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Comment by wilfra | Hacker News Reader

You read a study that said that artificially reducing prices leads to an inefficient market? What was the next paper written by that economist, that the sun coming out decreases the amount of clothes per inch people use to cover their bodies?

I didn't say it made the market efficient, I said an argument could be made that it was a net positive. That's not the same thing.

Example: efficient markets sometimes produce monopolies, who then abuse their monopoly power. That's a net negative - but it isn't an example of an inefficient market.

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There aren't any historical examples of free market monopolies. There are only examples of government enforced monopolies.

This is false. There are so called 'natural monopolies' where one large firm really is more efficient than multiple smaller ones. A popular example is google search. Of course, if that monopoly starts engaging in serious rent seeking behaviour, competition could become profitable again.

Give me a solid alternative and I'll stop using Google search. Until then, don't care if Google is a 'natural monopoly' - it does absolutely everything I want it to do and I occasionally click on advertisements from which they profit. It's a mutually beneficial relationship and I see no reason to switch. Net positive.

This is a problem with monopolies, though. Their competitors can't gain marketshare by being better but not better enough. Take Microsoft's monopoly in the 90's. There were competitors and it could be argued they were better, but they weren't better enough to justify switching to them. Even being of the same quality, the monopoly will continue to gain marketshare not because of being better but because of being bigger.

Microsoft is a natural monopoly because of the network effects between number of consumers of an OS and number of developers for an OS. What makes Google a natural monopoly?

I wasn't responding to Google being (or not being) a natural monopoly, I was responding to "Google is what I use, and it's what I use because it's Google".

On your point, it could be argued that Google's overall platform dominance might not be attributed to barriers to entry, but rather barriers to exit. While Google offers some of your data back to you in a portable format it's still quite difficult to leave their services, and even when you do they will still be tracking you for advertising. To form their potential natural monopoly in your mind, you can imagine how difficult and inefficient it would be to have multiple different firms tracking you to the same extent that Google does (search, Google+, Gmail, calendar, Google Docs).

I am not an amateur economist.

I really wish people would clarify what they mean by "free market" -- whether they mean unregulated (a politician's free market) or competitive (an economist's free market). If you are saying that there are no examples of monopolies in competitive markets, that's because it would be a contradiction in terms. If you're saying that all monopolies are created and enforced by governments, then that's just flat-out false. Pepsi and Coke dominate the industry of selling pop due to branding; the only "government enforcement" of their domination is that you can't brand your own pop so that it would be easily confused with Coke. Same with Microsoft -- the US government never threatened to jail you if you don't run Windows, but Windows had a monopoly on the desktop market for a while and it's only recently begun to show cracks.

I would go so far as to say: governments themselves are "free-market monopolies" in this sense. That is, there is no binding unilateral authority which solves intergovernmental disputes, and each government instead has to negotiate with other governments in an open and unregulated forum where even backstabbing and flagrant contract violations are permitted. If governments are monopolies on power, then the market of power is surely not a well-regulated one.

A monopoly is a market with only one supplier.

Pepsi and Coke are not a monopoly - as you explicitly acknowledge, there are at least two suppliers in this market.

Microsoft was never a monopoly, there were always other suppliers (Sun, Be, IBM, Apple, Linux, at different points in time).

That's why I was putting more emphasis on the word "domination" than on "monopoly". I agree that WalterBright may have been making a very dense and mostly irrelevant point, to which the proper response may have been "so what?". I simply disagree that this is how we should interpret it. Rather I would give the benefit of the doubt and take him as making a real, germane, substatial-but-misguided libertarian talking point. That is, there are legitimately people in the libertarian camp (I was one of them!) who falsely conflate deregulated markets and competitive ones.

That's because there are no historical examples of free markets, and for good reason.

There is no abstract measure of an 'efficient market'. The efficiency of markets can only be regarded in the context of the utility they create for their participants (direct and as externalities).

It is true that there's a difference between an efficient market and a socially optimal market (if efficiencies are only measured in monetary terms, and exclude any accounting for non-monetary benefits and externalities). However rent control is quite a bad example. There is abundant evidence that rent controls produce serious under-supplies of housing, which is a socially negative outcome by any measure.

> an argument could be made that it was a net positive

Net positive? Sounds like some kind of value theory. Which "net positive" are you talking about? Can't argue something you don't understand..

I made $500 playing craps. I spent $200 on my hotel and another $200 on food and drinks. The trip to Vegas was a net positive. I made $100.

In this instance it would mean that the sum total of the economic benefits to NYC that come from rent-controlled apartments outweigh the sum total of the negatives.

There's a word for profitability already. You're arguing price-control can be a profitable endeavor, but to who? Consumers? The cartels?

Society.

Price control is profitable to society? Is there a formula you could show me (I'll buy it from you)? Maybe some underlying principles? Or you just have that 'gut feeling'..

This is why we can't have nice things.

Correct me if I'm wrong but binding price ceilings and floors always lead to surpluses and shortages respectively and cause a deadweight loss.

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