The Monopolies That Dominate the Internet

Tim Wu has a piece up at the Wall Street Journal pointing out that the free-market, open Internet — "competition in its purest form" — has evolved to be dominated by monopolies. Wu argues that this is nothing new, and that each wave of information technology in the US has followed a similar pattern. "Today's Internet borders will probably change eventually, especially as new markets appear. But it's hard to avoid the conclusion that we are living in an age of large information monopolies. Could it be that the free market on the Internet actually tends toward monopolies? Could it even be that demand, of all things, is actually winnowing the online free market — that Americans, so diverse and individualistic, actually love these monopolies? ... Info-monopolies tend to be good-to-great in the short term and bad-to-terrible in the long term."

Comments

Its not 'internet'. its 'free market'.

[unity100]

free market is what tends towards monopolies eventually. because there is competition, and nothing to prevent the big players from getting bigger, unless they make a HUGE mistake, all 'free' markets only function as free for all initial chaos environments until a hierarchy and order is established. as per the below post :

http://slashdot.org/comments.pl?sid=1847700&cid=34083272

Re:Its not 'internet'. its 'free market'.

[Drasil]

Agreed. In a dog-eat-dog world you eventually end up with one very fat dog.

Re:Its not 'internet'. its 'free market'.

[arivanov]

That _WAS_ the case.

It took a couple of millions to start a let's say router company 10 years ago. Now you need 100M to just consider it.

It took a couple of millions to start a network management company 10 years ago. Now you need 30-50M.

It took a couple of millions to start an ISP 10 years ago. Now you need something on the order of a few 100M.

The "several guys in the garage making the next big thing" is the norm in any market in the beginning. HP was started in a garage. Apple was started in a garage. You cannot however start a computer company in a garage today. The Internet is quickly approaching that stage. The number of areas where there are still breakthroughs of garage companies is small and decreasing and this is normal for the development of the market.

Re:Its not 'internet'. its 'free market'.

[BeanThere]

Something I've come to see and realize over the years (yeah I'm getting a little older) is that as long as the market is free, there will always be competition. Always. No matter how big, no matter how dominant a company might seem, there is always some other equally big and successful company - usually in a slightly different market and looking for new opportunities.

And they are particularly attracted when a market has "fat" in it - which is usually the case when de facto cartels or monopolies have formed. But even in low-margin businesses, it remains the case. People are always scared that some big company is going to take over everything. The free market can seem 'scary' in that regard - but isn't.

Competition acts a bit slower than we'd usually like, but it always acts.

I find the article a bit ridiculous actually, and its basic premises are completely false ... the author claims there is monopoly domination, and proceeds to "prove" this by giving a long list of all strong companies that compete with one another, some fiercely. Apple, Google, Microsoft, all fierce competitors, all quite capable of providing similar services to the others. And the very existence of both Google and Facebook ARE textbook cases of how the Internet has allowed one or two 'garage coders' to become billionaires and compete with the other major players practically overnight. Apple, also started in a garage in the first place, was also almost dead very recently, and re-started itself afresh. These companies are proof of how incredibly competitive the industry is, and how easy it is for new small players to get in and grow.

Facebook had competition even when it launched, from services like MySpace and Friendster, both still going, and would step in in a minute. Google Buzz is another potential competitor to Facebook. They are everywhere. If Facebook disappeared, users would simply migrate to another service.

Re:Its not 'internet'. its 'free market'.

[Anthony Mouse]

Something I've come to see and realize over the years (yeah I'm getting a little older) is that as long as the market is free, there will always be competition. Always. No matter how big, no matter how dominant a company might seem, there is always some other equally big and successful company - usually in a slightly different market and looking for new opportunities.

The example I like to use in refutation of this is agriculture. Assume for a moment a world without antitrust laws. The most successful agribusiness corporation decides that it should reinvest all of its profits into buying more farmland, if necessary by buying its competitors outright. Some number of years later it owns all the arable farmland. All. As in people are planning to knock down buildings in order to have a place to start a small farm to compete with them, except that every time they do, the company offers them five times the value of the land so they can keep their monopoly.

How is that monopoly, once established, ever going to end without government intervention?

And it's hardly limited to farmland. Any time government grants a property right in a scarce resource, that is the long-term consequence: Land, wireless spectrum, copyright, patents, it doesn't matter. Someone with enough money can buy up all of the resources and use the government-granted monopoly on the resource as a cash cow and leverage market dominance into other industries.

Look at the wireless industry: A few major companies own all the spectrum allocated for consumer wireless. When more goes up for auction, the incumbents buy all of it -- and right now we're at a point when spectrum is being reallocated. Once it's gone, it's gone; at least as long as the government doesn't intervene by revoking their licenses. No opportunity would be left for a new wireless company. And so the oligopolists do their thing: Discouraging unlocked phones, preventing use of 802.11 to make VOIP phone calls, mandatory updates, you can't have root on your own phone and if you do you're a criminal, etc.

