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Comment by dtgriscom | Hacker News Reader

Back in the early '80s I took course in regulation from one of the leading experts in railway regulation. She was great, and the main idea I took away from it is "don't regulate if the market will naturally fix itself." So, the big question when deciding whether some issue needs to be controlled through regulation is whether the market will function well without regulation. (In most of the examples she gave, it would.)

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Ah, that was pre-deregulation in the US. Now we know what happens with de-regulation. At first, there are lots of new entrants in the industry. Gradually, the new entrants go bust or consolidate. The industry reduces to an unregulated oligopoly with four or less major players.

Examples:

- Wireline telephony. (AT&T, Verizon)

- Cellular telephony. (AT&T, Verizon, T-Mobile)

- Cable TV (Comcast, Charter, AT&T).

- Banks. (Bank of America, Citigroup, Chase, and maybe Wells Fargo)

- Package delivery (FedEx and UPS, plus USPS).

- Airlines (United, American, Southwest, and Delta)

Price competition seems to disappear at 3 or less direct competitors, from an EU study.

A corporate tax rate that increases with revenue would naturally disincentivize such monopolies/oligopolies (by making it easier for small companies to compete against them) without requiring the government micromanagement of deciding what is and what isn't a monopoly.

I don't think that'd work well: Companies would just split into smaller ones, led by the same people.

Could you split them while retaining the aspects of the business that made them a monopoly to begin with?

If I own 50 meat Packers totaling 50% of the market, I get taxed like one totaling 50%.

Cartels are already illegal.

Those all seem like fiercely price-competitive markets, with the exception of wired comms where there isn’t competition in regions which have been divided up between one provider or the other.

Also, they are all highly regulated industries, so it’s hard to disentangle whether any observed issues are due to market failure or regulatory failure.

Correct.

Which is why breaking apart companies that form monopolies is so important. Break up Facebook. Break up Amazon. Break up the Warner Bros Discovery merger that just happened (why was that allowed in the first place?).

Monopolies are the one major failing of capitalism. Busting up monopolies is an important function of government. Unfortunately, all our congress is now bribed (they call it lobbying and PACs) and work for the monopolies or oligopolies. So that's how Warner Bros Discovery has happened to create this huge news and media organization. In any merger, I like to see who the new CEOs are and get a sense of them. David Zaslav is the new CEO. If you haven't seen David Zaslav, the new CEO, speak, here is a little video of him good little speech: https://www.youtube.com/watch?v=0i0v5GVZ30o

Because our US congress is being bribed, a main solution to monopolies is term limits. About 90-95% of representatives are re-elected to Congress year after year. And about 80-85% of the Senate. For example, Diane Feinstein has been a California Senator for 30 years, and I am almost convinced that they have put an android in her and there's just a thin coating of her skin over it. Why is this happening...why don't we have term limits?

Maybe 6 years for both, then the politician is OUT.

Yes.

But why do you concentrate on "term limits"?

Surely it is campaign finance reform that is needed in the USA?

Term limits might be useful, it would strengthen parties and party discipline. Is that a good thing? I use to think so, but what has happened to the GoP is disturbing (from a distance - I am no expert on your USA politics)

Mono- generally means "one". When the lists being discussed all have a minimum of 2 companies we aren't talking about monopolies.

Those companies aren't monopolies either, they all compete with a large number of successful groups. Ticktok has been banned in some markets because they are too successful at competing with the existing social networks- it isn't from the US.

Google owns like, 90% of the market. If you are going to argue that there are other players, like Bing and ... whoever else there is, then I'm not buying that.

Amazon should be broken up, even though there are tons of other people with online stores. Amazon is a monopoly at what they do.

And even when there are 2,3,4 competitors, one has to have governmental regulators to make sure there's no collusion, which effectively makes a monopoly.

As far as tiktok goes, it is banned mainly because it is a Chinese company and they are collecting data on US citizens. And China is a dick, so that's why banned.

