Maybe I'm just thick as a board tonight, but while you wrote a lot, you don't really seem to have explained "the solution to rent seeking" as you see it. Can you expound?
The solution, then, is to reduce the size of the state and allow for less central planning and involvement.
Further to this: the size of the state and those who run it seek to gain more power. Power is delivered through votes. Thus much that passes for political debate is not based on reason, but rather emotions and feelings - people finding and leveraging biases, beliefs and BS. Virtually no modern policy making is done using reason and simple analysis - instead it is done by emotionally trying to sway the argument - the 'think of the children' model.
A triumph of reason over emotion and reduction in the size o f the state. This creates the environment where those rent-seeking cannot fool those using reason, and they lack the all-powerful controls to enforce the monopolies.
For real life examples, see the classic USA situations of railway and oil magnates in 19th century - these monopolies weren't caused by the state and regulations, but by lack of it.
Of course, states can also create bad monopolies, but the solution is to change government actions, not to "disarm" the state - since in that case the bad monopolies will stay anyway, and even more monopolies will arise.
In the case of Standard Oil, the consumers benefited greatly from the practices of Rockefeller. Despite controlling 90% of the market at one point, its output quadrupled in a single decade (1880-1890) and prices of kerosene dropped by threefold over the same time period. Standard Oil was simply the best at what it did and succeeded as a result. During the early 1900s, the market shifted away from kerosene to gasoline (thanks to Ford) and there was a large amount of competition entering that market. Its market share in oil production fell from 1898 to 1906 from 34% to 11%. Yet it was only in 1911 that Standard Oil was broken up by the Sherman Anti-Trust Act (which, funnily enough, was passed in 1890: at the end of the decade of massive increases in production and decreases in price by Standard Oil). The fact is that, in this case, the market function properly in spite of government interference, not thanks to it.
Funny that you mention the railroads as well. The biggest threat to competition was not the companies in the free market, but instead railroad companies in control of the ICC, created in 1887. It was this government entity which allowed railroad companies, through law, to eliminate competition and screw the consumer by raising rates in a collusive manner.
I don't follow your point. Do you think Google has done the investment not expecting to make a profit?
This example shows the point that it is virtually impossible to maintain a monopoly in a free market. So if one company had a monopoly on internet access, and then Google successfully enters that market, it's not a monopoly.
Short run market dominance and monopolies seem to be often conflated, but they aren't the same thing.
The free market does not tend towards monopoly or oligopoly. If any one player is gaining market power and capturing a lot of consumer surplus, then competition will eventually find a route around that and supply an alternative with better value. This has been proven time and time again.
Even coming up with a situation where you need a large capital investment to get started, given a compelling enough market (which is what is created when an individual firm tends towards monopoly) then the capital formation is possible to organise.
Your solution 'change government actions' is hopelessly unworkable, this is what the original post is all about. All the while the opportunity to rent-seek is available, people with the desire to do so are going to exploit it.
The countries with the worst monopolies are those with the largest share of the income owned and distributed by the state. These monopolies harm consumers and rivals and only exist because the state is there to back them up. This goes all the way up to the very worst monopoly of them all, which is where the state is the economy, such as in soviet russia.
Reduce the size and reach of the state, and you make it impossible for rent-seeking behaviour to occur, because there is no structure to support it.
I don't think I could disagree with that specific statement more than I do (even though I agree with some of your others, and your opening line). In order to accept those words I would have to ignore the existence of monarchies, dictators, cartels, and simple things like the phrase "the rich get richer." Our society and economies are structures imposed on the true mathematical and physical chaos of space and organic chemistry.
I agree with some of what you say ("Reduce the size and reach of the state, and you make it impossible for rent-seeking behaviour to occur, because there is no structure to support it."), but I would note that there are some things that individuals simply cannot do alone, the most important of which is holding the power of monopolies/oligopolies accountable. I would rather not call that government, simply a group action, but it still amounts to a common banner. Unfortunately, any organized power will only continue to claw for more power. Government won't limit itself. In that sense, I agree that it seems necessary to withdraw that power substantially and regularly from government, but I also see the renewal of that power as inevitable in order to prevent abuse in some other area. ("The price of freedom is eternal vigilance.")
Unfortunately we have a disadvantageously simple language of left vs right, all or none, (leading to extreme communism or extreme capitalism - for example, Ayn Rand vs Marx - both of which lead to the same totalitarianism), rather than focusing on the philosophical middle and economic nursery conditions where growth is possible, fair, and competitive. It is constantly necessary to destroy our last great success in order to make room for the next one (to focus on beneficial endevours). It is also our choice how long we avoid that renewal, and how big an undertaking it must be to move forward.
This is true under the usual simplifying first-week-of-Econ 101 assumptions (which exclude economies of scale, barriers to entry, irrationality -- including imperfect consumer information about the utilities realized in purchases, interaction between markets [note that the last two interact in an important way, in that enough money derived from one market and applied to the information market can drive imperfect consumer information in a particular direction], etc., etc., etc., ad nauseum, ad infinitum), which are useful for pedagogical purposes at that stage but tend not to exist in the real world in the markets for a wide variety of goods.
This has been proven time and time again.
On the internet, monopolies are natural for social networking, online auctions, classified ads, and search. Each of these require the user to go to the site with the most ads, friends, bidders or sellers, or results.
How do you think the government created an E-Bay, Google, Facebook, or Craigslist?
Suppose I were to argue that all our problems would go away if we had free energy. "Yes, of course" you might say. "That would solve many many problems. But we don't have free energy, and we probably never will." This is how I feel about your position.
A rational person will not come to this conclusion under a system where such inefficiency is discouraged - pure and perfect competition, capitalism.
Many people wonder whether capitalism is a good thing. Bring them reason, science, let them work it out and make their own basic decision. Let them fight the bad reasoning themselves, come out of their local optimas if you prefer a math analogy. Racism and religious extremism must have some value, or such behaviours would not have because so widespread. But they seem to be local optimas, or even destructive in the end, just like rent-seeking.
Here is another way to look at this - look at the immigration net flows: it seems that more people want to immigrate in capitalist countries than emigrate out of them.
If it is reasonable to doubt my deductions, is it reasonable to doubt so many people may have made the same conclusions independently ?
Read about how immigrants affiliate politically, which belief system they adhere to. Apparently a lot of them want to be paid for the fruit of their labour, and not for pure idleness, want to be left alone - and many other libertarian values.
I'm sorry if that is not a valid explain for you. It is for me.
I don't disagree with your premise, but I do disagree that this will result in rent seeking behavior going away. One of the classic problems with capitalism is literally exactly this- negative externalities are not properly accounted for.
I wouldn't phrase it that way, but yes, ideally negative externalities should be internalized by individuals to make the problem vasnish.
But failing that, if individual parties may engage in negotiations to achieve better outcomes (Ronald Coasce)
Less regulation are usually a 1st thing to try in that process, to cause change by voluntary association, naming and shaming. Issues can be mitigated. But regulation is a pandora box.
There are whole parts of economics studying that - public policy and industrial organisation.