Economics Questions

Re: Even without government intervention, can monopolies appear under free-markets?

Jon Irenicus — Sun, 14 Dec 2008 23:53:10 GMT

"Just" implies some sort of moral determination. We're basing this on what would be the competitive price if markets were efficient.

Which is about as fatuous a notion as that of a "just" price; that is, a price based on (perfect) "competition".

The situations are entirely different. In the case of a monopoly, the firm restricts output and this hurts consumers. Because there is not enough competition, the firm's interests are no longer in harmony with the consumer's interests. So markets are inefficient.

There is no such thing as "not enough competition". Only firms seeking to gain consumers' clientele. It may be one firm in an industry competing with firms in every other industry or a dozen or a thousand. There is no fixed number.

In the case of the tariff, there are some externalities such that there is underinvestment or underproduction, and imposing a tariff creates efficiency.

I.e., production that does not meet your own subjective preferences. There is no "Underinvestment" or "underproduction" on the market; only production according to consumers' demonstrated preferences. Econometric models can only capture quantities that exist in reality, not ad hoc nonsense like "Monopoly prices".

Coercion can arise in the free market, whether it takes the form of murder, theft, or natural monopoly.

Nice. Smuggle in "natural monopoly" to try win the argument. Fail.

Re: Even without government intervention, can monopolies appear under free-markets?

Jon Irenicus — Sun, 14 Dec 2008 23:45:31 GMT

My argument is that those prices are not more efficient, because of the monpolistic situation. The monopolist cannot charge any price, at some point all consumers will drop out of the market. But they charge a higher price and this causes a welfare loss.

Which is, in a word, unprovable hogwash.

Re: Even without government intervention, can monopolies appear under free-markets?

nhaag — Sun, 14 Dec 2008 09:39:45 GMT

Danja:
There is no need to speak of a just price. What I meant was there is a price that arises from competition, however in the real world that ideal is hardly ever reached. The further you get from that ideal, the more consumers are harmed. When trade does not happen because a firm with market power is restrictign output, the consumers who would have gained now lose out.

Prices do not arise from competition. They are a money value of a transaction that has taken place. If a transaction took place that means that both the seller and the buyer each value more what they got else no transaction would have taken place at all. Competition works to the benefit of the consumer, which means, that he can get more of what he values with providing less. Still, the idea that it harms a consumer is totally wrong. Nobody will buy something that he thinks is not worth the price he has to pay.

When trade does not happen and the demand for a good is high enough, other entrepreneurs will come in to fill that gap. Either with the same good, they start to produce, or with something that fulfils the same desire and can be produced without the consent of the monopolist. Only if the state, that is the only entity that has the power to coerce, backs a monopolist the economy is harmed.

Re: Even without government intervention, can monopolies appear under free-markets?

Juan — Sun, 14 Dec 2008 03:56:14 GMT

His avatar was rather disturbing...

Re: Even without government intervention, can monopolies appear under free-markets?

Knight_of_BAAWA — Sun, 14 Dec 2008 03:33:52 GMT

We'll just see if he comes back.

Re: Even without government intervention, can monopolies appear under free-markets?

liberty student — Sun, 14 Dec 2008 03:26:07 GMT

KOB, I can't thank you enough for getting rid of that troll. It's one thing to be ignorant but sincere. Another to troll.

Re: Even without government intervention, can monopolies appear under free-markets?

Knight_of_BAAWA — Sun, 14 Dec 2008 02:27:24 GMT

That wasn't an answer. I'll allow you a do-over. And this time: no lying.

Don't whine. Don't cry. Don't bitch. Don't moan. Don't do anything other than answer the challenge issued to you. Doing anything other than that will demonstrate that you have no care to actually discuss the issues, but rather than you wish to make unsupported assertions and erroneous statements without bothering to consider anything counter in order to stir things up. IOW: you'll demonstrate that you're a troll.

Re: Even without government intervention, can monopolies appear under free-markets?

Danja — Sun, 14 Dec 2008 02:08:48 GMT

Interesting. Believing in the public good makes me a troll? I guess that means anyone who's not a libertarian is a troll. What a lonely world you must live in.

Re: Even without government intervention, can monopolies appear under free-markets?

Knight_of_BAAWA — Sun, 14 Dec 2008 02:04:00 GMT

Ok, you get one shot to show that you're not a troll. Ready? Here goes:

Show that there is such a thing as the "public good", and then show that it overrides indvidual rights.

You'll be the first person in history to do it if you do. No pressure or anything, you know.

Re: Even without government intervention, can monopolies appear under free-markets?

Danja — Sun, 14 Dec 2008 01:12:20 GMT

liberty student:
Substitute any word for just then. You simply cannot know what the price should be, because you cannot gauge the resources or desires of the consumer, let alone absolutely forecast the outcome of competition or natural forces.

You can judge the competitiveness of a market using econometric methods. Of course, econometric studies are never perfect, like anything in science.

liberty student:
That's absolutely untrue. Both situations are the same, but instead of natural scarcity, you seek to fix prices and cause artificial scarcity with tariff legislation. You're arguing specifically that lack of competition is a deficit to the consumer, and then arguing that decreasing competition with a tariff is a benefit to consumers.

