Don't call it the free market. Call it what it is: COMPETITION.
"Free market" implies "I can do what I want", but frankly we don't WANT people to be free to pull anti-competitive shenanigans. Competition is the priority, not "the free market".
I always though free implied free from non-consensual acts. It's not much of a free market if your actions are non-consensual (1).
(1) Defining what makes an action consensual is difficult but doable.
An ordinary American internet user consents to countless pages of legalese in adhesion and other unread contracts (TOSs, privacy policies and so on) everyday day. These days, every website, piece of software, digital service or product comes with pages upon pages of contracts to which the user must consent to even walk in the door. Reading all of them is easily a full time job.
So, no one has coerced anyone into anything, just a bunch of consenting parties in theory.
In practice, getting consumers to throw away their rights and consent to stridently anti-competitive behavior by companies seems kind of easy.
Taken in the sense of an economy of mutual consent, "free market" is too low a bar to hop over. I can see why people don't think that the barebones style of "free market" is very free.
Your points pre-suppose parties consented to a dispute resolution system: one that is based on arbitrary boundaries and quite monopolistic (1).
> I can see why people don't think that the barebones style of "free market" is very free.
So, I agree that it is hard for people to understand what consent is when they were never given a chance to choose which dispute resolution system(s) they can participate in.
(1) Example being I was born in the USA so somehow automatically consented to the rules of the land.
Your parents consented on your behalf when you were born. Parents everywhere are entitled to make legal decisions for their offspring before the children reach the age of majority; this is what yours did for you.
When you reached the age of majority, you suddenly gained the freedom to consent on your own (by remaining) or reject the terms of living in your country of origin (by leaving).
There's no mystery about being ensnared into something you didn't ask for; your parents did so for you, following a tradition and law as universal and old as time.
I see your points. But I kind of feel like we were having a rather nuts and bolts discussion about how to improve security in Linux, and then someone chimes in that we should probably rewrite everything in Haskell.
If achieving a free market requires a complete upheaval of all of our governments and laws, then the idea isn't very useful.
The idea is extremely useful: act consensual to others. There is no better basis of a social system than this. Having conversations like the one were having now is really all we need. To force the ideas on others in anyway, especially through democracy, would be hypocritical.
A social system based on utility, which is basically all social systems we've had throughout history, is violent, aggressive and dangerous. No wonder history repeats itself.
However, it seems to me that, if one party to a negotiation takes actions which are intended to limit the other's understanding of the exchange, the usefulness of consent as a mechanism to prevent bad trades is degraded. This is not quite violence, but it is scummy, and it doesn't seem that it would be "anti-capitalist" to restrict it.
Call it competition; refer to the literal changes it entails; use strong examples like the one above about safer needles. (My go-to was always airless tires till now; I'm sure we could compile a list of technology advancements we're sitting on but haven't adopted because of our LSC society.)
That seems like the opposite of a solution.
For such a system to work one has to believe that that the regulatory apparatus is staffed with monks who are unaffected by the temptations of wealth, power and vanity that other humans are subject to and that 'regulatory capture' isn't a real thing.
Further that the price mechanism as an information channel is worthless, and that corrupting it with noise will have negligable effect on efficiency and technological development will remain at at least the same levels we enjoy now.
Yes, regulations aren't perfect. Yes, regulatory capture is a problem. Neither of those things is a reason to not have regulations.
>>that corrupting it with noise will have negligable effect on efficiency and technological development
What really hurts efficiency and technological development is monopolies. A company that is a monopoly has very little reason to innovate. We see this all over America with Internet Service Providers. They only improve their service levels if they fear competition (like what happened with Google Fiber).
No system of regulations you build won't eventually be corrupted because (exactly as he says) there exists no neutral desireless arbiters in our world to enforce them.
No system of regulations you build WON'T get you back here eventually. [0]
I don't believe that. Al Capone was notorious for bribing the police and the judges, or intimidating them and their families if bribery failed, to the point where many people thought he was invincible. That turned out to be incorrect:
https://en.wikipedia.org/wiki/Untouchables_(law_enforcement)
There exist people in the world with strong moral standards and fearless attitudes. We just need to identify them and put them in the right positions.
Such an approach hinges on the presumption that the people doing the identifying and appointing are also virtuous and non-corruptible. Any attempt at a guarantee of the neutrality of the arbiters and enforcers will quickly descend into a Seussian "who's watching the watch watchers?" scenario.
