewards of business cooperation?
How can nations increase trust within and between their borders?
Finally, Shermer considers the consequences of globalization and why free trade promises to build alliances between nations. Michael Shermer is the founding publisher of Skeptic magazine, a monthly columnist for Scientific American, and the author of Why People Believe Weird Things and Why Darwin Matters.
libertarianpaternalist: A total and free market always leads to monopolies, the economic version of the Hobbesian state, even Adam Smith ....
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
libertarianpaternalist:Especially so in my country of birth Sweden as near as you can come to a voluntary socialist state. We Swedish libertarians joke that "Sweden has not socialized its economy but its people". Swedes have become slaves under the welfare system, 60 % of the population are totally dependent on subsidies, grants and salaries to live. The Welfare interventionist state has now become self perpetuating until it collapses under its own weight.
Not really. There is nothing unfree about Sweden. It is just nudging and nurturing its citizens to make the best choices and use their freedoms in the most efficient direction. In a paternalistic yet libertarian way.
wombatron:Read some Austrian economics before you post on an Austrian forum.
Whom do you recommend?
@ libertarianpaternalist,
Markets are institutions or set's of institutions, where people do exchanges. Just make sure you do that kinds of exchanges with people who exchange for what you reasonably expect from them.
earthmoving
libertarianpaternalist:The risk and amount of investment needed is virtually impossible to achieve without some form of government intervention
I see where your coming from but those are usually the areas where their should not be any investment, especially if they lack enough of a profit to cover the initial investment. Profits are the signal to the business owner of consumer demand. Also what industries are we inquiring about in this scenario?
libertarianpaternalist:The old monopolies have for the most part become oligopolies, few actors and very limited competition
You are right. Just check out the nature of progressive taxation in keeping smaller business from amassing post tax wealth. Progressive taxation is the most effective in ensuring a caste system. Also check how much money these oligopolies get from government programs at the expense of the taxpayer. For a list of just some of the United States programs that benefit these huge corporations check out these government deparments: Overseas Private Investment Corporation, Export-Import Bank, the Federal Reserve. Do not forget the huge nature of the Military Industrial complex and the mules at its trough such as Boeing, Raytheon Lockheed etc. Of course there is also the usual subsidy that can be found in the annual federal budget such as in the agricultural department (money to agribusiness) or simple construction projects. Many people estimate that the amount of corporate welfare in the United States is $92 billion a year.
libertarianpaternalist:I have also a very difficult time in understanding how you can hold the tenet that a totally unrestrained market could work in reality in today’s world..
I think on this issue it can work in todays reality but it might be unrealistic to think we can get to such a state with the level of people dependent on government at this time. That does not mean that it cannot work it just means there are many people who do not want to see it happen despite that it can function (or in spite that it would work).
Please stop peddling misinformation, lies and nonsense to further your agenda. Dominick Armentano has eviscerated the myth of market monopolies. If you took the time to actually read the materials involved, as opposed to regurgitating nonsense about free markets you'd know that. I do not care what circles you move in nor what you think of Rand. I have very low tolerance for ideological cowardice. Moreover, do not expect me to take your fear of monopolies seriously when you advocate the paragon of all monopolies itself - the State.
libertarianpaternalist:The market is most definitely a tool, what is it else? It is not the end but the means to an end. In my opinion the only means.
Well it's a tool for the both parties involved in a exchange; people who talk of how it is a tool are just advocates of an external entity regulating, taxing, etc and otherwise imposing controls on how people can interact.
I certainely don't see a market as an institution though I guess you could create some pseudo market environment. A market is simply a social phenomenon, as people specialize in something they do well and repeaditly make offers for exchange, further structuring prices and dividing labor. If you interfer with it too much, people will just go back to a black market.
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