Government regulation doesn't create competition.
Edit: It's remarkable that any statement regarding regulation that isn't overtly Marxist immediately gets half a dozen down votes on HN.
Edit: It's remarkable that any statement regarding regulation that isn't overtly Marxist immediately gets half a dozen down votes on HN.
Not always. Comcast may have got in early and laid substantial infrastructure (copper/fibre/HFC) - something that can be substantially cheaper if you leverage "new" (cable reserves and/or piggy-back off the utilities when they are expanding their networks.
New players, however, need a substantial amount of capital to get started. Comcast (or anyone like them) can leverage their position in the market to drive up prices or push smaller players out. By using regulation to effectively turn the infrastructure into a public utility, it allows smaller players to compete.
The argument against this regulation (which is in place in the UK and Australia, amongst other countries) is that the monopoly (BT/Telstra) spent money building out their network and therefore should not be forced to share it.
The argument for this regulation is that often the telco built out this infrastructure in a particularly favorable environment that cannot be replicated today due to the huge costs of installing physical cable. As a further example, Telstra in Australia (previously Telecom) was government owned and therefore had a directive to supply the population with telecommunications. Many parts of their copper network (cable, conduit, pits, exchanges) were built during this phase. When they were privatised (sold by the Government) this was no longer their key directive. Any new player attempting to get into the market-even a small part (i.e. inner Sydney)-had a lot of catching up to do. Huge capital costs, a significant amount of regulatory hurdles and cable reserves to negotiate access to, etc.
This is of course a simplification of the issue, and you could argue that in Telstra's case the government did effectively grant them a monopoly on the market by privatising them. But had they started out as a private company originally, I believe we would have still ended up in a similar place - getting in early when rolling out disruptive infrastructure (as trenching cable tends to be!) projects is a huge advantage in and of itself.
I think you're correct to point out that "in Telstra's case the government did effectively grant them a monopoly" in the first place.
The specifics I'm talking about in the Comcast case is that government is continually granting the monopoly privilege by preventing other companies from creating infrastructure (laying wire), even if a company wishes to do so.
This is precisely what allows Comcast to charge whatever it wants, begging more regulation down the road to force Comcast to charge 'fair' prices ('fair' in the minds of the legislators).
If any competitor was allowed to enter what is an enormous market it would provide continual downward pressure on consumer prices. The monopolistic privilege granted to Comcast leads to higher prices, as consumers can only pay the high price or forego service.
Since when does ensuring vigorous competition equate to Marxism? Seems pretty capitalist to me.
Markets are vigorously competitive in their natural state. This is the nature of a market, where firms compete for customers' business. This can only be hindered with regulatory interference where a legislator is arbitrarily granting privileges to certain firms and not others. That's crony capitalism or mercantilism. It's not a free market.
The problem with idealized free markets is that "free" is not the natural state of a market. You can act as a de facto government by having a monopoly on something other than force (like land or infrastructure), and de facto government actions have all the same defects as de jure government actions, generally with none of the public accountability.
Do some digging into the history of antitrust legislation. The Sherman Antitrust legislation was an act of mercantilism designed to protect incompetent businesses who were losing market share to superior competition, most notably Standard Oil, the poster boy monopoly which gained an 85 percent market share through lower prices and economies of scale, delivering a benefit to consumers but harming their comparably inefficient competitors. It was those same competitors who spearheaded the antitrust legislation, not the poor consumers 'suffering' from lower prices and superior service at the hands of the 'monopolistic' Standard Oil.
Microsoft.
I'm a libertarian, but one of the reasons I can't even consider being an anarchist is that I consider anti-trust regulation to be a good and proper function of a government. I'd break up a lot more, personally. It's one thing that I find the otherwise-excitable class warriors to be bizarrely reticent to do.
I'd also observe that antitrust regulations do not forbid monopolies... they forbid the abuse of monopolies, according to a certain definition of abuse. Microsoft was not punished for having a dominant desktop OS, they were punished for using that dominance to engage in shenanigans to try to "abusively" (in accordance with the legal definition) extend that dominance into a another sphere. Of course that is the theory, and what happens in the courtroom in fact may be arbitrarily related to the theory, but that is the theory.
I'm aware that there was an anti-trust judgement against them, but as far as I can tell it didn't deter them in any significant way.