While this is somewhat off topic, as far as China goes, I'd put super harsh limits on everything that they do here. I'd make them follow the exact same rules that they make others follow in their country. China is ALL about forced partnerships, for example. with forced partnerships, so that they can steal IP. One of the conditions of working in China is FORCED transfer of technology. Foreign banking, telecom, payment systems are not allowed. China has banned Facebook and Google. China requires all foreign fund management companies to set up an internal unit for supervision by the Chinese Communist Party. So this applies to companies like Blackrock Fidelity, etc. So Tiktok isn't a particularly good example for me.

Wouldn’t it be easier to bribe short termers? Or prop up new ones with bribed money?

Breaking up any of the tech giants will require a new legal definition of monopoly.

Cool. Let's make a new definition, love your idea, thank you!

Also, I think that this type of argument, which I've seen before, is an attempt to split hairs and and engage in obfuscation. FUD. I'm not falling for it.

These are some of the most regulated industries in the US.

Regulated oligopolies.

Hardly market forces!

If you believe in the utility of markets then breaking up the oligopolies formed by market failure (unless price gouging monopolistic practises are not viewed as "market failure"...) is very important.

Regulating them is ineffective because the oligopolies get so rich they heavily influence, if not actually write, the regulations. By bribing the regulators.

However, the brewing and trucking industries have done the exact opposite. Maybe your model is broken.

De-regulation is a misnomer, and using it as a pejorative shows ignorance as to how regulation really works. Quality will always matter way more than quantity.

Brewing:

* Anheuser-Busch InBev - 45% of US beer market

* MillerCoors - 25% of US beer market

Trucking:

The big ones are FedEx and UPS, who of course dominate small package delivery.

For big loads, the big players are XPO Logistics and J. B. Hunt. Everybody else is considerably smaller. Full-truckload shipping has distance cost and is simpler than package delivery, so the network effects are not as strong and there's room for local and regional players.

[1] https://blog.bizvibe.com/blog/largest-trucking-companies

That isn't monopolization. There are over 8000 active microbreweries in the US, and they haven't been put out of business by Anheuser Busch. In fact, Anheuser Busch has been scared of their growth for decades now. In 1979, when the wave of beer de-regulation started, there were only 90 breweries in the entire US.

There are almost 1M independent public-carrier trucking companies in the US. There are some 300,000 independent owner operators.

Your model is broken. De-regulation doesn't inevitably cause monopolization, there is something else that does that. In fact, you already alluded to it: network effects. Along with high fixed costs (which overly aggressive regulation contributes to), they're one of the defining features of a natural monopoly.

I feel like your brewery examples doesn't support your thesis. In brewing we have a couple of mega breweries. There are thousands of upstart local breweries. They have trouble distributing beer because most states have enforced useless middlemen that control this, the liquor distributors. The distributors control whether the local breweries can get on supermarket shelves or into bars. The breweries can't just do this on their own in most states.

And guess who owns most of the liquor distributors. Yes, it is other mega breweries. In reality the booming beer industry would be far advanced if there wasn't the constant sequence of breweries selling out to big beer (because the monopolists limit the ability of the small breweries to grow and succeed). We need to break up the monopolists controlling the industry.

De-regulation of brewing took us from 90 breweries to over 8000. So at the very least at the local level brewing can thrive.

You're right that distribution inhibits smaller breweries from growing a national presence. But again, that is due to regulation. Alcohol distribution is heavily regulated, and there is tons of legacy regulatory capture, and larger distributors are constantly lobbying for more regulations to maintain their stranglehold on distribution.

Brewing - deregulated. Distribution - heavily regulated. Maybe you don't need to break up the brewing giants, just dismantle the captured regulation stranglehold they have on distribution.

You really want 100s of competitors. If they’re running advertisements they’re exploiting market power.

I need to find the reference, but an European Union antitrust study indicated that price competition usually disappears around when the number of real competitors drops below 4. Below 4, you tend get implicit collusion, where nobody wants to cut prices much to gain market share.

An efficient market doesn’t have price competition because MR=MC. Price above the margin and nothing sells. Price below and you’re losing money-and no one has money to lose for market power.

I realize I’m talking about markets people would have a difficult time looking for examples. This illustrates how wide spread concentration is. I’m not concerned with the N=M inflection points.

… and the internet overlords, like Google and Facebook.