--
On a tangent, I don't believe regulation-free markets are even possible; power and money are inherently connected (money itself being a form of power), so you'll always have "money in politics", and if governments were to suddenly disappear, then private actors with money would start performing their functions.
The author claims 6 seed companies are worse than hundreds of seed companies, but doesn't give a single fact to support that claim.
If a market is closed to new entrants purely because the economies of scale make the established players products cheaper, then that is one thing.
That is rarely the case. Usually, as described here, there are also deliberate attempts by the established players to exclude new entrants via other means.
"The primary supplier of syringes, which controlled 80 percent of the market, structured an arrangement with a vast network of hospitals that essentially closed our industry to new firms for good."
> The author claims 6 seed companies are worse than hundreds of seed companies, but doesn't give a single fact to support that claim.
Yes, he does:
"The result is that the farmer’s share of each retail dollar of food has been collapsing, while consumers pay either the same or higher prices. Mega-corporations in the middle exploit their dominant market positions to reap all the profits."
For ISPs the problem is that companies tend to expand. So where 20 years ago an ISP might have been a small regional provider. Things have consolidated and expanded so now that same company owns almost the entire infrastructure and many other services that depend on it. They can also bundle services together to make it harder for a new competitor to enter.
Not cooperatives. Co-ops tend to focus on their region, and have neither a reason to push into other territories, nor usually the foothold to do so as easily as in their own region.
"Farming out" your lines to outsiders then deciding that you don't want further construction efforts because 'the cables are already there' - effectively giving them a monopoly over your region - is what got us into this mess in the first place.
The problem with monopolies is that they begin to approach government like control over one or more dimensions of society, but we have no corruption control on them.
That's only if we demand unreasonable effectiveness of such a system.
In practice, it only requires that the people (consumers etc) can influence government and policy more than conglomerates and big private interests can.
Few people fear violence since they know the law is weak.
I come to HN so that I don't have to read such stupid, knee-jerk, badly thought through opinions. If you have to, post this in a Facebook comment thread, but not here.
What do you think would be the consequences of legally allowing lynching? And I mean all consequences, not just the ones you intend?
I've joked for years that the end stage of capitalism is "one company selling you oxygen".
Turns out someone else had that idea back in the 1920's and there is a 'sci-fi' book based on the premise.
As the professionals are probably fine bellowing off their ivory towers so they can later go doen as "having been right" rather than actually attempting to change things (except Lessig who iirc tried with a PAC), I don't think relying on them will get you anywhere. Better to analyze what the people think and why, and work to improve that baseline, than ignore it.
(Or come up with an alternative model of democracy which does privilege 'professional known' information with minimal corruption risk somehow.)
They naturally occur in markets with network externalities, which are quite common.
Of course industries like food service don't have monopolies, but they don't pay very well. They are also geographically restricted. I don't really care about those companies, they don't contribute much to the middle class.
Google is an effective monopoly, Amazon is certainly headed that way. Facebook is pretty close. Microsoft would be except the rare occurrence of someone writing a free operating system that was very good at the dawn of the internet age. Airlines are effective monopolies in their selective hubs. Monsanto certainly. They don't have to be the last company standing to show monopolistic tendencies in my mind. Microsoft wasn't technically a monopoly in the 90s, but it might as well have been.
Air France has a practically guaranteed monopoly within France; the only reason that monopoly doesn't extend past its borders is that international air transport agreements would make it impossible for Air France to control the entire French air transport system.
Where's that freedom to compete? If one argues that "Europe does it better," I might argue that either that person hasn't ever lived and done business in the US and hasn't lived and done business in Europe. Anyone that suggests that competition is protected in Europe (or in my case, specifically France,) has no idea what they're talking about. Competing against entrenched players in agriculture, transport, infrastructure and technology is excessively difficult. In the US anyone that can buy an airliner, get the FAA inspections can essentially start an airline. In France such an attempt would be met with violence. Air France itself attempted to start a budget airline in 2014 and strikes essentially shut down French aviation for over 11 days.
Protecting competition would mean the that the government wouldn't abide the labor monopolies that hamstring companies attempting to compete.
France does have monopolies -- although most of those monopolies are in labor -- and labor monopolies, otherwise known as unions are just as destructive as any other form of monopoly.
Europe does not do it better -- they just do it differently.
