The principles behind the free market are flawed. Copyright and patents are flawed. We're being played. But somehow the incumbents always get away with "but we have fair rules", when everybody who has ever entered a game of monopoly late knows this is not true.
Newtonian principles does a really good job for a huge number of use cases, but it isn't the end all.
When it comes to intertwining human taste, a doctrine of equal opportunity combined with private property, and scarce resources, I don't want to throw the baby out with the bathwater.
Usually the discussion of that kind of thing revolves around the near-elimination of profit via (hypothetical) too-perfect competition among producers and too-perfect information for consumers, but with the rise of automated mass-scale spying and automated finer-grained price discrimination (plus enormous consolidation of markets due to near-abandonment of anti-trust enforcement in the ‘70s), we’re kinda seeing the real deal play out the other direction: approaching-maximum extraction of profit from every transaction.
Which sucks, to put it mildly. You do not want markets that function “too well” in any direction.
Far more complicated theories get much closer to reality, but aren’t nearly as well known outside of economic circles.
It's also common practice to show the effect of something on an idealized free market, with the idea of being that even under supposedly ideal conditions, the something being analyzed is still problematic.
There are far fewer single family homes on the market and they are a lot harder to bring up in the market. However, multi-tenant facilities cost a lot less to bring to market but there are few owners of those buildings.
With a much smaller set of unit owners, it makes collusion a lot easier to pull off. Only a few facilities need to participate in order to raise the prices and once it goes up for the large owners the smaller owners will happily raise their prices because "it's competitive with market rates".
The part that's totally divorced is that the cost of these units has nothing to do with business expenses and everything to do with market availability. A new player can't really come in and disrupt things and even if one or a few actors start undercutting the others it doesn't matter because they only have so many units they can sell which will fill up quickly.
The whole thing has driven up housing prices to the extreme. My 15 year old home is worth 5x the price I purchased it at. That actually scares me. I couldn't afford my home today and I can't afford to really move into a nicer home in the future.
> Free markets as described by Econ 101 don’t apply.
They don't apply anywhere. It's a 101 class. It's over simplified. It looks accurate enough but a first order approximation isn't enough to operate effectively in the real world. It's like thinking you can code if you're able to read psuedocode. It's a great outline, but there's a lot of little things in between that ends up being >90% of the lines of code you need to make a working program
You're right, but I'd add that important thing here is that this is not a free market.
Can you go into specifics?
E.g. the model "use VC money to subsidize cost until all competitors are bankrupt then hike prices to recoup" is not really reflected in this "free market"
Can you give some examples of this happening in real life?
None of the examples I can think of where people criticised the companies for operating unprofitably, such as Amazon retail or Uber, were able to corner their markets.
Harvey Normans, Targets, Argos's, Walmarts, all still exist and compete with Amazon retail. Most towns still operate normal taxis services, Lyft, FreeNow, Bolt, all compete with Uber.
VC funding subsidising pricing, albeit temporarily, is still good for consumers. It doesn't seem to imply higher eventual prices. The opposite seems true, in fact.
Austin had a local rideshare app that entered the scene when Uber/Lyft left the area because the city passed a law it failed to propagandize against called RideAustin. Non-profit, worked really well and paid well. When Uber and Lyft came back, they heavily subsidized the cost of doing business in Austin by both arbitrarily lowering prices and heavily juicing rewards for drivers. Conveniently, when RideAustin shut down because most drivers and riders had moved onto either app, these rewards started getting clawed back and prices went way back up.
Uber is the canonical example of this, I guess.
> None of the examples I can think of where people criticised the companies for operating unprofitably, such as Amazon retail or Uber, were able to corner their markets.
It's not about people criticising this behavior or not. It's about being factored in the model. The free market model assumes that every participant in the market has the same access to capital, ensuring that every market participant can equally undercut everyone, making this particular strategy irrational, therefore not part of the model.