Monopoly, Oligopoly, Market Power and AntiTrust
Capitalists unendingly seek monopoly, oligopoly, monopsony and oligopsony as routes to the highest possible profits. All are inefficient according to ordinary microeconomics. This is a huge, measurable cost. Capitalists cannot self-regulate this problem away: government must.
- Natural Monopolies (5 links)
- Libertarians like to deny the existence of natural monopolies in roads, sewers, and many other services (like Google search) that have increasing returns to scale. Or they make crazy arguments that they should not be produced or regulated by government.
- Digital Monopolies (9 links)
- Microsoft, Apple, Amazon, Alphabet (Google) and Facebook are the 5 largest companies in the USA. Why? Because they are all natural monopolies due to network externalities. Twitter is also a monopoly. These monopolies have the unaccountable private power of spying on and banning users arbitrarily from this important cultural infrastructure.
- State monopoly on violence (3 links)
- This is a quotation out of context from Max Weber. He wroterther on : "The right to yse physical force is ascribed to other institutions or individuals only to the extent to which the state permits it." The state judges what violence is LEGAL, and often without a monopoly. This allows the state to permit and regulate violence by lesser governments and private parties, as well as making some of its own violence legal. We deliberately delegate much violence to the public state, because private parties are too partial when unregulated. Not to mention states are only local monopolies: there are 100+ states to choose from.
- Algorithmic Prison (22 links)
- The algorithmic prison idea is that big data allows business and government to deny us loans, jobs, right to travel, etc. without our knowing why or being able to contest and change the data. This also makes us very vulnerable to dirty tricks.
- Antimonopoly Is as Old as the Republic [More...]
- Should the U.S. enforce more explicit restrictions on monopolies, or can innovation and democracy alone mitigate the pervasive effects of monopoly power? A panel of historians and economists at the recent Stigler Center conference on concentration in America discussed the historical evolution of this debate.
- Break 'Em Up: Recovering Our Freedom from Big Ag, Big Tech, and Big Money (book, online) (1 link)
- "Every facet of American life is being overtaken by big platform monopolists like Facebook, Google, and Bayer (which has merged with the former agricultural giant Monsanto), resulting in a greater concentration of wealth and power than we've seen since the Gilded Age. They are evolving into political entities that often have more influence than the actual government, bending state and federal legislatures to their will and even creating arbitration courts that circumvent the US justice system. How can we recover our freedom from these giants?"
- Credit Cards (1 link)
- Credit cards assess a hidden tax called the Interchange Fee. It is the money withheld from the merchant by banks and credit card companies to pay for the privilege of using a credit card in the transaction. This tax also frequently falls on cash customers, because credit card contracts with merchants generally provide that merchants cannot reveal the tax with a surcharge for using a credit card. Merchants can offer cash discounts, but most do not, charging the same prices, and so cash customers subsidize credit card fees. This is VERY big business, due to oligopoly in the industry.
- Free markets killed capitalism: Ayn Rand, Ronald Reagan, Wal-Mart, Amazon and the 1 percent’s sick triumph over us all [More...]
- "The American economy is more concentrated today than it’s been in more than a century, since the days of the plutocrats. Pretty much every sector of the economy is dominated by a few Goliaths, sometimes a single dominant corporation. "
- Grocery Goliaths: How Food Monopolies Impact Customers [More...]
- "This growing consolidation of the food supply is severe at every step of the food chain, from farm to fork. And it impacts not only farmers and food manufacturers, but also consumers in the form of reduced consumer choices and higher grocery prices."
- How Market Power Leads to Corporate Political Influence [More...]
- "Neoclassical economic theory assumes that firms have no power to influence the rules of the game... This is true only in competitive product markets. When firms have market power, they will seek and obtain political influence and vice versa."
- Imperfect Competition, Legitimate at Last [More...]
- A short history of monopolistic competition (industrial organization) studies, which has resulted recently in the Nobel prize in economics for Jean Tirole. Chicago Economics takes a drubbing.
- Labor Market Monopsony: Trends, Consequences and Policy Responses [More...]
- "This issue brief explains how monopsony, or wage- setting power, in the labor market can reduce wages, employment, and overall welfare, and describes various sources of monopsony power." "But in the presence of anti-competitive firm behavior or labor market frictions that limit competition, policy must take a multipronged approach to promoting wage and job growth."
- Liberals, you must reclaim Adam Smith [More...]
- David Brin denounces modern libertarians and their selective citation of Adam Smith. Brin calls for progressive reforms to bring capitalism back to Smithian competition.
- Liberty! What Fallacies Are Committed in Thy Name! [More...]
- Cosma Shalizi points out that libertarian-style arguments about eliminating antitrust have severe empirical difficulties: ie. price fixing is rampant in the global marketplace.