Those were never regulated. Industries where the network effect is so strong it leads to monopoly used to be rare. In the early days of antitrust, only railroads, street cars, gas, and electric companies had extremely strong network effects. Competition didn't work. So those industries were regulated into common carriers or regulated utilities.

Today far more industries have strong network effects. But that's another topic.

>> Banks. (Bank of America, Citigroup, Chase, and maybe Wells Fargo)

This one is a pretty bad example. If I want to avoid Spectrum, I don't get cable. If I want to avoid FedEx and UPS, I don't get to order things online.

If I wan't to avoid Bank of America, Citigroup, Chase, and Wells Fargo (which I do, particularly that last one), I bank at a credit union.

But yeah, it's fun to imagine what it would be like to live in a world where any company with more than 4% market share gets broken up as a monopoly.

The EU is different than the US. The EU has country club culture of old families that stay off each other’s turf. That used to be the case in the US where airlines split routes, and the cable business is still a mess. Steve Jobs tried to pull that shit with programmer salaries. Frankly I have little issue with US monopolies as many you list only make a 10% margin. I’d rather pay T-Mobile $27 than the $30 I currently pay, but I am not all that upset about it. An Epipen is $600. That is due to the FDA only approving 1 device with $0.10 worth of epinephrine, when the EU has 6 choices all less than $100. Bad government policy can screw us. It would be really nice if the US government relaxed the regulations on a drug invented in 1910 combined with a spring.

I’m not disagreeing with you but I just feel like I am as likely to get screwed by regulatory capture as natural monopolies. Wild west entrepreneurial capitalism is a decent antidote to crony capitalism which thrives with regulation.

MBS, Putin, Biden, Trump, Xi all want power over industry, media, and education. I question how much I want a savior empowered by the law and a duty to save us from monopolies and tycoons. Elon Musk seems to be creating a monopoly on space access and he is high on the scale of douchbag, but he is unlikely to make my life worse. Even if he controls space.

From a monopolistic standpoint, you have to laugh at Zuck getting a Fuck from Chinese TicTok. It may not be good, but he isn’t cronies with Mr. Zhang.

It is also worth acknowledging that most of the audience here has benefited directly or indirectly from the obscene profit margins that the US tech scene has created. Complaining about monopolies is biting the hand that feeds. Ignore any negativity as the choir here gets the rich milk of profit margins which have historically only ever been created by monopolies.

What makes me laugh is that the US military and US fracking means we Americans get the good life and high programmer salaries because US tech is immune while Europeans hang their laundry outside.

That misses about 95% of reality. To mention just one key factor: without government intervention you end up usually with a monopoly or oligopoly.

Not to mention safety standards, labour protection, quality and warranty, ...

Without regulations and often intervention all goes to pieces.

to directly counter your argument: no railroad ever developed without government intervention and at least funding, guarantees and land grants.

natural monopolies are short-term, unless propped up by government

being propped up includes excessive copyright protections

At one time, Walmart and Microsoft were considered by some to be "natural monopolies".

>> At one time, Walmart and Microsoft were considered by some to be "natural monopolies".

Natural monopoly:

"A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors"

Newspaper headline, 1962:

"Can Tiny Wal-Mart Survive Against the Big Guys?"

Obviously, by Betteridge's law of headlines, Wal-Mart does not exist. Which is correct, since it is Walmart now.

(The Big Guys were Woolco, Kmart and Target. There are 21 Kmarts left in the US. I have no idea what Woolco was. Oh OK, looked it up, Woolworths.)

You could just as easily say that government causes 95% of monopolies. Regulatory compliance is almost universally a fixed cost to a business, and large fixed cost structures are the defining characteristic of a natural monopoly market. That's also the reason why small public IPOs disappeared after Sarbox...small corporations can't handle the cost of regulatory compliance.

Regulation can prevent monopolies, but it can just as easily enable them. And lack of regulation can allow monopolies to form, but they can also allow markets to commoditize. Quality of regulation will always matter more than quantity.

>without government intervention you end up usually with a monopoly or oligopoly.

