Monopolies: The mistake I keep seeing here (or just ignorance)

[Rassah]

In the many discussions about state v.s. free market on this forum, the one thing I keep running across is people claiming how if someone establishes a monopoly in a libertarian society, then everyone else in that market is screwed. Their reasoning is that anyone else trying to enter the field will get kicked out by the established monopoly. Recent example was oil companies (https://bitcointalk.org/index.php?topic=47747.msg568485#msg568485), where the claim is that starting your own oil company is now impossible, because established oil companies now have too much control over oil.

The mistake I keep seeing over and over and over (and over and over) is that people seem to think there is only one way to destroy a monopoly, which is to create a more competitive  business in the same market. There are actually two ways:

Outcompete the monopoly in their own market

OR

SUBSTITUTIONS

If a company has a monopoly on ALL soda (Coke, Sprite, 7-UP, etc) and prices go up too high, people substitute with drinking milk or juice.
If a company has a monopoly on all operating systems, people can substitute with built-in application platforms, like running Google Docs or Chrome apps on PCs regardless of the OS installed.
If a company has a monopoly on electricity (common, with public utilities being only options for running wires), people substitute by reducing power usage, buying generators, or using their own solar and wind generators.
If a company has a monopoly on cable TV, people substitute by buying satelite, or buying internet, only, and streaming TV through Hulu/Netflix.
If a company has a monopoly on oil, people can substitute by switching to natural gas, ethanol, or electric.

There once were monopolies on trains, typewriters, telephones, televisions, and a slew of other stuff, much of which we don't even use anymore. They were all killed by substitutions.
So, next time you want to bring up a point about how a monopoly you are thinking of is entrenched and can not be replaced by someone else selling the same stuff, PLEASE stop, remember the word "substitution," think, and see if there is anything else that people can use in place of that monopoly's product.

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[Hawker]

The substitution I've neen waiting for since the 80s is nuclear fusion.  Creating Helium out of water and having massive amounts of pollution free power.  No more oil, gas, coal or green powers.  Energy "too cheap to meter" in the words of the industry. 

Its been worked on forever - I really hope it happens.

[GideonGono]

The level of ignorance on these forums is staggering. Hopefully someone will learn something from OP.

[NghtRppr]

Wondering why most statists are delusional is like wondering my most religious people are ignorant or scared of dying, because the rest of us stopped being religious.

[FirstAscent]

The level of ignorance on these forums is staggering. Hopefully someone will learn something from OP.

I completely agree that the ignorance on these forums is staggering. For example: https://bitcointalk.org/index.php?topic=25626.0

[Rassah]

The level of ignorance on these forums is staggering. Hopefully someone will learn something from OP.

I completely agree that the ignorance on these forums is staggering. For example: https://bitcointalk.org/index.php?topic=25626.0

... wtf is a C02?

[Sannyasi]

good post mr... +1.5

[The Script]

In the many discussions about state v.s. free market on this forum, the one thing I keep running across is people claiming how if someone establishes a monopoly in a libertarian society, then everyone else in that market is screwed. Their reasoning is that anyone else trying to enter the field will get kicked out by the established monopoly. Recent example was oil companies (https://bitcointalk.org/index.php?topic=47747.msg568485#msg568485), where the claim is that starting your own oil company is now impossible, because established oil companies now have too much control over oil.

The mistake I keep seeing over and over and over (and over and over) is that people seem to think there is only one way to destroy a monopoly, which is to create a more competitive  business in the same market. There are actually two ways:

Outcompete the monopoly in their own market

OR

SUBSTITUTIONS

If a company has a monopoly on ALL soda (Coke, Sprite, 7-UP, etc) and prices go up too high, people substitute with drinking milk or juice.
If a company has a monopoly on all operating systems, people can substitute with built-in application platforms, like running Google Docs or Chrome apps on PCs regardless of the OS installed.
If a company has a monopoly on electricity (common, with public utilities being only options for running wires), people substitute by reducing power usage, buying generators, or using their own solar and wind generators.
If a company has a monopoly on cable TV, people substitute by buying satelite, or buying internet, only, and streaming TV through Hulu/Netflix.
If a company has a monopoly on oil, people can substitute by switching to natural gas, ethanol, or electric.