- Market economics means more than just supply and demand [More...]
- A simple and clear explanation of Jean Tirole's Nobel prize winning work on market dominance.
- Market Power (17 links)
- In a market exchange, there is producer surplus and consumer surplus. Market power is a market failure that occurs when producers can raise prices above the marginal costs to capture more of the surplus. Usually through monopoly, oligopoly or other bottleneck techniques. Libertarians often deny the existence of market power.
- Monopolies Are Worse Than We Thought [More...]
- Market concentration increases prices, limits market size, and makes the economy less efficient. And new evidence indicates that it hurts workers and increases inequality.
- Monopolies May Be Worse for Workers Than for Consumers [More...]
- There isn't much evidence that they raise prices, but they do seem to hold down wages.
- Monopolized: Life in the Age of Corporate Power (book, online)
- “Americans prosper most when business competition is robust, David Dayen explains in this smart and eye-opening book. In plain English, Monopolized shows how the rapid rise of monopolies thwarts competition, shrivels your paycheck, and tears families apart.” -- David Cay Johnston
- Monopsony in Motion (book, online)
- Analyzes labor markets from the real-world perspective that employers have significant market (or monopsony) power over their workers because of transaction costs of changing jobs. "The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence."
- Peter Thiel on the Virtues of Monopoly [More...]
- "Fair enough, Thiel. But what about consumers? That model we learned shows us that they’re worse off under monopoly. And what about the deadweight loss triangle–don’t forget about that ugly thing! "
- Pharmacy Benefit Managers (2 links)
- Middlemen who manage prescription drug benefits for health plans. They are unregulated and oligopolistic, taking a very large cut of revenue from pharmacies and customers. Because their methods are not transparent, drug companies, insurance companies and pharmacies don't even know how much they are paying these middle men.
- Political Determinants of Competition in the Mobile Telecommunication Industry [More...]
- "We show that the way a government designs the rules of the game has an impact on concentration, competition, and prices. Pro-competition regulation reduces prices, but does not hurt quality of services or investments. More democratic governments tend to design more competitive rules, while more politically connected operators are able to distort the rules in their favor, restricting competition. Government intervention has large redistributive effects: U.S. consumers would gain $65bn a year if U.S. mobile service prices were in line with German ones and $44bn if they were in line with Danish ones."
- Restoring Antimonopoly Through Bright-Line Rules [More...]
- "From the first, effective antimonopoly policy has relied on simple, bright-line rules. Today again, a comprehensive set of simple structural limitations -- implemented through legislation, regulation, and policy guidance -- is critical to protecting our democracy and our most fundamental liberties."
- Robber Baron Recessions [More...]
- The virtual end of antitrust enforcement which began under Ronald Reagan seems to have brought about secular stagnation. "For we aren’t just living in a second Gilded Age, we’re also living in a second robber baron era."
- Silicon Valley’s Tax-Avoiding, Job-Killing, Soul-Sucking Machine [More...]
- "Four companies dominate our daily lives unlike any other in human history: Amazon, Apple, Facebook, and Google. We love our nifty phones and just-a-click-away services, but these behemoths enjoy unfettered economic domination and hoard riches on a scale not seen since the monopolies of the gilded age. The only logical conclusion? We must bust up big tech."
- Standard Oil, Monopoly and Predatory Pricing (3 links)
- For decades libertarians have relied on the egregious revisionist history of Standard Oil by John McGee of the Chicago School to declare predatory pricing and monopoly rare and impractical. This claim has been thoroughly refuted by legal and economic research, both empirical and theoretical. Now it is up to the courts to catch up with academia.
- T-Mobile Turns an Industry on Its Ear [More...]
- In 2011, officials at the Federal Communications Commission and the Justice Department moved to block AT&T’s proposed $39 billion acquisition of T-Mobile on antitrust grounds. That led to some very serious price-cutting and unbundling competition.
- Teddy Roosevelt Wouldn't Understand the EU's Antitrust Fine Against Google [More...]
- Because it is based on stiffling innovation, rather than prices.
- The Cost of America’s Oligopoly Problem [More...]
- An innovative new study finds substantial, increasing deadweight losses resulting from oligopolistic behavior and points to the important role that startup acquisitions—particularly by large tech firms—played in driving this trend.
- The Decline of American Journalism Is an Antitrust Problem [More...]
- "Weak antitrust enforcement set the stage for Facebook and Google to extract the fruits of publishers’ labor. We won’t be able to save journalism and solve our disinformation problem unless we weaken monopolies’ power."
- The Food And Agricultural Global Cartels Of The 1990s: Overview And Update [More...]
