Economics Questions

Re: Google: Proof that monopolies aren't all bad

cyclops — Thu, 10 Jan 2008 00:49:02 GMT

Sorry, this is a bit of a threadjack but I was just wondering what Austrian's have to say on Monopolies, Collusion, Cartels etc.

Do they believe the problems will be self correcting, or is it a legitimant function of governments to 'keep markets free' (yes, I am aware of the paradox :))

Re: Google: Proof that monopolies aren't all bad

macsnafu — Wed, 09 Jan 2008 23:36:58 GMT

macsnafu, what is the point of your reply?

How many people in this thread have already defined monopoly as 100% market share and forcible restriction into the market? And then you come in and say, in spite this, that Microsoft is a monopoly. At best, you are using a non-technical, non-economic definition of "monopoly". Microsoft is not a monopoly in any real sense, EVEN IF they are engaging in coercive acts to prevent competition.

However, if most people want something done about Microsoft's alleged monopoly status without proof of those coercive acts, if in fact they consider Microsoft's large market share in itself to be proof of their alleged monopoly status, then that just means they have a bad feeling about Microsoft and are assuming that successful companies can only be so through coercion, and not through successful business practices.

Re: Google: Proof that monopolies aren't all bad

libertarian — Wed, 09 Jan 2008 22:03:05 GMT

macsnafu:
libertarian:
Microsoft is a monopoly. Microsoft uses obvious patents and lobbying to dominate the market. Every software developer knows how buggy and poor quality Microsoft's products are like.

Here's the mainstream mindset. "Monopoly" is loosely defined as having a dominant market share, not that entry into the field is forcibly restricted, that having a dominant market share is proof in itself that a company had done something wrong, and therefore, the government must do something about it. Essentially, these people want to punish people for being successful, not because they can point to any specific initiation of force by the company.

macsnafu, what is the point of your reply?

Re: Google: Proof that monopolies aren't all bad

macsnafu — Wed, 09 Jan 2008 19:28:44 GMT

libertarian:
Microsoft is a monopoly. Microsoft uses obvious patents and lobbying to dominate the market. Every software developer knows how buggy and poor quality Microsoft's products are like.

Here's the mainstream mindset. "Monopoly" is loosely defined as having a dominant market share, not that entry into the field is forcibly restricted, that having a dominant market share is proof in itself that a company had done something wrong, and therefore, the government must do something about it. Essentially, these people want to punish people for being successful, not because they can point to any specific initiation of force by the company.

Re: Google: Proof that monopolies aren't all bad

libertarian — Tue, 08 Jan 2008 21:40:20 GMT

Microsoft is a monopoly. Microsoft uses obvious patents and lobbying to dominate the market. Every software developer knows how buggy and poor quality Microsoft's products are like.

Re: Google: Proof that monopolies aren't all bad

Kirznerian — Wed, 02 Jan 2008 16:37:45 GMT

Nathyn:
With that high of a market share, it's clear that, provided it doesn't face any major problems, it will soon reach monopoly status, in that same sense as Microsoft.
It will dominate the market, not allowing any firm to seriously compete. However, other search engines will exist because they can still generate a marginal profit, because of customer loyalty, costs to provide the product are low, and the consumer surplus is low.

Microsoft is not a monopoly. What is a monopoly? Monopoly means that the entry in one sector of the market is blocked.

Large market shares are the consequence of the competitive superiority of certain companies. Some companies have large market shares because they have discovered profitable opportunities before everybody else. These tipes of companies have discovered ways of coordinating individual plans in a more efficient manner.

Re: Google: Proof that monopolies aren't all bad

Grant — Wed, 02 Jan 2008 09:46:47 GMT

Err... Google can't ever be a monopoly, because there is no barrier to entry in search engines or any other website. The only scarce resource Google might monopolize is the trust of internet-goers, and to keep that resource they will have to continue to innovate and offer awesome services.

A better example might be Microsoft. They are hated as a monopoly, and yet they rank only slightly worse than average in consumer satisfaction surveys. I suspect a lot of the drop in '07 has to do with Vista's problems; Windows XP and 2000 were much better (although I'd have thought the X-Box 360 would have helped them quite a bit).

PS: Isn't it interesting that no solvent business experiences consumer satisfaction as low as Congress's? And that the most hated industry is the one with state-granted monopolies, cable television providers?