I would love to hear your explanation of how government intervention is the only thing preventing a monopoly or oligopoly of plumbers, electricians, pet groomers, or halal carts.

no explanation needed, just look at medieval history where guilds had de facto monopolies on certain services or manufacturing and if you wanted to be independent... tough luck.

> where guilds had de facto monopolies on certain services or manufacturing and if you wanted to be independent... tough luck

This conflates too many historical threads to support the hypothesis. The guild era was one where most countries required official consent to start a business of any kind. That's how the guilds enforced their monopoly.

Corporations secure their standing through regulation. It prohibits upstarts from competing because of artificial overhead that only the largest and most well-connected (to government insiders) can handle.

It's practically dragging the ladder up behind them.

Unless you are claiming that there are no issues that don't need government regulations, I don't see how your argument contradicts the parent post.

Can you name an example of a monopoly that has developed in the last 50 years that didn’t occur because of crony capitalism?

lock-the-spock explicitly writes about reality, and within the real system we have, monopolies develop.

The problem is that it’s difficult to distinguish whether the government caused the oligopoly, or is mitigating its (often deleterious) impacts.

It very much depends what we agree monopoly means. Did Microsoft Windows have a monopoly on consumer desktop operating systems? Arguably Apple only survived because Microsoft bailed them out in 1997 to avoid being accused of having a monopoly. Does Google have a monopoly on search?

Tech naturally tends towards monopolies because almost everyone benefits from using the same tech as everyone else they know. The same messaging system, the same operating system running the same applications that use the same file formats.

As for crony capitalism as a source of monopolies, sure of course that can happen, but if we look away from capitalism basically the only other alternative anyone has come up with is pure unadulterated cronyism. Communism, socialism, they all end up being pure cronyist monopoly systems. At least with capitalism you have an outside chance of getting away from that.

> 50 years

The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914.

so yeah, you won't find many, because the regulation works.

You seem to have noticed the part where the parent comment says “don’t regulate”, but missed the part where it says “if the market will naturally fix itself”. Please, read it again, so that you can respond to what it actually says, instead of what your imagined version of it says.

Most disciplines evolved in the last 40 years (looking at you psychiatry), but economics has changed rather drastically. Methods for testing theory back then were Bad. Like, really bad. Ed Leamer's 1983 paper on this (http://www.econ.ucla.edu/workingpapers/wp239.pdf) is a good read if you want the details. Beginning in the late 80s, there was a movement toward study design and credible identification. Software like Stata (and nowadays there's R, julia and python) started lowering the costs of doing data-intensive work. The 90s and 00s are full of really interesting papers pushing the frontier on what could be done do gather evidence of causality: Angrist and Lavy in 1999 using Maimonedes Rules and RDDs to estimate class-size effects, Hoxby 2000 using rivers and county borders as exogenous variation on public school competition, Acemoglu, Johnson & Robinson 2001 using colonizer death rates to estimate long-term effects of colonization. The discipline has evolved and so has our understanding of minimum wages (https://academic.oup.com/qje/article/134/3/1405/5484905), gun violence (https://www.nber.org/papers/w23510) and nation-building (https://scholar.harvard.edu/files/dell/files/paper_combined....). Pretty sure Railway Economics has changed too.

> the big question when deciding whether some issue needs to be controlled through regulation is whether the market will function well without regulation.

All markets are regulated. Markets are defined by their regulation. You're talking about the calculation one should do when deciding when some market needs to be more or differently regulated.

And if the market doesn’t manage to regulate something just put those things in the Externalities bin.

Who was she?

This is taught in any Economics 101 class in college.

Government regulation = market inefficiency

  > Government regulation = market inefficiency

there are many causes of inefficiency, such as too many middlemen, monopolies, oligopolies, cartels etc...

I don't know people downvoted me. Take any freshmen econ 101 class. One of the first things they teach you is that government regulation/intervention means market inefficiency. And they keep pounding this idea over and over again throughout the course.

Am I the only one here who has taken Econ 101?

No. Other people took better courses or read more widely...

At the fundamental level, any regulation is a disruption to the free market.

An unregulated market is not a fair market. Companies will put the risk and externalities on others. That's why we don't let them dump chemicals into the watershed, or rather we incentivized them through regulations and fines.

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