There once were monopolies on trains, typewriters, telephones, televisions, and a slew of other stuff, much of which we don't even use anymore. They were all killed by substitutions.
So, next time you want to bring up a point about how a monopoly you are thinking of is entrenched and can not be replaced by someone else selling the same stuff, PLEASE stop, remember the word "substitution," think, and see if there is anything else that people can use in place of that monopoly's product.

Monopolies are a really interesting subject.  I'm trying to study and learn more about them.  It's interesting to note that I'm finding out that the examples commonly cited as the reason for anti-trust action, such as Standard Oil, weren't actually doing the harm people claimed they were.  No doubt Rockefeller was a ruthless businessman but his ruthless efficiency slashed the prices of kerosene benefiting millions of American consumers.  Also, by the time anti-trust action was taken against Standard Oil their market share had dropped from from 90+% to about 64% because of market competition.  Also, it seems that in general anti-trust action is very subjective in nature as it is hard to tell whether companies are truly engaging in "unfair" market practices.  And what is really "unfair" practice anyway...

[cruikshank]

If a company has a monopoly on ALL soda (Coke, Sprite, 7-UP, etc) and prices go up too high, people substitute with drinking milk or juice.

A hypothetical for the sake of discussion: What if the same soda company also had a monopoly on the dairy farms, orchards and even the distilleries?

[jtimon]

... wtf is a C02?

http://en.wikipedia.org/wiki/Co2

[Elwar]

My economics teacher in college mentioned that there is only one company in the United States that has a full on monopoly.

That company is the company that creates the little white collar things for priests.

[GideonGono]

The level of ignorance on these forums is staggering. Hopefully someone will learn something from OP.

I completely agree that the ignorance on these forums is staggering. For example: https://bitcointalk.org/index.php?topic=25626.0

Of course, because statist society has solved global warming.

[ParrotyBit]

If a company has a monopoly on oil, people can substitute by switching to natural gas, ethanol, or electric.

We've got more than 6 billion people on the planet and no one has destroyed the oil monopoly yet. Odds are we'll all be dead before it's broken. It's not the government keeping down the electric car, it's the "free market" producing products that fit right into oil's plan. Demand for plastics aren't disappearing anytime soon, and hybrids killed electric cars off.

"The man with the visible hand" isn't trying to stop clean energy sources from gaining a foothold. There was no guy who made a car that got 120 MPG but got hushed up by the government. Clean energy gets you a tax break the oil monopolies don't get, and polluters have to buy carbon credits. Ethanol? Weren't some free-marketers complaining about corn subsidies earlier? As for natural gas, I'm fairly sure you know exactly which companies have the infrastructure to extract and transport it better than any others. Gasoline is heavily taxed, and even required to go through additional purification processes to be used in our vehicles. Despite what some people believe, there's no magic magnetic source of energy waiting for an angelic BTC investor to pick it up. I'd hate to see how poorly these substitutes would do without the massive assistance they're getting from the government as they are now.

In a real free market, the oil monopoly would end when they ran out of oil or kill off all ocean life (and the rest of the world) with another BP leak they can't stop (Where's the free market obligation for them to stop the leak anyway? The consumers haven't punished BP at all, only the government has).

I'd say the biggest mistake/ignorance I see here is people assuming the "free market" is a giant reset button. This isn't like starting a new game of Civilization or playing EVE on a clean server. The same people who own all the land/wealth/means of production now will own all the land/wealth/means of production even if every single government was abolished this second. I'm sure you'd want to call a "do over" and let everyone grab what they wanted (and your free-market children would ask for exactly the same thing), but that's not happening. You'd still be the 99% with 1%, and they'd still be the 1% with 99%. 100 years from now, they'd be the 1% with 99.9%. I'm sure everyone here thinks they've got the skills, expertise, or talent to be in that 1%, but I'd say about...1% of you are right about that.

Incidentally, placing 24th out of 26 isn't being in the top 1%. It's not the top 50% either.

