Comment by anigbrowl | Hacker News Reader

Comment by anigbrowl | Hacker News Reader

Although I'm a classical liberal (as in, I believe in markets rather than command economies), McCullagh would have us believe that private companies are uninterested in monopolies or locking in their customers - and while he provides examples of where lock-in has failed, it's alive and well in other spaces, such as cellphones. McCullagh cites Hollywood lobbyists' influence on copyright law, while skating over the question of how a libertarian approach would help - indeed, I suspect it would wind up as a land grab on the public commons, with the first to digitize getting ownership rights, much as a copyright photograph of an old painting gains rights for the photograph (even if it has no original content).

Though he's right about the weaknesses of slow-moving legislative supervision of fast-moving technology, his conviction that it'll just work itself out seems rather Pollyannaish. Michael Heller's tragedy of the anti-commons analyzes the problems of fragmented ownership from an economic rather than a philosophical perspective, and points up some flaws in libertarian theory; http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp...

The problem with your criticism of "private companies" is that they lack enforcement power. Monopolies are nearly impossible without government backing. The only non-statist monopoly I can see would be a secure trade secret - like the formula for Coke or the Shipstones of Heinlein's novel "Friday", and even they are vulnerable to substitutes.

As for the anti-commons, I can't see that it applies here, since the networks are already private as are all "creative works" (since automatic copyright has existed since the 1978 revision).

"Monopolies are nearly impossible without government backing."

As they say on Wikipedia, "citation needed".

We can classify monopolies into three categories:

1. Natural monopoly - Returns to scale are large enough (or the market it small enough) that one firm can provide the product for a lower price than multiple firms. This is possible without government backing, but is basically harmless if entry into the industry is not blocked. The natural monopoly may be the only seller, but it still faces potential competition.

2. Artificial monopoly - Firms merge to monopoly, firms form a cartel, etc., in an industry without returns to scale. This is the kind of monopoly that people worry about, but in a free market, they are (or would be) very uncommon. There is always an incentive to cheat on a cartel agreement, and there is always an incentive to enter the industry if profits are above normal.

3. Government monopoly - Firms take advantage of government-created (whether intentional or unintentional) entry barriers to establish an artificial monopoly, or the government itself establishes a monopoly in the activity. Very common. For instance, heavy regulation might favor large firms that can more easily absorb the fixed cost of compliance.

If you are interested in learning more about this, look into the branch of economics called "Industrial Organization." The best textbook is by Carlton and Perloff; it is the one I used when I taught IO this semester.

Natural Monoplies being 'harmless' is not standard economic theory.

http://en.wikipedia.org/wiki/Natural_monopoly

That wikipedia page goes to some lengths to accommodate the libertarian views (which I'm guessing you lean towards) while covering the standard view.

A quick review of Industrial Organisation on Google Books seems to show it reflecting the standard themes on natural monopolies, that nationalization or regulation are the standard remedies and that neither are without problems.

The more-mainstream free market argument is that no regulation of monopolies creates problems, but those problems are less than the problems created by nationalization or regulation. Pretending there is no problem with monopolies is a bit extreme for my tastes, though it seems to get mentioned a lot in the US at least.

I meant to imply what you call the "more mainstream free market argument," though I think it is now the standard view of people who study this stuff. The question is "harmless compared to what?" Conceivably, a regulatory environment in which all-knowing and benevolent bureaucrats costlessly implement and enforce regulation would outperform a laissez-faire approach to natural monopoly. But Hayek won the Nobel prize for showing that government is not all-knowing, and Buchanan won it for showing that it is not benevolent. It's not useful to judge natural monopoly against an alternative that does not and cannot exist.

Compared to the relevant alternatives, natural monopoly is basically harmless.

Feel free to provide a counter-example.

As to the examples, every cable-service monopoly in the US has govt backing. The postal service monopoly has govt backing. Intel uses patents (read govt backing) to limit the number of x86 producers. The old AT&T's long distance monopoly had govt backing, lost it, and then sprint and others started.

Standard Oil almost made it without govt backing, but we'll never know if they could have held.

Given that, in the US, government intervention mostly seems to consist of busting monopolies, I'm just a bit wary of the statement that no monopoly can exist without government support.

It seems to me that it is in the nature of a "true" free-market enterprise to seek, as much as possible, to neutralize the operation of the market in order to ensure the enterprise's survival. And history seems to provide some examples of such -- all manner of cartels, trusts, etc. have been devoted to nothing more or less than bringing the operation of the free market to an end, as quickly and effectively as possible.

> Given that, in the US, government intervention mostly seems to consist of busting monopolies,

Oh really? How are you measuring "mostly"? I see millions of patents. I see thousands of govt franchises.

> I'm just a bit wary of the statement that no monopoly can exist without government support.

I'm confused why anyone would think that a govt that "busts monopolies" couldn't also support them.

