A Joke about the Joke that is Antitrust Law
Let's change gears for a bit and talk about Antitrust Law. I'm going to start by retelling a joke (actually it's two jokes) I heard from Walter Block. Then in follow up comments (and follow up posts), I'm going to explain what Antitrust Law really is. This law is not a friend of consumers, it's not used to keep big business from going wild, or any other nonsense you have been taught in school.
Three Soviet prisoners are sitting around comparing stories. Eventually the subject turns to what crimes they committed to end up in their predicament.
The first prisoner says, "I came to work late and they accused me of cheating the State out of my labor services.
The second prisoner says, "I came to work early and they accused me of brown nosing."
The third prisoner says, "I came to work exactly on time every day without fail, and they accused me of owning a Western wristwatch."
Three American prisoners are sitting around comparing stories. Eventually the subject turns to what crimes they committed to end up in their predicament.
The first prisoner says, "I charged higher prices than everyone else and they accused me of profiteering and price gauging."
The second prisoner says, "I charged lower prices than everyone else and thy accused me of predatory price cutting and cut-throat competition."
The third prisoner says, "I charged the same prices as everyone else and they accused me of collusion and cartelization."
If You Can Define the Terms, I am a Monopolist
Perhaps the most disgusting aspect of the mainstream economics profession is Antitrust and Monopoly Theory. You can't even say that it's "Theory" without getting a little bit nauseas. Perhaps because their spectacular failures of the last decade, mainstream economics already suffers in your view.
Well, you ain't seen nuthin' yet.
Mainstream economic treatment of Antitrust and Monopoly works like this:
Step 1: Developing an unrealistic, idealistic definition of competition. Call it Perfect Competition.
Step 2: Judge every industry against your bogus definition.
Step 3: Take every industry and redefine the actual industry to make it narrow as possible. If I am a cereal maker, I am no longer in the food industry. I am not even in the breakfast food industry. I am in the cereal industry, so they can exclude breakfast bars. If they can, they'll put me in the cold cereal industry, to exclude oatmeals.
Step 4: Prostitute yourself to the newly empowered Antitrust regulators to testify as experts about how Company X in its narrowly defined industry no longer meets the made up definition of Perfect Competition. Hope that no one comes along and points out that you defined all the terms.
Step 5: Collect the check. Then campaign for more socialist reform.
If you think this formula is unrealistic, it's not. That's actually what happened. Mainstream economists defined all the terms. Then they earned tremendous financial rewards by posing as 'experts' for antitrust lawyers (especially the ones hired by big business to crush competition, but we'll get back to that later.) It was all about money, people. Nothing more. Nothing less. Mainstream economists served as intellectual prostitutes to destroy American businesses on behalf of their competition and an overzealous government. They whored themselves out.
So what is a real monopoly?
A monopoly is any service where entry to competition is prevented by force. If you can enter the field and are free-to-compete, it's not a monopoly. If you are free-to-compete and lose, that alone does not make it a monopoly. The other business is perhaps just better than you.
In New York City, there are many taxi companies. But you can't drive your own taxi and offer rides to customers. You will go to jail. That's a monopoly. You are prevented from competing by force. It doesn't matter how many taxi companies are given this monopoly protection. It's still a monopoly.
However, if you have an industry dominated by one company, as in the case of ALCOA in the early 20th century, but you are free-to-compete with ALCOA, it's not a monopoly. If you enter the industry and lose, guess what? Tough breaks, kid. They're better than you. There is nothing you can do, unless an intellectual prostitute comes along....
More on ALCOA in upcoming posts.
I open this up to questions and comments.
David in Qatar