It seems to me that they simply collapsed under their own hubris and the blowback from their decades of abusive practices, and as soon as they weakened the competition ate their lunch.
YMMV vary, but my conclusion is this: The government successfully prevented Microsoft from crushing the rest of the browsers. They really were trying, really did damage Netscape, and really were well on their way to more dominance in that field than they had a "right" too. And they were on their way, too; Netscape was faltering and IE was a better browser for a good long time. As it is they still had enough dominance to end up causing web tech to stagnate badly for a few years.
However, recall why Microsoft was so scared of the browser, which is that it threatened to become its own OS and make it so you could run a computer without Windows that could do everything you needed. Broadly speaking (bear with me here), this still has not happened. Here in 2014, you could run a small business out of a browser, and you can do a lot with a Chromebook, but Windows is still around, still powerful, and still pretty full of legacy software that doesn't exist in a browser and businesses are not having an easy time disposing of... witness the continuing lurching life of Windows XP, which Microsoft wants to be rid of and can't be.
I think it was a good decision and still correct, even if ultimately it really only served as a very large shot across Microsoft's bow (even if it was aimed at the hull) due to the fact that the browsers of the time weren't going to be able to manifest the promise of displacing Windows. We'll never know, but the secondary effects of chastising Microsoft may have been worth more than the primary effects ever could be. And I do think the secondary effects were more important; the direct impact pales in comparison to the fact that they'd just been notified they couldn't proceed down that path any farther than they'd already gone without the costs exceeding the benefits.
Of course, what truly displaced Microsoft turned out to be more Apple, via the MacOSX and mobile, which Microsoft continues to struggle with. But so may years ago, who'da thunk it? And it would have been silly for the government to count on that.
Microsoft licensed the Mosaic browser from Spyglass and that became IE. As you pointed out, they developed IE until it was a better browser. The Netscape stagnation happened when they had a long delay in releases due to their undertaking a "thing you should never do [1]," a from-scratch rewrite. Around that time the 2000/2001 dot-com collapse happened which certainly didn't help, but Microsoft didn't cause any of that.
Fast-forward a decade, and now Microsoft is stagnant. Apple developed WebKit and Safari, and Google came along with Chrome, a better browser. By the time Microsoft worked its way through IE 6-7-8 to a browser that was actually competitive again, they had lost a lot of their browser share. Apple, with Safari, and Firefox, rising from the ashes of Netscape, also offered compelling alternatives.
"Who'da thunk it." Well I'm not sure. I don't see any evidence that the government has any better thinkers than the companies in the tech sector though.
1: http://www.joelonsoftware.com/articles/fog0000000069.html
Netscape was boned either way... not doing a from-scratch rewrite would still have doomed them to being stuck behind Microsoft for a long time. It would have allowed them to keep making releases instead of just going silent, but they still would not have been able to be as good as IE. And they'd have still be stuck hard by the fact that Microsoft monopoly'd the price of a browser down to 0... and Microsoft would probably have monolopy'd the price of a server down to 0 too even faster than it did, given the chance.
Microsoft was "stagnant" because they could be stagnant because they had won. The judgment at least prevented them from pushing home the advantage, because they knew they'd be slapped down. This is what I'm saying was probably the most important thing about it, and it's easy not to see what "didn't happen", but I suspect that Microsoft would have done yet more "evil". Perhaps it would have gone poorly, but it would have been foolishness for anybody to count on that. (What we know now about Microsoft and Ballmer's leadership makes that a safer bet, probably, but we didn't know that at the time!)
I think people look back at the world in which Microsoft was slapped, and see a world where bad things didn't happen, and don't realize that, due to second-order effects, there's probably more relationship between those two things than they realize, even if obvious first-order effects are missing (like, Bill Gates never rent his clothes in twain on national TV going "Woe are us, for we are injunction'ed!"). In the end Microsoft's dominance would have been cracked sooner or later, sure, but in the long run we're all dead; no policies can be written based on that theory.
I can't disprove that Microsoft depended entirely on IP, but I'd suggest that it's at least a reasonable theory that it really didn't.
That Standard Oil succeeded just through scale is a complete fabrication.
When Adam Smith was talking about a "Free market", the freedom he was talking about was freedom to enter and freedom to exit a market. That is, freedom from barriers to market. These freedoms are guaranteed by governments. Businesses left to themselves will raise the barriers to market thereby making the market non-free in Smith's terms.