> all manner of cartels, trusts, etc. have been devoted to nothing more or less than bringing the operation of the free market to an end, as quickly and effectively as possible.

You're forgetting that a cartel or trust can only "regulate" behavior of its members. It can't affect transactions between third parties unless govt steps in.

Yes, one can imagine a situation where a cartel owns all of the relevant resource, but, apart from patents, that's quite rare.

"I see millions of patents. I see thousands of govt franchises."

Ah, yes, the vaunted trick of slyly redefining a term out from under the interlocutor. While it is true that a patent is an exclusive right and thus a form of monopoly, this type of monopoly is not what I was talking about and you were well aware of that. If you're so distrustful of your own arguments that you have to resort to rhetorical tricks to try to pull attention away from them, perhaps you should spend some more time thinking about the issue.

"I'm confused why anyone would think that a govt that "busts monopolies" couldn't also support them."

And I never suggested that a government cannot support a monopoly, or that no government has ever done so. This really makes you look desperate, you know? You start by trying the old redefinition trick, and then proceed into stuffing words into my mouth.

"You're forgetting that a cartel or trust can only "regulate" behavior of its members. It can't affect transactions between third parties unless govt steps in."

A cartel cannot enforce any part of its own operating agreements on third parties, true, but that's not necessary to the creation or maintenance of a monopoly and so is no counter-argument. A single large established entity, or a group of such working together, can easily manipulate factors such as supply chains, prices paid by the ultimate customers, etc. to cripple or destroy any competition.

What's more, parts of the history of the US abound with examples of precisely that behavior -- non-governmental entities subverting or disabling the operation of the free market for their own benefit. Do you dispute this?

> Ah, yes, the vaunted trick of slyly redefining a term out from under the interlocutor. While it is true that a patent is an exclusive right and thus a form of monopoly, this type of monopoly is not what I was talking about and you were well aware of that

You should probably describe the type of monopoly you are referring to, then. I have a general idea what you are talking about, but not a perfect one.

> What's more, parts of the history of the US abound with examples of precisely that behavior -- non-governmental entities subverting or disabling the operation of the free market for their own benefit. Do you dispute this?

You should definitely give a few examples, it's not exactly clear what you're talking about. For the record, I think that you're basically right: it's quite possible to create a monopoly without government intervention (De Beers, Microsoft, US Steel at one time.) However, it's difficult to maintain one (previous examples notwithstanding.)

> [patents are not the type] of monopoly is not what I was talking about

Since you were responding to my message where I explicitly mentioned a patent-based monopoly.... I note that you also didn't bother with the govt franchise monopolies.

Instead, we have vague references to cartels and the like that are supposedly not supported by govt action but were instead "busted".

> "I'm confused why anyone would think that a govt that "busts monopolies" couldn't also support them."

>And I never suggested that a government cannot support a monopoly, or that no government has ever done so.

You'll have to take that up with the person who wrote "Given that, in the US, government intervention mostly seems to consist of busting monopolies, I'm just a bit wary of the statement that no monopoly can exist without government support."

> A single large established entity, or a group of such working together, can easily manipulate factors such as supply chains, prices paid by the ultimate customers, etc. to cripple or destroy any competition.

Can "easily" requires some support. There's one big example, standard oil, but it manipulated prices down, for both customers and suppliers.

> prices paid by the ultimate customers, etc. to cripple or destroy any competition.

The argument for monopoly profits requires that the monopoly eventually raise prices. If it can't do that because competition might come in, where's the harm?

> What's more, parts of the history of the US abound with examples of precisely that behavior -- non-governmental entities subverting or disabling the operation of the free market for their own benefit. Do you dispute this?

I dispute that more than a handful have managed to maintain high prices without govt assistance. There are, of course, many examples where high prices had govt support.

Standard Oil also lowered the cost of fuel by a significant amount, improving the lives of many across the nation.

Lots of utilities are natural regional monopolies. For example, it would be unrealistic and uneconomic to have two separate water companies, each with their own separate networks of rivers, sewage works, water pipes, etc.

The same is also true to some extent for electricity generation and supply, gas pipelines, and railway networks. (Incidently the railways in the UK were built by competing companies, which is why the network is suboptimally designed, with for example separate stations in a town or city that don't easily connect to each other.)

Monopolies of physical items and commodities are hard without government backing, but software is not so clear-cut. Bear in mind that anyone with copyright or patents relies on the government (either directly or indirectly via the courts) for enforcement anyway.

The tragedy of the anti-commons as it relates to copyright is that very little older content has entered the public domain since the 1920s - I cannot legally cover A Gershwin song for money, say, even though the man is long dead - and much energy, both public and private, is wasted on nonsensical interpretations of things like the DMCA. If you are film producer (say) trying to cover your legal bases by licensing any and all copyrightable material that appears in your film, it can get very expensive.

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