Can anyone tell me the difference between the two. The best I can gather from sources such as Wiki and general usage has to do with the alleged "purpose" of the two. I think the justified suspicion here would be that both are inherently unstable and need to be propped up by state coercion in order to thrive. I get the impression that a guild has the "benign" function of setting standards where a cartel focues more on restricting output and raising prices. Is there any real difference, or are the two terms largely used interchangebly?
Tim Hopkins
My impression of the two is they are basically the same.
Guilds restrict output and raise prices of labor and the production of the members from what I understand, same as unions, while cartels do the same.
I read somewhere that cartels are unstable without coercion to prop them up because they benefit the weakest members at the expense of the strongest -- in another thread here I believe is where I saw that, don't want to take undue credit.
Well they're unstable because there is always the incentive to cheat (because by so doing one may significantly undercut the other firms engaged in the cartel.) New competitors also pose a significant risk to their stability (the fact that these firms will make high profits will be a definite signal to competitors to enter the market.) Without a legal monopoly, they won't last very long.
Just as it is possible to increase the supply of goods by merging many companies into one large, unique supplier, and thus realize economies of scale, it is also possible to merge them into a cartel and realize economies of scale without the administrative problems of a single supplier. As such cartels are competitive. What we call a "franchise" business, like McDonalds, is a cartel.
A guild is something different in the sense that it enjoys a legal monopoly over a certain area, and can force out suppliers. That is what labor unions or professional orders do. That is not competitive.
The fallacies of intellectual communism, a compilation - On the nature of power
Anonymous Coward:My impression of the two is they are basically the same.Guilds restrict output and raise prices of labor and the production of the members from what I understand, same as unions, while cartels do the same.I read somewhere that cartels are unstable without coercion to prop them up because they benefit the weakest members at the expense of the strongest -- in another thread here I believe is where I saw that, don't want to take undue credit.
The Libertarian argument against the problem of monopolies & cartels as I understand it is:
1. They don't have full control over prices (aside from rigid elasticity) because they face potential competition. If a lot of people are dissatisfied with a monopoly, they may boycott it outright.
2. The existence of a monopoly creates an incentive to establish technologies that enable the development of competition.
3. Cartels aren't stable because members can sometimes benefit by secretly trying to deceive other cartel-members, for his own gain. As a result, cartels tend to break up and splinter, which defeats their purpose.
Of course I think all these points apply to government themselves. If you're going to defend monopolies and cartels, you have little justification to attack government, aside from the fact that I think the above arguments are poor.
"Austrian economics and freedom are not synonymous." -JAlanKatz