Edit: That being said, government can get involved in the wrong ways and cause problems with subsidies and bad regulation.
Yes, it's true that you can't get the nice properties of a free market without some conditions being met. Specifically, you need the government to be the arbiter of physical force between people. Otherwise, you have gang warfare (anarchism).
All economic discussions of free markets that I have ever heard have implicitly or explicitly stated that one of the necessary oversights of government is to break up or regulate natural monopoly-prone industries.
It's just that it's a false concept that doesn't actually exist.
Take electricity, for example.
First, there are many large companies that could raise the necessary capital to build power plants and electric transmission lines.
Second, people can always get together and form a non-profit power company if the normal market isn't providing stable, competitive prices. (By "people" I mean, say, the people of an entire US state.)
Third, having deregulated electricity systems would open up the field to innovation, such that we'd probably all have small nuclear reactors at our houses, or wireless power transmission, or something.
So, in conclusion, a "natural monopoly" is not a true monopoly. It's a false concept.
You have the benefit of the doubt from me, but your specific arguments leave out the installation phase of the electrical grid, which I'm sure you are very familiar with.
>>>First, there are many large companies that could raise the necessary capital to build power plants and electric transmission lines.
Agree, but capital isn't the only thing. You have to put the electrical lines into the ground, disrupting traffic. The costs and capital of the electrical system are not what makes it a natural monopoly, the physical reality of our current technology does (pending wireless transmission as you mention later).
The current physical reality is solved by having the government own the last mile(for some definition of mile), while electrical providers can connect at hubs. This is how it works in places where the population understands the specifics of natural monopolies.
>>>Third, having deregulated electricity systems would open up the field to innovation, such that we'd probably all have small nuclear reactors at our houses, or wireless power transmission, or something.
The biggest problem is that these technologies do not yet exist. Maybe in the future they will be stymied by regulation, but if they were invented today I can't think of an electrical grid regulation that would stop them. Remember, consumers can hook up power generating technology to the grid already: solar panels.
>>>Second, people can always get together and form a non-profit power company if the normal market isn't providing stable, competitive prices. (By "people" I mean, say, the people of an entire US state.)
Businesses are in the business of making money. When a corporation thinks it can make money by suing municipalities that form broadband networks, they do so. Like in Lafayette.
http://www.broadbandreports.com/shownews/60150 http://usatoday30.usatoday.com/news/nation/story/2012-02-01/...
Want to know why this isn't all over the news, with the competing ISPs and cable companies badmouthing these bad corporate actions? Because the cable companies and the ISPs and the media companies are largely owned by the same people, and collude monopolistically. This is a very recent accomplishment: regulations existed to prevent it but were overturned by the deregulation achieved through the Telecommunications Act of 1996.
http://en.wikipedia.org/wiki/Telecommunications_Act_of_1996 http://en.wikipedia.org/wiki/Concentration_of_media_ownershi...
A better solution would be to have the "last mile" owned by the people who own properties, but that may be nit picking. And I think that's probably how things would have eventually developed without government intervention.
Now, I think that in reality, power companies (in the US, at least) almost always are regulatory monopolies, i.e., government-granted ones. But, because of the "last mile" solution, they don't _need_ to be.
In summary, I feel like my point that natural monopolies don't exist is still supported.
When a corporation thinks it can make money by suing municipalities that form broadband networks, they do so. Like in Lafayette.
You can't (logically) use one abuse of government power to justify other government power that counteracts it, which seems to be your argument.
In the example you gave, the abuse is being able to win invalid lawsuits, and that is being used to justify government regulation of arbitrary industries (telco, in this specific case).
Better to just make it so you can't win invalid lawsuits.
Because the cable companies and the ISPs and the media companies are largely owned by the same people, and collude monopolistically.
They do collude monopolistically: the telcos have government-granted regulatory monopolies.
deregulation achieved through the Telecommunications Act of 1996.
Given that the telco industry is 100% made up of government-granted regulatory monopolies, this act clearly did not implement deregulation.
I do not think it is controversial to say that deregulation is the act or process of removing or reducing state regulations. I have checked several dictionaries and encyclopedias, on line and dead-tree.
So a slight reduction in the regulatory laws that contributed to the formation of "government-granted regulatory monopolies" is deregulation. Therefore, the 1996 telecommunications Act of 1996 is deregulation, since it reduced and removed some, but not all, regulatory laws.
If we can agree on this, I will reply to the rest of your comment. If we disagree I can still reply, but the definition is really important to my argument.
I think that many people act as if and/or think that a proper definition of "deregulation" is "reducing regulation."
However, I see no point in arguing about definitions. I propose that we just use the terms "complete deregulation" and "partial deregulation" from here on out, so as to be non-ambiguous.
Given this, let me state my stance on partial deregulation. I thought about stating it earlier, but it seemed just barely too tangential.
I think partial deregulation is often much worse than regulation.
For example, regulation may take the form of "Cable company X has the exclusive right to lay coaxial cable in our city. In return, cable company X must allow our city to have our own special channel where we can post public announcements; and, it must lay wire to all areas of the city, regardless of income level; and, it must allow the city to set rates that subscribers can be charged."
Under partial deregulation, X may be allowed to set whatever rates it wants, but still have the exclusive right to lay coaxial cable. So, it can gouge customers.
In this case, partial deregulation didn't correct a situation in which the government was overstepping its bounds. It partially corrected it, and in doing so, made things worse.
I think this is overwhelmingly the kind of thing that happens with partial deregulation, and I think partial deregulation is overwhelmingly what happens these days when politicians talk about deregulation.
Sorry, I know you just wanted me to agree/disagree with your definition rather than adding a bunch of new intellectual content... but I figured the above would be helpful (and likely similar to what you were thinking).
Agreed. All dictionaries disagree, but I'm not talking to any of them.
I believe that all reasonable people agree that history has shown that monopolies are inefficient in a capitalist system(see the 1920s for example). I feel that government-granted regulatory monopolies are also inefficient in a capitalist system. From your comments, I assume that you agree with both of these things, please let me know if you have a different view.
My understanding of the invention of regulations is this: Full deregulation of business seems like the best possible solution, until the point that companies become so big that they form monopolies that stifle competition. Then the government has to come in and regulate them until they are no longer monopolies. From your comments, I assume that you agree with this, let me know if you have different views.
I have to go eat but I have a comment written up about natural monopolies with relation to telcos ready to be edited and then posted.
Well, I don't think natural monopolies exist (as we discussed previously), only regulatory monopolies.
So, I don't think companies can become so big that they become natural monopolies.
I had written about some example cases that help support this (IBM, MS, Bell Telephone), but it was too long and probably not worth it, so I removed them.
Wow, way to punctuate a diatribe of ignorance with equating anarchism with gang warfare.
But for anyone else who might happen on this comment and be truly curious, here's a good starting point: http://theanarchistlibrary.org/library/the-anarchist-faq-edi...
It's heavily cited so you can go as deep as you care to.
P.S.: The short answer is: the "gang warfare" scenario comes from bartering, whether with money or direct bartering (e.g. trade 100 loafs of bread for a bicycle). For Anarchism to work, you'd need to get rid of capitalism and bartering completely. Think Star-trek.
Also note, I'm not arguing for anarchism but rather against ignorance. I personally don't think the world is ready for anarchism but at least I know what it actually is.