The trouble is that if a resource is scarce and treated as property, sooner or later a single entity will attempt and succeed at buying all of it. And that situation, once reached, is exceptionally stable. Having a monopoly on a resource raises its value to the monopolist since it allows monopoly prices to be charged, which means the monopolist never has an incentive to sell part of the resource to a prospective competitor.

And antitrust as it is today isn't much more than a band aid. It stops AT&T from merging with Verizon, but it doesn't allow a third party to start a new wireless carrier once all the spectrum is allocated to the incumbents.

But the "monopolies" from TFA are different: They aren't property-based monopolies, they're network effects-based. In theory those work more like what you're imagining -- especially if the government doesn't "interfere" by allowing e.g. Facebook to sue someone who copies all of the data out of a user's Facebook account with the user's permission and imports it into a competing service, or by granting thousands of stupid patents that allow incumbents to sue anyone who makes any competing products whatsoever. Not that we're so lucky.

Perhaps there are reasons unrelated to monpolies

[whoever57]

Microsoft's Bing, launched last year by a giant with $40 billion in cash on hand, has captured a mere 3.25% of query volume

Apparently, according to the author, MS's failure in search is purely down to Google's monopoly and completely unrelated to the fact that MS has in the past chosen to skew search results and hence proven itself to be an untrustworthy search provider? The "$40B cash on hand" number is meaningless, because MS hasn't chosen to spend $40B on entering the search market. Perhaps the difference is simply that Google has been able to develop and maintain a better product?

How hard?

[RightSaidFred99]

How hard would it be to go a week without Google? Or, to up the ante, without Facebook, Amazon, Skype, Twitter, Apple, eBay and Google?

Pretty fucking easy, actually. My God what are we becoming when people think this shit is so important?

Back in my day (well, ok, my grandfather's) we worried about important shit like steel, or oil. Hell, even telephone wire - it's physical, someone owns it, and they control it completely. Those are monopolies - you're strangled by one provider.

Facebook? Apple? Amazon? Give me a fucking break. Oh noesies, I can't go read about something cute one of some guy I barely know's brat kids did! Oh no, I have to buy a less expensive version that functions just as well of some gadget I don't need! Uh oh, I have to walk my fat ass to Target or order from one of the other billion internet stores!

Author makes common mistake of confusing a monopoly with most successful provider of something that one could, if one wanted, get from 20 other places.

Re:How hard?

[catbutt]

The issue has little to do with how "necessary" or "important" the service is. Ok, so you can survive without facebook, as can I. So? What does that have to do with anything?

Regardless, the difference here is that, with the internet vs. "physical things", network effects are in full play. Just as Ma Bell had a network monopoly (who's going to sign up for Joe's Phone Company when they can't call anyone because everyone else is on the Bell System?), and Microsoft had/has a certain sort of monopoly (who's going to get an alternative operating system when most of the apps they want to run are Windows-only, and who's going to write an app for that alternative operating system when most of the users are on Windows?)

How is that true with steel or oil? It's a lot harder for someone to control all steel production. Possible, I suppose, but a lot harder. Eventually, everything tends toward monopoly if you don't have antitrust law being enforced, but with "network" sorts of things (which includes things like proprietary API's), the situation is a lot more pronounced.

Re:How hard?

[S77IM]

Author makes common mistake of confusing a monopoly with most successful provider of something that one could, if one wanted, get from 20 other places.

You (and many of the other posters on this thread) have missed a key point:
The value of a network is proportional to the number of people using it.

This is easiest to see in the case of sites like Facebook. Sure, you could use a competitor, but if none of your friends are on it, what would be the point? If your peeps do all their communication through Facebook, and you want to get their updates, you need to use the Facebook. It's less clear-cut with sites like Google. I mean, you could use Bing for search, or Yahoo!. But what about ads? If you want to advertise, or host ads on your site, the sheer size of Google's ad network makes it more attractive than any competitor.

This is what TFA author was getting at with his analogies to things like the telegraph networks and phone networks. Just because Facebook or Google doesn't own the actual fiber (oh wait, they are a tier 1 provider and own a ton of fiber) doesn't mean they don't have anything of value. They have the network of users -- a "critical mass" of participants that will make it hard for competitors to break into the market.

The nice thing, is that there could be a technological solution to this. Aggregation. Remember when you had like 3-4 different IM clients? Then multi-protocol clients like Trillian came out and suddenly network didn't matter any more. For ads there are already options like this. Let's just hope somebody can wrapper Facebook soon.

  -- 77IM

Re:How hard?

[kaladorn]

Whereas I agree we can survive without social networking and entertainment products, I'm not sure Internet search is so easily dispensed with.

Certainly, my job as a software developer would become approximately 5x more inefficient - the Internet is a treasure trove of problem solutions and basic and advanced reference information that is easily located.

In the old days (which I still remember), I'd have to order (often sight unseen) a bunch of books and hope they had the reference material I needed in them and I'd possibly have had to spend significant time resolving problems others had solved (but I had no easy access to their solutions).

Fast Internet search with much useful information available freely is a huge mulitplier to productivity in my work.

