Comment by AnIrishDuck | Hacker News Reader

Comment by AnIrishDuck | Hacker News Reader

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> Any real economist.

Any real economist can cite many monoplies that arise through market forces alone.

> Inevitably, if any industry is profitable, competition will arise.

This is not true. There are many different definitions of "profit", and there are many cases where an industry that makes a real business profit will not support a competitor that makes an economic profit. The obvious example is markets with very large economies of scale [1].

> Government regulation (often through corruption) is the only mechanism which ensures a lack of competition. This can be observed in any industry throughout the last 100 years.

I'm interpreting this to mean "only through government intervention can we ensure a lack of competition". Again, this is not true. Any party that can make a massive capital investment (which already vastly reduces the pool of competition) can enter a space and make any future entrance by a competitor completely unprofitable.

To see an example of this, lets go a century back in time to the day of Standard Oil. Standard Oil was notorious for leveraging its massive capital advantage to destroy its competitors. It would enter a new market and lower its prices (leveraging its massive war chest). Once its competitors left business, it would raise prices again to screw over consumers. After many people caught wind of this blatant market manipulation, it turned to deceptive practices and things like tying agreements [2].

What government policy led to the dominant monopoly of Standard Oil?

> You're right that companies can lock up the vast majority of a market by out-competing others, but this generally doesn't last very long (typically a decade or less).

Standard Oil was supreme for over thirty years. If only we could invent a time machine, to hear the gales of laughter from the businessmen of the day at the notion that Rockefeller became the king of oil by "out-competing" others.

He became dominant through backroom deals and anti-competitive practices. Government intervention was what finally ended the Standard Oil monopoly. It was also likely the only thing (barring the death of Rockefeller or some kind of market shift) that ever would.

1. http://en.wikipedia.org/wiki/Economies_of_scale 2. http://en.wikipedia.org/wiki/Standard_oil#Monopoly_charges_a...

> He became dominant through backroom deals and anti-competitive practices.

Backroom deals AKA corruption. Corruption and regulation are two sides of the same coin. Had the market been perfectly competitive (ie. state governments not succumbing to corruption) the monopoly likely would not have formed and lasted.

Your only example merely proves my point.

Try to find a monopoly that has arisen in an open market, free from government 'intervention' (either regulation OR corruption).

It's clear from your response that you didn't read the cited link.

> Backroom deals AKA corruption. Corruption and regulation are two sides of the same coin.

You seem to labor under some obtuse notion that the state governments were the subject of the backroom deals. Let me dispel that for you, by quoting from the article cited that you apparently couldn't be bothered to read:

> In a seminal deal, in 1868, the Lake Shore Railroad, a part of the New York Central, gave Rockefeller's firm a going rate of one cent a gallon or forty-two cents a barrel, an effective 71 percent discount from its listed rates in return for a promise to ship at least 60 carloads of oil daily and to handle the loading and unloading on its own

> Rebates, preferences, and other discriminatory practices in favor of the combination by railroad companies; restraint and monopolization by control of pipe lines, and unfair practices against competing pipe lines; contracts with competitors in restraint of trade; unfair methods of competition, such as local price cutting at the points where necessary to suppress competition; [and] espionage of the business of competitors, the operation of bogus independent companies, and payment of rebates on oil, with the like intent.

> The general result of the investigation has been to disclose the existence of numerous and flagrant discriminations by the railroads in behalf of the Standard Oil Co. and its affiliated corporations. With comparatively few exceptions, mainly of other large concerns in California, the Standard has been the sole beneficiary of such discriminations. In almost every section of the country that company has been found to enjoy some unfair advantages over its competitors, and some of these discriminations affect enormous areas.

> Almost everywhere the rates from the shipping points used exclusively, or almost exclusively, by the Standard are relatively lower than the rates from the shipping points of its competitors. Rates have been made low to let the Standard into markets, or they have been made high to keep its competitors out of markets. Trifling differences in distances are made an excuse for large differences in rates favorable to the Standard Oil Co., while large differences in distances are ignored where they are against the Standard. Sometimes connecting roads prorate on oil—that is, make through rates which are lower than the combination of local rates; sometimes they refuse to prorate; but in either case the result of their policy is to favor the Standard Oil Co. Different methods are used in different places and under different conditions, but the net result is that from Maine to California the general arrangement of open rates on petroleum oil is such as to give the Standard an unreasonable advantage over its competitors

> 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

Note that the word "government" appears nowhere in any of these allegations. All of these backroom deals existed with other market participants.

If you redefine "corruption" to mean "not involving the government whatsoever" then your points are indeed true, but you are then proving the exact opposite of your initial assertion that "only governments can create monopolies".

Anyway, it's not clear if you're a troll or ignorant at this point, and I doubt that further effort to dispel your quaint notions will be worth my invested time.

Well first of all, I did glance at the article, and now concede I may have been mistaken. However, there have been charges of government corruption vis à vis Standard Oil.

http://www.pagetutor.com/standard/chapter13_part1.html

The whole text. http://www.pagetutor.com/standard/toc.html

It does seem as though they (mostly) legitimately competed, and given the historic oil price throughout their reign (which fell drastically, http://www.pagetutor.com/standard/chapter16_part1.html) it doesn't seem as though they exercised monopoly power (at least not nation-wide).

> Try to find a monopoly that has arisen in an open market, free from government 'intervention' (either regulation OR corruption).

How about you cite an example of an open market that is free from government intervention?

There are indeed very few in this day and age. However markets free from government intervention do exist; open air markets in 3rd world economies would be an example. All markets follow the same principles.

I will grant that are likely no monopolies that have developed out of open-air markets in 3rd world economies.

> What government policy led to the dominant monopoly of Standard Oil?

Where did their mineral rights come from?

They bought them from landowners, sometimes through nefarious means if you remember your early 20th century literature.

By nefarious means, do you mean illegal? Was it government policy to intervene in those illegal acts or to let it happen?

No, just for the most part greedy people. Sometimes greedy people were able to bribe greedy officials to bend laws, especially in relation to oil in Oklahoma on American Indian reservations, who we initially stole our land from anyways.

Private landowners would sell their rights either directly to Standard Oil, or to companies owned by Standard Oil. If you can point to a deal where Standard Oil bought mineral rights directly from the government in some kind of corrupt deal, I'm all ears.

Or are you arguing that the right to own private property comes from the government? What then, is the proposed alternative? Dispel property rights? Because history indicates this is likely to make the problem of monopolies worse instead of better.

Try reading Henry George for an externalities based approach to land ownership.

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