Citation needed. There are government mandated monopolies but you can also achieve a monopoly using purely free market tools and simply lock up all supply and/or distribution via aggressive investments.
You seem to imply government-induced monopolies > free market monopolies, but provide no evidence or even an argument that this is indeed true. You just state it as a universally recognized fact, when that is obviously not the case.
Any real economist.
Inevitably, if any industry is profitable, competition will arise. Government regulation (often through corruption) is the only mechanism which ensures a lack of competition. This can be observed in any industry throughout the last 100 years.
You're right that companies can lock up the vast majority of a market by out-competing others, but this generally doesn't last very long (typically a decade or less).
Any real economist can cite many monoplies that arise through market forces alone.
> Inevitably, if any industry is profitable, competition will arise.
This is not true. There are many different definitions of "profit", and there are many cases where an industry that makes a real business profit will not support a competitor that makes an economic profit. The obvious example is markets with very large economies of scale [1].
> Government regulation (often through corruption) is the only mechanism which ensures a lack of competition. This can be observed in any industry throughout the last 100 years.
I'm interpreting this to mean "only through government intervention can we ensure a lack of competition". Again, this is not true. Any party that can make a massive capital investment (which already vastly reduces the pool of competition) can enter a space and make any future entrance by a competitor completely unprofitable.
To see an example of this, lets go a century back in time to the day of Standard Oil. Standard Oil was notorious for leveraging its massive capital advantage to destroy its competitors. It would enter a new market and lower its prices (leveraging its massive war chest). Once its competitors left business, it would raise prices again to screw over consumers. After many people caught wind of this blatant market manipulation, it turned to deceptive practices and things like tying agreements [2].
What government policy led to the dominant monopoly of Standard Oil?
> You're right that companies can lock up the vast majority of a market by out-competing others, but this generally doesn't last very long (typically a decade or less).
Standard Oil was supreme for over thirty years. If only we could invent a time machine, to hear the gales of laughter from the businessmen of the day at the notion that Rockefeller became the king of oil by "out-competing" others.
He became dominant through backroom deals and anti-competitive practices. Government intervention was what finally ended the Standard Oil monopoly. It was also likely the only thing (barring the death of Rockefeller or some kind of market shift) that ever would.
1. http://en.wikipedia.org/wiki/Economies_of_scale 2. http://en.wikipedia.org/wiki/Standard_oil#Monopoly_charges_a...
Backroom deals AKA corruption. Corruption and regulation are two sides of the same coin. Had the market been perfectly competitive (ie. state governments not succumbing to corruption) the monopoly likely would not have formed and lasted.
Your only example merely proves my point.
Try to find a monopoly that has arisen in an open market, free from government 'intervention' (either regulation OR corruption).
Where did their mineral rights come from?
1) Property. If you have a monopoly on the property in a given area you can charge whatever you want for rent, and no competition will be around to add competition.
2) Vertical monopolies. If your company buys out not just the competition, but the entire supply chain, and there is a high cost of entry to being able to enter the market -- say automobiles -- then you can quash competition as it arises.
3) Coal mines. If the only job you can get is in a coal mine, and the operator of said mine owns all the mines in your geographic region, you don't have much of a choice. This is especially true if you are working 12+ hours a day 7 days a week for a pittance, or are a minor child.
4) This is libertarian fantasy and rightfully deserves the scorn and ridicule it has so far received in this thread.
There are many, many ways to abuse the market to the detriment of the workers, both with and without regulation.
Then people can move elsewhere. People won't tolerate it forever. This can be seen in the real estate market in the city I live in. Several downtown blocks in prime locations have a single owner. She charged outrageous rents, and now half of these (prime) locations are empty, and new businesses have cropped up in the neighborhoods around the downtown core.
> 2) Vertical monopolies. If your company buys out not just the competition, but the entire supply chain, and there is a high cost of entry to being able to enter the market -- say automobiles -- then you can quash competition as it arises.
While this is possible in theory, it hasn't happened in a free market.
> 3) Coal mines. If the only job you can get is in a coal mine, and the operator of said mine owns all the mines in your geographic region, you don't have much of a choice. This is especially true if you are working 12+ hours a day 7 days a week for a pittance, or are a minor child.
I live in a country where people will travel 4000 KM for a job. People will move if they perceive economic conditions to be unfavourable. If enough people do this, the mine owner will be forced to raise wages or face a shortage of labour.
> 4) This is libertarian fantasy and rightfully deserves the scorn and ridicule it has so far received in this thread.
Only Americans would make an accusation of political bias in a discussion such as this, using such terms (libertarian).
Fact is, the study of economics is the same whether you're in a market economy or a controlled economy (and likewise whether you vote right, left, or centre). And most economies are mixed BTW.
1) If rent is too high then renters will leave.
2) If an automobile is too expensive then consumers will use mass transit or carpool.
3) If there is a coal shortage due to labor conditions then consumers will use natural gas or other alternative sources of energy.
An industry can be profitable for the existing market participants and still have a high enough cost of entry as to have a negative expected profit over any meaningful timeframe for a prospective new entrant.
In practice, this is likely to change due to changing external conditions (e.g., technological progress that lowers the cost of entry or creates previously-impossible substitutes) but there is no theoretical reason why this must be the case.
Yet it has always turned out to be the case anyway...
Even in the world of offshore drilling (which probably has a higher cost of entry than any other business you could possibly enter) there are tons of start-ups, joint ventures, etc... Of course, the oil business is also very susceptible to corruption, but wherever land rights are auctioned fairly, you see good competition.
Free market monopolies are only allowed to last a decade or less BECAUSE of government intervention; otherwise they would last much longer. Your 100 year time line horizon corresponds to about the time when governments began regulating and dismantling monopolies.
Anyone who pretends that economists agree on anything is not worth taking seriously.
Also, a private-sector monopoly, no matter how seemingly entrenched, is always vulnerable to disruption (when was the last time you used a PC manufactured by IBM? Or were forced to use IE against your will, for that matter? And yet those were both at one time monopolies that came very close to being broken up by the justice department because people claimed the free market could never topple them). That's why that "distopian future scenario" the OP referenced didn't come about in most of the world. Other browsers came about that users liked better and despite the big advantage IE gets from being bundled with most PCs others have had success in the market. Contrast that with the difficulty in breaking a government-enforced monopoly like the one referenced in the article.
(All of these are well known, well documented examples a little over a century old. For a more modern alternative, consider the many people who have a single provider for internet access – they can either pay or give up on significant participation in the modern economy.)
> Also, a private-sector monopoly, no matter how seemingly entrenched, is always vulnerable to disruption (when was the last time you used a PC manufactured by IBM? Or were forced to use IE against your will, for that matter?
Amusingly, both of your examples are cases where the monopoly was disrupted under the treat of government action. The reason those other browsers had a chance is that Microsoft couldn't lock down the PC market as much as they wanted to while the DOJ was investigating. Similarly, look at IBM's history – do you think the PC market would be as open if they hadn't had to worry about a replay of the 1969 antitrust settlement?
That can be pretty bad if the "good" you are going without is food, shelter, a necessary medical procedure, or some other fundamental requirement.
But I don't see the claim of government monopolies > free market monopolies you reference.