The difference between the two situations is externalities. In the case of tariffs, firms are underinvesting. In the case of a monopoly, firms are underproducing. It's actually very similar if you look at it from the perspective of the public good. If you don't, well, I see why you wouldn't get it.

Re: Even without government intervention, can monopolies appear under free-markets?

liberty student — Sun, 14 Dec 2008 00:56:44 GMT

Danja:
"Just" implies some sort of moral determination. We're basing this on what would be the competitive price if markets were efficient.

Substitute any word for just then. You simply cannot know what the price should be, because you cannot gauge the resources or desires of the consumer, let alone absolutely forecast the outcome of competition or natural forces.

So again, any attempt to claim prices are not accurate in a free market, is an imposition of your own subjectivity and moralism, not a failure of the market to it's participants.

Danja:
The situations are entirely different. In the case of a monopoly, the firm restricts output and this hurts consumers. Because there is not enough competition, the firm's interests are no longer in harmony with the consumer's interests. So markets are inefficient.

In the case of the tariff, there are some externalities such that there is underinvestment or underproduction, and imposing a tariff creates efficiency.

That's absolutely untrue. Both situations are the same, but instead of natural scarcity, you seek to fix prices and cause artificial scarcity with tariff legislation. You're arguing specifically that lack of competition is a deficit to the consumer, and then arguing that decreasing competition with a tariff is a benefit to consumers.

You're either very confused, or lying. The externalities are irrelevant when you argue both sides of an argument and claim you are right in both instances.

Re: Even without government intervention, can monopolies appear under free-markets?

nibbler491 — Sun, 14 Dec 2008 00:51:01 GMT

The only way a company can obtain a monopoly is by serving its customers better than any of its competitors, to such an extent that no one ever has any reason to try another product. If they gain the monopoly and then begin to do monopolistic things(mainly, price gouging), they'll lose what gave them the monopoly in the first place(their amazing service). It's like Standard Oil, Rockefeller was able to gain his massive market share because he lowered the price of kerosene from 58 cents to 8 cents. If he were to jack up the price, he'd cut greatly into his profits, as the common people wouldn't be able to buy the oil anymore. Therefore, he wouldn't do it because it's not beneficial(praxeology 101).

This applies to all monopolies(even monopolies on resources). What does a company gain by gouging its prices so no one can buy their product any more? They might be able to charge more than they were before(when they had competitors), but they still have to keep the prices reasonable, because when it comes down to it, businesses still have to convince their customers to purchase their products. This raising of prices can also have adverse effects on the company by forcing its customers to look for alternatives, or to boycott the item altogether.

Re: Even without government intervention, can monopolies appear under free-markets?

Danja — Sun, 14 Dec 2008 00:47:11 GMT

liberty student:
You can only say there is a welfare loss, based upon a just price. Again, you don't know what just prices are. Each consumer determines that on their own.

"Just" implies some sort of moral determination. We're basing this on what would be the competitive price if markets were efficient.

liberty student:
Why? What factors cause common results from opposite policies?

The situations are entirely different. In the case of a monopoly, the firm restricts output and this hurts consumers. Because there is not enough competition, the firm's interests are no longer in harmony with the consumer's interests. So markets are inefficient.

In the case of the tariff, there are some externalities such that there is underinvestment or underproduction, and imposing a tariff creates efficiency.

Re: Even without government intervention, can monopolies appear under free-markets?

liberty student — Sun, 14 Dec 2008 00:42:14 GMT

Danja:
My argument is that those prices are not more efficient, because of the monpolistic situation. The monopolist cannot charge any price, at some point all consumers will drop out of the market. But they charge a higher price and this causes a welfare loss.

You can only say there is a welfare loss, based upon a just price. Again, you don't know what just prices are. Each consumer determines that on their own.

Danja:
No wonder libertarians are considered utopian

Utopian? lol

Danja:
Sure they are. In the other thread, higher prices bring the social return in harmony with the private return. In this thread, higher prices create a divergence between social welfare and private welfare.

Why? What factors cause common results from opposite policies?

Re: Even without government intervention, can monopolies appear under free-markets?

Danja — Sat, 13 Dec 2008 22:55:28 GMT

liberty student:

I don't think you understand the earlier point about just prices. If the price is too high, and there is no competition, people will leave that good and buy other goods. Your argument was first, that the monopoly could charge any price (false), your second argument is that the good is sticky, and now you're trying to say that choosing to satisfy other needs at more efficient prices is a loss of welfare.

But there is no way for you to gauge, even for a single individual, let alone an entire market, why they need a particular good, and how they are disadvantaged by not having it at a low price. You simply cannot calculate the constantly changing ordinal desires and resources of the marketplace, even for an instant.

My argument is that those prices are not more efficient, because of the monpolistic situation. The monopolist cannot charge any price, at some point all consumers will drop out of the market. But they charge a higher price and this causes a welfare loss.

liberty student:
You're missing the point. A free market, by definition, is not coercive. So if you have coercion, you no longer have a free market. It's not what I mean, it's what it actually is.

No wonder libertarians are considered utopian

liberty student:
It is ironic that you argue in this thread about high monopolistic prices, and in the free trade thread you argue for propping up prices with regulatory power, in essence discounting free trade and decreasing competition. You do realize that these positions are not reconcilable?

Sure they are. In the other thread, higher prices bring the social return in harmony with the private return. In this thread, higher prices create a divergence between social welfare and private welfare.