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For you who believe in the existence of free market monopoly

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July 05, 2010 – Comments (5) | RELATED TICKERS: BLOKA.DL

Here's the real-world remedy we have. 

http://mises.org/daily/4506 

Please read the whole article: it's a wealth of stimulating thought. But here's my favorite part.

In defining a market as narrow as video-rental stores, the FTC excluded online rental services like Netflix and even larger retailers like Walmart. Antitrust requires static markets with a few easily identified competitors. Complexity is too messy for mediocre talents like government attorneys to manage. By defining the market as, say, three firms and only three firms, the regulators can apply simple mathematical tricks to prove the existence of "monopoly power," even if the true marketplace is heterogeneous and incapable of such rigid analysis. 

5 Comments – Post Your Own

#1) On July 05, 2010 at 10:59 PM, whereaminow (< 20) wrote:

It's funny that 99.9% of adults believe that the free market produces monopolies.  It just goes to show how we can become the victims of terrible economic ideas.

One cannot find a singe economist of any ideological stripe in the late 1800s that supported antitrust regulation.  Politicians preyed on people's fear of big-ness.  Instead of big companies that worked for the consumer, the people were rewarded with big governments that worked for the power elite. 

Then in the 1930s along came a group of psuedo-scientists like Joan Robinson and Paul Samuelson.  They decided that in order for there to be perfect competition (a nonsensical term to begin with - competition, by nature, must be imperfect), the market must have homogeneous products and perfect information.  Obviously no such market exists, so these wackos concluded that every market was a monopoly.

This was ex post facto justification of government power grabs all around the country.  In the name of the people, nearly every major industry was strangled, big companies were protected by competition through the force of antitrust, and competition was silenced.

There is no doubt in my mind that gas would be 20 cents a gallon or less today if the oil industry was free.  That's the path we were headed before "antitrust saved us" from competition.

David in Qatar

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#2) On July 06, 2010 at 12:43 AM, 1315623493 wrote:

Interesting. There's a Hollywood video store right down the road from me closing its doors. I say, if a company is THAT good, that it becomes a monopoly, than so be it. They must be doing something right...right?

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#3) On July 06, 2010 at 12:55 PM, FleaBagger (28.07) wrote:

BetapegLLC - most people would argue that they could then charge higher prices and allow their quality to decline, but of course, those exploding monopoly profit margins would attract entrepreneurs and concurrently drive customers to different products and other innovative ways of avoiding being overcharged.

The bottom line is that those who believe in free market monopolies must believe that humans are, as Men At Work said, helpless automatons.

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#4) On July 06, 2010 at 3:53 PM, USNHR (32.48) wrote:

There is no doubt in my mind that gas would be 20 cents a gallon or less today if the oil industry was free.  That's the path we were headed before "antitrust saved us" from competition.

 Taxes on gas in my state are around 35 cents  a gallon.

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#5) On July 06, 2010 at 5:48 PM, 1315623493 wrote:

Fleabagger,

Most people would argue that they could then charge higher prices and allow their quality to decline,

That, they could. Microsoft could easily charge $50 for Windows 7 and still make a huge profit. But unless the good they sell isn't a homogeneous public good (i.e. electricity, water, etc), I would still think that company is entitled to raise their prices and lower quality if they so choose (as long as no one is criminally harmed by it). Which leads to your next statement below...

but of course, those exploding monopoly profit margins would attract entrepreneurs and concurrently drive customers to different products and other innovative ways of avoiding being overcharged. The bottom line is that those who believe in free market monopolies must believe that humans are, as Men At Work said, helpless automatons. 

And if they so choose to raise prices artificially and lower quality, innovation could eventually dethrone the monopoly from its pedestal. If Microsoft raised doubled their prices on Windows 7 and their next operating system stinks, theoretically, Google could enter the market with a cross-compatible Android operating system for free like Linux. 

I would think, only in the most grotesque circumstances, should anti-trust government action take place. 

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