Re: Google: Proof that monopolies aren't all bad

JAlanKatz — Wed, 02 Jan 2008 04:34:53 GMT

Suppose Google did outcompete all the rest, and have 100% of the market share. What do we expect would happen? It just so happens that Rothbard had something to say about that. Rothbard argued that a company in that position faced much the same situation that Mises described for a central planner. Facing no competition for consumers, they lose effective market signals, and fail to satisfy consumers, opening the door to competition, which will reemerge as long as theres no violent barrier to entry, since there will be a profit opportunity.

Re: Google: Proof that monopolies aren't all bad

macsnafu — Tue, 01 Jan 2008 19:52:32 GMT

Nathyn:

The market share of search engines:
Google is the most used search engine on the web with a 53.6% market share, ahead of Yahoo! (19.9%) and Live Search (12.9%)

With that high of a market share, it's clear that, provided it doesn't face any major problems, it will soon reach monopoly status, in that same sense as Microsoft.

It will dominate the market, not allowing any firm to seriously compete. However, other search engines will exist because they can still generate a marginal profit, because of customer loyalty, costs to provide the product are low, and the consumer surplus is low.

53.6% of market share isn't a monopoly, nor is 75% or even 90%. It takes 100%, or very close to it, to constitute a monopoly. Even then, if they don't forcibly prevent competitors, it could be considered a benign monopoly, or even not a monopoly, since their position isn't held by force.

However, if a company forcibly prevents competition from occurring, monopoly or not, it's still doing something immoral. But what could Google do to prevent its competition from operating, hmm? It's not impossible, I suppose, but I think it would be difficult, given the nature of the internet.

Re: Google: Proof that monopolies aren't all bad

Inquisitor — Tue, 01 Jan 2008 15:00:35 GMT

I agree with Libertarian. Also, this is worth reading:

A politically incorrect guide to anti-trust

Re: Google: Proof that monopolies aren't all bad

Paul — Tue, 01 Jan 2008 06:09:18 GMT

Vinge was the one who coined the term "technological singularity", if that's what you're talking about.

Re: Google: Proof that monopolies aren't all bad

libertarian — Tue, 01 Jan 2008 05:45:21 GMT

Paul:
Heh. Ever read Vernor Vinge's short story Conquest By Default? Alien anti-trust guys come to Earth and break up governments.

No. Never heard of Vinge nor read his books. It is interesting that Vinge is also a singularitarian.

Re: Google: Proof that monopolies aren't all bad

Paul — Tue, 01 Jan 2008 05:37:42 GMT

Heh. Ever read Vernor Vinge's short story Conquest By Default? Alien anti-trust guys come to Earth and break up governments.

Re: Google: Proof that monopolies aren't all bad

libertarian — Tue, 01 Jan 2008 05:23:11 GMT

If google had been broken to two smaller companies, each have only have half the number of employees and half the computer equipment; which is more damaging than the benefits. MSN and Yahoo would catch up due to google's poor quality due to lack of employees and the other missing half of computer equipment. The other half of vital computer equipment may be unconstructible. People would be "forced" to use lower-quality alternative search engines. The two googles would never be are adjusted to the original size, since the demand of employees is higher and vital missing computer equipment. The two googles 99% would become bankrupt. Copyright laws and trade secrets would be disputed. Anti-trust laws are anti-merge. Innovative mergers would never happen. Anti-trust laws is equivalent to robbing google.

Anti-monopoly lawsuits should applied to States. Smaller States have less corruption. The barriers to entry for a State is nearly infinite. Therefore it is ideal to have anti-trust laws for States.

Google: Proof that monopolies aren't all bad

Nathyn — Tue, 01 Jan 2008 05:10:31 GMT

I saw an article on Digg, speculating about what search engines would emerge if Google was broken up by anti-trust:

http://searchengineland.com/071230-095315.php

The market share of search engines:

Google is the most used search engine on the web with a 53.6% market share, ahead of Yahoo! (19.9%) and Live Search (12.9%)

With that high of a market share, it's clear that, provided it doesn't face any major problems, it will soon reach monopoly status, in that same sense as Microsoft.

It will dominate the market, not allowing any firm to seriously compete. However, other search engines will exist because they can still generate a marginal profit, because of customer loyalty, costs to provide the product are low, and the consumer surplus is low.

There is clearly a benefit from Google's existence. It has been one of the most innovative companies to date as well as investing extremely wisely, by turning down a buy-out proposal by Microsoft, then snapping up Youtube and Blogger.

It has also been extremely efficient, being run by a very small group of people.