How do you figure? A totally free market results in monopolies, which are rife with externalities that exist for the purpose of maintaining the monopoly. Government is the body responsible for balancing and managing those negative factors against the desirable results being produced.
In cases where there is a natural monopoly (because economies of scale outweigh the deadweight costs of a larger firm), yes. Historically such cases are rare. Most historical cases of monopoly are due to government interference, not free markets. Indeed, the word "monopoly" originally meant a government-granted exclusive right to sell some particular good or service.
If manufacturing semiconductors, with fabs that cost tens of billions of dollars isn’t a natural monopoly, why do we think anything is?
> The Myth ofNatural Monopoly Thomas J. DiLorenzo
> It is a myth that natural monopoly theory was developed first by economists, and then used by legislators to "justify" franchise monopolies. The truth is that the monopolies were created decades before the theory was formalized by intervention-minded economists, who then used the theory as an ex post rationale for government intervention. At the time when the first government franchise monopolies were being granted, the large majority of economists understood that large-scale, capital intensive production did not lead to monopoly, but was an absolutely desirable aspect of the competitive process.
How are utilities not a natural monopoly? The cost and disruption of building infrastructure to serve everyone is definitely a monopoly. Do you really want four or five companies digging up streets and building pipes, wires, etc?
Also, if you had multiple companies competing, they would only serve the most profitable customers who live in the most dense areas. You see that now with internet providers - especially fiber.
Utilities are not a natural monopoly because we have multiple examples of competition lasting decades in municipalities. This is not compatible with the economic concept of natural monopoly. It’s a disproof by existence.
If you want to discourage too much digging up the street charge people to do it. If they’re doing too much charge more. Problem solved; the various companies that want to dig up will come to a mutually agreeable arrangement on cost sharing if they want to dig up the street.
Multiple competing companies going after the most profitable customers is very much not proof of the existence of natural monopoly. It’s also perfectly fine. If you want uneconomic customers served for reasons of equity pay for it. You can either pay for it directly and make the costs visible or you can mandate universal service and spread the costs across all customers. Either way the cost is paid; you don’t get anything for free.
And as far as what happens when you let multiple companies dig up the streets that are willing to pay for it, we also have an example of what happens when a company decides to abandon an area when it’s not profitable and leaves the infrastructure and the streets in a mess. Google Fiber and shallow trenching....
https://www.cnet.com/news/google-fibers-secret-weapon-in-its...
What do you think is going to happen when these companies go out of business? Are we now also going to have multiple companies serving the last mile? What happens at the last mile when your water company goes out of business? How long will it take a competitor to get to your home?
Water, sewer, and storm drain, yes, that's a plausible natural monopoly. Electrical power, telephone, and internet, no. At most the conduits that the cables have to go through could be a natural monopoly, but not the services themselves.
> if you had multiple companies competing, they would only serve the most profitable customers who live in the most dense areas. You see that now with internet providers - especially fiber
This could be an argument for individual municipalities building their own infrastructure, owning it, and leasing it to service providers like ISPs.
It is not an argument for what we actually have in the US, which is higher-level governments giving monopolies to private companies, and those private companies successfully suing individual municipalities that try to build their own infrastructure, own it, and lease it to service providers.
There is historical precedent for internet providers competing for internet over a common infrastructure. That use to be required for DSL. None of the companies were profitable. Locally there was MindSpring and Telestream among others that both tried.
Railroads: government granted.
Public utilities: government granted.
Telephone: government granted.
Air travel: government granted.
Cable TV: goverment granted.
ISP: government granted.
Seems like a lot.
The remedy would seem to be for more decisive government action - to regulate or nationalize the infrastructure, break up the incumbents as necessary, and create a robust market for services that utilize the infrastructure and pay rents and taxes to the government.
https://en.wikipedia.org/wiki/Northern_Securities_Company
https://en.wikipedia.org/wiki/Standard_Oil
My condolences for your narrative.
Also, your rebuke is pretty weak if you have one example compared to the thousands of government granted monopolies all over the US.
I'd have to disagree. Not many markets have monopolies - where you only have one firm in the market. Tech is an exception.
In fact, I'd say that many government policies, while necessary, are a major contributor to monopolies, by imposing high costs to enter markets.
Our markets are becoming less competitive today because of government action due to regulatory capture - the intentional weakening of the regulatory state from within. We need more powerful, dedicated regulators in order to maintain competitive, free markets.
The evidence is, in fact, absolutely conclusive that the Standard Oil Co. charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher [2].
[1]. Grayson, Leslie E. (1987). Who and How in Planning for Large Companies: Generalizations from the Experiences of Oil Companies.
[2]. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911).
That the practices conducted by Standard Oil were considered acceptable?
Or are you stating that because it is done today (wrongfully so, imo), it was okay back then?
Please elaborate.
My guess is you just found out that coupons are price discrimination and are still pretty upset about that? If so, I’m sorry to break that news to you.
Back this up. None of your statements have any backing.
Edit: From your comment style and prior history, you have a history of utilizing red herring and slippery slope style comments to get your way without backing a single thing you say. Please, cut the bullshit.
Grocery stores getting more sophisticated: https://www.forbes.com/sites/moneybuilder/2012/08/21/individ...
Here’s airlines: http://theconversation.com/a-travellers-guide-to-airline-pri...
There’s a bunch of examples right in the fucking wiki page on price discrimination: https://en.wikipedia.org/wiki/Price_discrimination
Please spend a little effort at least googling before you make demands for proof of something so common.
> From your comment style and prior history
That’s just pathetic. Nobody is ever impressed you read someone else’s comment history to make a childlike ad hominem attack, especially just to misuse the term “red herring”. Stalking has ever advanced a conversation. Stick to the topic.
Unfettered faith in free markets and unfettered faith in governments are equally bad things.
No, they're not, because while externalities and other forms of misaligned incentives are departures from the norm in free markets, they are the norm in governments.