By Europe, I think you mean 3 or 4 countries in all of Europe. Most countries in Europe entirely fail at what you're claiming and most are embarrassingly behind the US on: innovation, productivity, median incomes, unemployment, global & domestic corporate competitiveness, research spending (both public and private).
I wasn't aware that Russia, Ukraine, Latvia, Poland, Hungary, Croatia, Belarus, Lithuania, Romania, Greece, Spain, Portugal, Italy, Bulgaria, Moldova, Serbia, etc. had such stellar economies, that functioned at a high level with excellent competition and dynamism.
The majority of nations in Europe are backwards, poor (often extremely poor), mediocre at competition, with terrible median incomes, terrible median household net worth levels, perpetual unemployment problems, and very stagnant innovation within their economies. The results - among the nations I listed for example - when it comes to GDP per capita, median incomes, unemployment, exports, etc. all speak very loudly.
Many of the nicer countries in Europe, have rigid economic systems that are narrow industry dependent, non-innovative and stagnant. That includes Norway, Denmark and Finland (which is trying to crawl out of a ten year near-depression, and is heavily dependent on ancient industries like paper production). France has had a stagnant economy for decades with hyper low growth, rigid is an understatement there; if they grow median wages at 1/4th the rate of the US, it's considered a good outcome.
Germany would be in the middle of a ten year recession, were they not free riding on their Euro neighbors when it comes to benefiting from an artificially cheap currency (cheap for them).
Europe is not better than the US at facilitating competition, a very select few countries in Europe may be (Sweden for one). Europe is overwhelmingly dominated by dynastic corporations, handed down through the generations (Europe overall has a far worse stagnant dynastic wealth score than the US), and have almost entirely failed to keep pace with the US when it comes to spurring very successful new companies in the last 30 or 40 years. That proof is in how far behind nearly all (not all, nearly all) European nations are in rapid innovation fields like software, Internet, mobile, AI, biotech, robotics, VR/AR, etc.
But feel free to list all the amazing Internet, biotech, robotics, AI, Mobile, etc. firms in the highly dynamic & competitive Russia or Greek or Spanish or Polish markets.
If I was wrong, the results, the economic standing, for all those nations I listed, wouldn't be so horrible. Poland wouldn't have a $13k GDP per capita; Russia's median income wouldn't be 1/5th that of the US; Spain wouldn't have 20% unemployment (still); Bulgaria wouldn't have a median income that's nearly at third world levels; and so on.
What you are saying about the economies of those countries might be true, but it's not necessarily because they are worse at regulating capitalism. The effects of the Soviet Union, the size of the countries, language barriers, sanctions on Russia, problems with how the currency works, etc are enough to cause the things you mention even if they are better at making their markets more dynamic and competitive than the US. Countries with five million people like Norway, Denmark and Finland simply don't have enough people to have multiple strong industries simultaneously.
What you're asking for is the opposite is the opposite of what you're stating the problem is. The courts doing nothing but enforcing contracts is expected.
Asking for the courts to step in to say "while legal this isn't right and won't be enforced" is asking for 'more reach' by the courts.
How would you know? We haven't had anything approaching a free market since the early 20th century, even if we ignore government-granted monopolies via restricted land grants and patents.
In a "free market", what is going to prevent this? Every actor here is acting in their best interest. What could possibly change their behavior other than the government telling them to?
ISPs are a special case because regulations make it difficult or impossible for competitors to run cable. But economies of scale turned cars, PCs, consumer electronics, air travel, etc, from rich peoples play toys into affordable products for the masses. As consolidation hit all those industries their products merely got cheaper and in most cases, far better.
The question isn't when economies of scale hurt, that's a loaded question. The question is "when does consolidation no longer benefit the consumer?". I would argue many, many industries have reached this point, with ISPs being the most obvious one, but there are many examples (like the syringe one given above) where a business you've never heard of silently corners the market through consolidation and trust building.
You can argue that Walmart hurt the standard of living of the Americans (less than 1% of US employees) who actually work for it. But that ignores the fact that the smaller competitors didn't pay much better, and never had a stock option plan, so the pay difference was marginal while the customer benefit was massive. Walmart big advantage wasn't labor costs, it was scale and inventory management from day one.
And it's products are as good or better as the competitors. I hate Walmart, hate shopping there, but when I have to I'm always struck by how good the products are and how amazing the prices are.
>It's inarguable that consumers got lower prices, substantially lower prices. That's increased their standard of living.