- Global cartels give the lie to libertarian claims that government regulation smothers competition with red tape. "Needless to say, global cartels are also the most injurious price fixing ventures yet devised, causing massive losses in market efficiency, losses in income for customers, and losses in faith in the honesty of businessmen and the integrity of market institutions." Lysine, citric acid, vitamins A and E and other chemicals.
- The Greatest Anticompetitive Threat of Our Time: Fixing the Horizontal Shareholding Problem [More...]
- "Common sense and economic theory indicates that firms with the same leading shareholders are less likely to compete vigorously against each other."
- The Light Bulb Cartel and Planned Obsolescence [More...]
- "The average life of a standard reference lightbulb produced in dozens of Phoebus members’ factories dropped by a third between 1926 and fiscal year 1933–34, from 1,800 hours to just 1,205 hours."
- The Myth of Capitalism: Monopolies and the Death of Competition (book, online)
- A few very powerful companies dominate key industries that affect our daily lives. Digital monopolies like Google, Facebook and Amazon act as gatekeepers to the digital world. Amazon is capturing almost all online shopping dollars. We have the illusion of choice, but for most critical decisions, we have only one or two companies, when it comes to high speed Internet, health insurance, medical care, mortgage title insurance, social networks, Internet searches, or even consumer goods like toothpaste.
- The U.S. Only Pretends to Have Free Markets [More...]
- "From plane tickets to cellphone bills, monopoly power costs American consumers billions of dollars a year... What the middle class may not fully understand, however, is that much of its stagnation is due to the money that monopolists and oligopolists can squeeze out of consumers. "
- Thomas Jefferson Feared an Aristocracy of Corporations [More...]
- "The author of the Declaration of Independence warned against the threat to democracy posed by big banks and big corporations. Too bad the Supreme Court doesn't respect the original intent of the founders."
- Too big to ignore [More...]
- Monopolies and oligopolies have come to dominate Western economies, and the case for breaking them up is strong.
- Trends in Income From 1975 to 2018 [More...]
- "From 1975 to 2018, the difference between the aggregate income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion... those with incomes below the 90th percentile lost a sizable share of their economic power over the last four decades..."
- Unfriendly Skies [More...]
- "It’s time to admit that airline deregulation has failed passengers, workers -- and economic efficiency."
- We were shocked: RAND study uncovers massive income shift to the top 1% [More...]
- "The median worker should be making as much as $102,000 annually—if some $2.5 trillion wasn’t being “reverse distributed” every year away from the working class."
- What Is a Billionaire? [More...]
- "A Billionaire Is Someone Who Runs a Very Important Tollbooth... Put another way, the Bloomberg billionaire index isn’t a list of the most important Scrooge McDuck’s, it’s a list of the biggest tollbooth operators in the world... they are (largely) men with a strategic position of power protected by public laws and rules... At the end of the day, tollbooths are nothing but bottlenecks on a road on which we would otherwise travel faster and more freely."
- Worst-case deadweight loss: Theory and disturbing real-world implications [More...]
- The deadweight loss from a monopolist’s not producing at all can be much greater than from charging too high a price. The column argues that the potential for this sort of deadweight loss is greatest when the market demand curve has a particular (Zipf) shape. Calibrations based on the world distribution of income generate this shape, with disturbing consequences for potential deadweight loss in global markets.
- “As if the Last 30 Years Never Happened”: Towards a New Law and Economics, Part 2 [More...]
- Antitrust doctrine was changed with a myopic "consumer welfare standard" that ignores the harms to workers, small companies, and many other parties as market power (and monopoly) is increased.
Though free market theorists are reluctant to admit it, capitalists are not fond of free markets, since open and fair competition forces them to invest in product development while they cut their prices. Monopoly and the destruction of competition is the ideal condition for the entrepreneur, and he will strive to achieve it unless restrained not by conscience but by an outside agency enforcing “anti-trust” laws.
Ernest Partridge, "A Dim View of Libertarianism, Part VII -- Some Concluding Questions"
[T]he information revolution in economics that Hayek kicked off well over a half century ago, ended up pointing to a larger public role both in rectifying market failures and in addressing the problem of unaccountable power exercised by employers over employees.
Sam Bowles, "How Hayek’s Evolutionary Theory Disproves His Politics"
In the real world, "monopoly rents" and "abnormal rates of return" are known as "acceptable profits", and serious investors have a word for someone who proposes to start a company in a field without barriers to entry. That word is "idiot", usually followed by remarks on the order of "Why are you wasting my time with crap?"
Cosma Shalizi, "Liberty! What Fallacies Are Committed in Thy Name!"
The invisible hand of the market makes a very good pickpocket.
The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
Adam Smith, "The Wealth of Nations", last sentences in conclusion of Book 1.