[Anonymous]

Oil is still highly subsidized mostly by governments. It's far from regulated into the negative.

The same people who own all the land/wealth/means of production now will own all the land/wealth/means of production even if every single government was abolished this second.

Who owns what isn't relevant. It's only a matter of who controls the monetary policy and the means of exchange. Our shackles are only enforceable by the monetary policy that allows money to flow into our political systems. Allow competing monies internationally and people's desires will overthow any coercion that may come from owning certain things. There will be too much value to be had from people to hoard and there will be no power structures to inhibit people.

That's all that will matter in the end: what people want.

[Rassah]

... wtf is a C02?

http://en.wikipedia.org/wiki/Co2

Yeah, that's CO2, not C02.

[Rassah]

If a company has a monopoly on ALL soda (Coke, Sprite, 7-UP, etc) and prices go up too high, people substitute with drinking milk or juice.

A hypothetical for the sake of discussion: What if the same soda company also had a monopoly on the dairy farms, orchards and even the distilleries?

They can drink water, or wine, or anything else. It's unlikely that a single company will own all drink able products, because due to them being so different, a company trying to be the jack of all trades will end up being horribly inefficient, and a more focust comtetitor will emerge.
Also, not buying the product is a form of substitution (substituting it for nothing). Didn't want to go into it in the OP,  but if soda becomes too expensive, people will buy it less, meaning drop in demand, and thus drop in price.

[Rassah]

Re: ParrotyBit

Ethanol is doing just fine in Brazil, and our corn farms would likely get decimated by Brazilians if they weren't so heavily subsidized.

I actually wish oil wasn't so heavily subsidized by the government in the form of land leases, tax subsidies, and international security (wars). If gas at the pump was actually $6 a gallow, like it's likely supposed to be, other options like electric, compressed air, hydrogen, ethanol, etc. would actually become competitive and see a lot of push for tech development. Worst case, there's always rail with electric (I envy Europe for that one)

As for who owns what it would be a terrible catastrophy is the 99%ers were suddenly given everything the 1%ers own. Those 1%ers own what they do because they know how to make it work, and how to keep it producing more. A 99%er who suddenly found himself with a chunk of land with an apartment building, a factory, or a restaurant on it will very likely soon find himself with a bare worthless chunk of land with a boarded up empty building. It would be as if the entire world has suddenly suffered a Millionaire's Curse (see majority of people who strike it rich through lotteries or windfalls, who end up destroying the wealth and being way worse off that they started)

[Hawker]

Re: ParrotyBit

Ethanol is doing just fine in Brazil, and our corn farms would likely get decimated by Brazilians if they weren't so heavily subsidized.

I actually wish oil wasn't so heavily subsidized by the government in the form of land leases, tax subsidies, and international security (wars). If gas at the pump was actually $6 a gallow, like it's likely supposed to be, other options like electric, compressed air, hydrogen, ethanol, etc. would actually become competitive and see a lot of push for tech development. Worst case, there's always rail with electric (I envy Europe for that one)

As for who owns what it would be a terrible catastrophy is the 99%ers were suddenly given everything the 1%ers own. Those 1%ers own what they do because they know how to make it work, and how to keep it producing more. A 99%er who suddenly found himself with a chunk of land with an apartment building, a factory, or a restaurant on it will very likely soon find himself with a bare worthless chunk of land with a boarded up empty building. It would be as if the entire world has suddenly suffered a Millionaire's Curse (see majority of people who strike it rich through lotteries or windfalls, who end up destroying the wealth and being way worse off that they started)

Surely the issue is the 1% are getting richer by taxation and chicanery on the 99%.  If a mid-tier firm is in trouble, they get the sword of death from the free market.  If a big bank is in trouble, they get bailed out.  America seems to have bought into the idea of survival of the fittest for those who work and socialism for those who inherit money.

[Anonymous]

I don't think any of us support the current system.

[Hawker]

I don't think any of us support the current system.

Fair point   I was responding to Rassah's assertion that the 99% are far better off without the money that has been transferred to the 1%.