Tuesday, June 17, 2014

A libertarian primer: Monopolies

Ask most people about monopolies and they will generally respond negatively.  Monopolies are perceived as bad for a variety of reasons but mostly, I would argue, because they have been the target of a sustained and powerful assault reaching back, in this country at least for well over a century.  I suggest that this reputation is undeserved but let's take a look at what the reputation is.

First of all I think that most people who think of monopolies assume that they are bad for the consumer because a company which holds a monopoly can raise prices at will and provide substandard service, on the grounds that there is no  competition. At first glance this might seem true, but only in terms of a shortsighted view of planning and profits.  Although companies could theoretically be out for the quick buck, the amount of investment involved in creating a product and a market makes it impractical and less than optimal to ignore the long term consequences of this behavior.  In a free market a competitor will arise to provide better service at a lower price, especially absent government controls on who can enter the market and how.  It turns out that most monopolies that actually exist in our society are government enforced monopolies.  How many choices do you have for garbage service, cable television, or electric power?  The airlines were heavily regulated by the government in terms of markets and routes prior to the Reagan presidency.  Their monopoly was government created and maintained.  Since deregulation real prices have fallen dramatically and consumer choices are legion.

Secondly, lets take a look at the proposed solution.  Problem: one group has a monopoly on X. Solution: let's create a giant monopoly called "government" and put them in charge of breaking up the X monopoly.

Which is worse, someone temporarily being the sole provider of Beanie Babies or a permanent body with the authority to take your money and impose its will on you in the form of police and legal powers?

I suggest that the cure is worse than the so-called disease.

2 comments:

newrebeluniv said...

The only thing bad about monopolies is when force is used to create or enforce it.

The same people who will tell you that monopolies are bad in the markets will tell you that government monopolies on the use of force are good things.

heresolong said...

Yup. Been long known and uncontroversial that government is, by definition, a monopoly on the use of force.