It's a multifaceted issue. Yes, Walmart sells cheap stuff, but that's not the company's only impact on the standard of living. The middle class has been steadily shrinking since the 70s, consistent with the rise of Walmart http://www.huffingtonpost.com/2013/06/06/middle-class-jobs-i...
> You can argue that Walmart hurt the standard of living of the Americans (less than 1% of US employees) who actually work for it.
The key issue is not Walmart's employees, but rather the employees of the companies they source from.
> Walmart big advantage wasn't labor costs, it was scale and inventory management from day one.
Once again, it's about the cost of the goods they sell that has a bigger economic impact than their direct labor cost. What goes into the cost of the goods they sell? Labor costs of their suppliers. What did they do after their advantage of scale and great inventory management management eroded? They started sourcing products from markets that were fueled by cheap labor i.e. not the USA. Sam Walton has been rolling in his grave for years: The first true Wal-Mart opened on July 2, 1962, in Rogers, Arkansas.[18] Called the Wal-Mart Discount City store, it was located at 719 West Walnut Street. He launched a determined effort to market American-made products. Included in the effort was a willingness to find American manufacturers who could supply merchandise for the entire Wal-Mart chain at a price low enough to meet the foreign competition. --> https://en.m.wikipedia.org/wiki/Sam_Walton
> I'm always struck by how good the products are and how amazing the prices are.
You're probably one of very few
Add downsizing, consolidation, price gouging (i.e. Koch's, oil), and offshoring to get an even bigger one across the board. The Recession was a given with buying power always going down while costs always go up.
From what I've read, Despite the cheaper prices, there was a net loss in jobs and significant damage to small business-resulting in higher losses in the local economy than gained from cheaper product. I don't know if there's enough evidence of all of that, but it seems logical.
Also you're ignoring the local economic impact of closing small businesses. It's not just the small retail store employee that loses out. Small businesses close-that means there's less need for accountants, cleaners, advertisers, real estate, etc. Walmart does all of this at the corporate level. This results in even more, well paying job loss, and sets off a spiral that destroys these communities.
> And it's products are as good or better as the competitors.
Sounds like confirmation bias to me. Nothing I ever see or buy from walmart has ever been quality, but I couldn't present that as evidence.
Only when thinking in first-order effects. How about the city businesses it destroyed, and thus the standard of living associated with the families that owned them and the whole support system? How about the power it affects upon manufacturers -- and thus to the people that work there?
But it can destroy a whole lot of value (and be the last "business" standing) in the short and mid-run.
In fact as such businesses erode the working/middle class, short and mid-term they become more enticing to it than other stores, since they are the cheaper options.
If a company causes a "race to the bottom" for jobs and wages by selling too cheaply and paying too little, then those whose wages are affected will mostly be able to shop at that place exactly. And if that company is one business upon many that are causing the same issues, then people wont even be able to single them out for blaming...
A lot of people in the same economic class as the workers are receiving government assistance meaning you are footing the bill for the food stamps that feeds the cashiers kids while ironically congratulating yourself on the good deal you got.
Hong Kong is often held up as a fairly free market that has worked well. The government does get involved in health care and the like but commerce is pretty free.
http://www.cnbc.com/2016/02/01/hong-kong-is-worlds-freest-ec...
By the time Standard Oil was broken up, railroads were everywhere, steel ships ruled the sea, cars roamed the roads. Homes were lit by electricity. Energy consumption had skyrocketed because the costs (esp. the cost of oil) had plummeted. Labor saving devices increased productivity and the standard of living, and were made possible by cheaper steel as well as cheaper energy.
It reminds me of Microsoft receiving credit for computers becoming pervasive and useful in everyday life, as if they deserve special recognition, or thanks, for brutally clawing their way to the top of a very profitable industry and ruthlessly suppressing competition, even when it meant scuttling superior technology. Clearly someone else would have made an OS for home and small business computing if Microsoft didn't.
We know exactly because of that. That there's the theoretical free market and the "really existing" one, and the really existing one is exactly what we get in practice if the big players get their way.
The US isn't even close to a free market (although it used to be very close), so I don't think the current performance of the US economy is a reasonable basis on which to judge free markets.
Similarly, many people used countries that were barely socialist to judge socialism, which is also a bad idea.
People need to stop wishing for the "free" market. The term is abused by orators and manipulators who prey on peoples desire for a market which is free in the spirit of the word, and deliver to them a market which is technically "free" and horrible.