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Skating with the Enemy

May 14, 2007

Tags Free MarketsMonopoly and Competition

I have something that I have to get off my chest. Please be kind as it's always tough to admit ones indiscretions in a public forum. OK, well here goes, and forgive me: I have been skating with the enemy. Yes, indeed, I have been associating with the number one enemy of the free market, the dreaded monopolist.[1]

Please let me explain. Until last month, there were two owners of public ice skating facilities in Central Ohio. There was the small outfit that operated a marginal rink, and a ravenous organization that managed the other seven. Here is where my indiscretion occurred; my son and I skate for the club run by the ravenous ice shark — a robber baron hidden beneath a friendly logo.

Now, everything used to be just fine. There were two entrepreneurs operating ice rinks, and my son and I simply chose the one that provided the opportunity to speedskate. We stated our preference for ice sports and slept soundly knowing that there was an active skating market in Central Ohio.

Then it happened. In order to capture the local market for ice time, and to drain ice lovers of their precious dollars, the robber baron bought his competitors' rink. This heroic rink had fought the competition of the monopolist for a number of years, but finally succumbed to the unfair practices of my sponsor.

You see the evil ice baron created a market that slowly drained the lifeblood from our tragic heroes. What with heated areas, clean restrooms and lockers, pro shop, and a stocked snack bar, there was no way for our heroes — the small outfit — to compete.

Of course, the baron was obviously offering such services to the consumers of ice time in order to capture the local market. We all know his evil intent: once all local rinks are under the baron's control, he will inevitably reduce offerings and increase ice fees. The baron is pure evil.

The baron will do whatever he can to harm consumers. He will engage other suppliers in heartless competition so that he can monopolize the market in the end. The baron's sole goal is to make as much money as fast as he can. He will reduce supply, increase prices, and sit back and watch profits shoot through the roof.

That is the standard view of competition in the free market. A view that keeps the feds and state attorneys general in hot pursuit, eager to prosecute and bring justice to an unjust system.

However, that view is simply untrue. Whether a sole supplier, or one of many similar suppliers, the entrepreneur — the baron in this case — actually satisfies the greater good: a public service that government claims only it can perform. Let's use the ice market of Central Ohio as the example.

Ice sports are relatively new to this part of Ohio; they are marginal sports at best. Anyone investing in skating facilities is taking a great risk as the market could collapse overnight, leaving the entrepreneur with big box refrigerators and years' worth of debt.

To enter a market such as this, the entrepreneur has to be very careful not to destroy burgeoning ice sports. After talking to the baron's lieutenants, it becomes obvious that they understand their position relative to the market for their product, and this is the reason that there is a speedskating club in Central Ohio.

As the assistant general manager notes, evening ice time is a very scarce commodity. There are youth leagues that have some money to spend, and then there are the adult leagues that are loaded with cash. And, these adults love hockey so much that they are willing to pay top dollar in order to buy any available after-work ice time. They can simply outbid the youth leagues, not to mention the marginal sports such as speedskating, curling, figure skating, etc.

Yet, the assistant general manager does not just go with the adults and the profit. He recognizes that his company's large, long-term investment relies on a farm system of sorts; a system that produces a continual supply of wealthy, adult hockey players. He wants to see ice sports grow, for the profits of course. However, this desire for profits ends up serving the greater good.

Figure skating has a strong base, but why would anyone want to support and grow speedskating and curling? Simple: To grow the market for ice sports in general so that long-term investments in ice facilities lead to long-term profits. To that end, the baron provides marginal sports with a portion of the scarce, and expensive, ice time at a reasonable price.

To think, it didn't take an elected body, their appointed committees, and coerced tax dollars to provide a system where all ice consumers benefits. Profit-seeking individuals are able to address the needs of active participants; in a localized monopoly nonetheless.

OK, but what about the unfair competition between the heroic rink owners and the evil baron? The owners of the marginal rink could not meet the demands of the consumer. In addition, I suspect, they were not very adept at running such a business. Therefore, they went under. Since the baron fears anything that could be perceived as a negative reflection on ice sports, he bought the failed facility and began making significant investments in order to revamp it.[2]

The baron was not looking to reduce the available supply of ice time; he was looking to keep it at its then-current level, and potentially increase it in the near term. The baron could have allowed the rink to close and then raised prices on the remaining rinks due to an increased demand on a reduced number of local rinks. Nevertheless, that is not his operating model. He wants the market to grow. As he sees it, anything that grows the market is good for him in the end. Good for the consumers of ice time too.

The other supposed supplier of the general good is government. While the free market has been able to address the needs of the consumers of ice time, a government solution would have harmed local residents, and ice consumers and their chosen sports. All area residents would be taxed for the benefit of the few who enjoy the sound of sharp metal slicing through ice, and we — the lovers of ice — would suffer due to the whims of the government bozos who know nothing about, nor even care about, sports on ice. The tax-funded bozos would simply be doling out ice time to those who will support them in their next election campaign, not a pleasant situation for anyone other than the elected elite, their appointed minions, and benefit-eager supporters.

Wow, after this mea culpa and some reflection, I am now very comfortable with my association with the market monopolist. While the individual looking for my spending money is there to serve, the entity draining my wallet through coerced taxation simply wants my money. Go with the robber baron over the elected official every time.

Notes

[1] Of course, there can be no real monopolies absent government intervention.

[2] "Chiller's Move Solidifies Place in Market," The Columbus Dispatch, March 31, 2007


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