Oh, and pointing this out is not "Marxist".
"Any market left to its own devices will devolve into a monopoly." This is not an observable phenomenon. A market left to its own devices will continually deliver better, cheaper products to its customers over time. This is the effect competition has on a marketplace.
"Businesses left to themselves will raise the barriers to market thereby making the market non-free in Smith's terms." If a business is not using physical force or fraud then the only barriers they can erect to keep out competitors are superior offerings in the marketplace.
Microsoft is such a great example here. Their competitors were crying monopoly but Microsoft had created its marketshare through innovation and entrepreneurship. If they abuse this marketshare by offering inferior products at high prices, it creates a market opportunity for another competitor to create better products at more attractive prices. In this sense it's the free consumer choice that's providing the "regulation" in the market. Businesses have to follow the consumer's wants to gain marketshare.
The only government "regulatory" role in a market is to settle disputes about property or fraud or criminal behavior. With that basic structure in place, Adam Smiths's "invisible hand" would take care of the rest.
One might argue that after taking into account historical context, modern capitalism is completely opposite to free markets. For example, in a free market, labour unions would be as powerful as the owners of capital - in the modern world, capital owners have a disproportionate influence on law-making to subdue this power. A very good example in the recent past is the wage collusion by Apple, Google and many other companies (working to preserve the interests of the capital owners) to suppress the power of the free market.
anarco-capitalism = free market
crony capitalism != free market
I use the term capitalism to describe the anarco flavor. Capitalism is defined as the private ownership of production, and when this idea is adhered to rigidly you end up with something exactly like or closely approximating the anarco-capitalist flavor.
> in the modern world, capital owners have a disproportionate influence on law-making to subdue this power.
You're right. It's abhorrent but this is not capitalism, this is a mixed economy (state capitalism or crony capitalism) in which firms use government to buy influence over the marketplace. I am not advocating for that.
You weren't advocating for free markets, you are pretending monopolies don't exist except where created by the government. That's simply ahistorical nonsense. Calling people Marxist for quoting Adam Smith would be an amusing troll if you didn't sound like you actually believe it.
There is a strong case for this view, and it is shared by many well-regarded economists throughout history.
And I haven't redefined the terms: http://wiki.mises.org/wiki/Monopoly
Citation needed
> And I haven't redefined the terms: http://wiki.mises.org/wiki/Monopoly
Even ignoring the question using a heavily-biased resource, that page would not need to mention “government-sanctioned monopolies” if there were in fact no other kind.
http://principlesnotmen.wordpress.com/2013/02/09/does-the-fr...
Rothbard, Sowell, Mises and others share this view. Google their names followed by the word "monopoly" for an abundance of material.
http://wiki.mises.org/wiki/Monopoly
"A monopoly is a grant of special privilege by the State, reserving a certain area of production to one particular individual or group." in bold in the middle of the page.
If I can't quote a university that advocates for the Austrian view without you labeling it bias, there's no point to this discussion.
You accused me of redefining monopoly. I point to an entire school of economics that defines monopoly as I defined it. You dismiss it as bias.
There's obviously a pretty fundamental problem with any discussion of economics which limits itself to the former kind of monopoly and fails to at least discuss the latter kind (even if it uses a different name for it for some reason). And there's equally obviously a problem with any discussion of monopoly in economics which ignores that the use of the term in economics usually means the latter, not the former (while in law, "monopoly" without other qualifications in certain contexts does mean the former, though in other contexts -- e.g., anti-trust, it means the latter.)
[1] Both definitions illustrated here: http://thelawdictionary.org/monopoly/
It's not as big of a stretch as it might sound as first; there a number of ways in which Smith was more like Marx than like a modern capitalist (and plenty of ways in which he was far from either, particularly his identification of the feudal landed aristocracy -- explicitly and particularly as opposed to the mercantile/capitalist class -- as the class whose interests were most naturally aligned with the common interest. (Though one who shared Smith's concerns about the mercantile class might see Marx's investment in the proletariat as the only solution given the demonstrated failure of the landed aristocracy, as such, as a viable class in the face of capitalism, so even that view could be seen as less incompatible with Marxism than with modern capitalism.)
To be clear, its ridiculous to call some one a Marxist just because they quote Smith, but not as ridiculous as it might seem from the naive association of Smith with capitalism and Marx with its opposition.