Many people use the internet for productive purposes, both at work and in their personal lives (finding out about government services, locating services more effectively than a phonebook, getting directions to places without having to go out and find and buy a map, filing forms online, doing research, etc). Remove that and you make peoples' personal and work lives in many cases far less efficient. That has a clear cost in terms of productivity, dollars, and time.

I remember the early days of the Net. I remember how limited the information available was and the challenges of trying to locate the information that was there in a format that was useful. I also remmeber some of the early balkanization of the corporate parts of the Internet... Compuserve wasn't exactly cheap back in the day, as one very trivial example. Access was expensive and it took a long time to locate and longer to acquire useful information.

Google, when it came along and put the smackdown on the other search companies which, in their day, had been big steps forward, created a net productivity gain for pretty much anyone whose job requires finding things out in a fast and efficient manner. Unsurprisingly, this spills over into people's private lives as well.

So, as much as your comment is far on social networking and entertainment, it is blatant tripe when it comes to fast, broad Internet search. Yes, we would not immediately keel over dead if we didn't have it, but make no mistake, it would cost our economy tens or hundreds of millions of dollars *per day*. That's a serious impact.

Re:How hard?

[SEE]

Yahoo!, Bing, Ask, etc. are all still out there. Not quite as good as Google, but serviceable. The only way Google can keep its market share is by continuing to be better, because it's trivial to switch. There's no monopoly lock-in.

Re:What a shocker

[0123456]

In the absence of regulation, free markets always end up as monopolies. Not sometimes but always.

Name three.

Back in the real world, actual, real monopolies can only exist if:

a) the monopoly is more efficient than any competitor, thereby providing better service to their customers.

or:

b) the government keeps competitors out of the market.

In many cases in communications, governments built the initial infrastructure using its powers to take land from its owners at gunpoint, and then handed it over to private companies, which no new company can easily compete with since they don't have such powers. Similarly, big business loves regulation (or, at least, the 'right kind' of regulation as produced by its lobbyists and their tame politicians) as it raises the barriers of entry and keeps new competitors out of their market.

It's crashing the economy

[copponex]

Our current market economy depends on finite supply, and with limited production capacity per person in order to employ people and pay them wages so they can also be consumers. As automation and robotics take over the means of production, only societies that can cope with overproduction with more socially shared resources will be able to thrive.

In other words, China and Europe will continue to eat our lunch.

Re:It's crashing the economy

[roman_mir]

Excuse me? China (and to a very lesser extent Europe, you probably mean mostly Germany) are 'eating' your lunch because the gov't created monopolies destroyed competition in USA by using gov't as means to destroy free market and to get themselves all the subsidies and regulations that keep out the new startups, so then once the economy became global the monopolies could easily outsource the labor to cheaper locations.

But if the market in US was actually free and gov't didn't destroy the liberties in it: didn't take away capital through income tax, didn't impose regulations and rules that prevent businesses from starting and succeeding, didn't create the unbearable expectations of social net without actually having any way to pay for such obligations and because of that creating huge pyramid scams like SS and medicare and THEN because of these scams destroying the currency and eventually credit affordability of US private market, then US would still be producing.

Take the minimum wage as an example, it's not really hugely important but it does show the destructive force of gov't intervention into free market:

1. Minimum wage prices certain people out of market, out of jobs, out of apprenticeships.
2. Minimum wage kills certain jobs, jobs that are NOT worth paying over certain amount, over minimum wage in this case.
3. Minimum wage puts labor into competition not only with labor but also with capital, so instead of only competing with another worker, you have to compete with money that can be spent to automate the job away.

Now, certainly automation is inevitable, but it does compete with labor costs.

If a machine to wash floors by itself costs half a million dollars and a person costs 15K/year, then it doesn't make sense to buy the machine.

However if the person costs 50K/year total, then maybe it DOES make sense to look into buying the machine and amortizing it over 10 years especially if it's possible to get cheap money coming out of gov'ts wazoo.

China and the rest of productive labor in the world are an actual productive part of economy, while US and most of Europe are really not that productive at all when all regulations and rules and social obligations etc. are compared!

So obviously Asia will see economies growing and US and most of Europe will see economies shrinking and dying because they are borrowing (which by the way is a way to tax you in the future, so it's a deferred tax + interest) and they are printing (which is killing the fiat currencies very quickly and it is taxing people who are mostly invested into those currencies, so people who live paycheck to paycheck for example, and it's taxing the ENTIRE savings of those people, not just their income).

To fix this economics disaster that is happening and that is going to accelerate, the unproductive parts of the world need to do the following:

1. Get rid of income tax. It's crazy to tax productive work and it's a terrible idea from point of view of liberty first, and from point of view of giving money to the unproductive gov't second.

2. Get rid of all social obligations. Many believe they are entitled to SS money because they 'paid into it'. But what they don't realize is that dollars can only be spent once. 1 dollar can only be spent on 1 thing that costs 1 dollar. So if you pay taxes and supposedly some of them go to SS, but then SS is raided and money is used for other purposes by politicians elected by the people, then in principle the politicians are using the SS money to pay for other things that they promised to get elected, so the people already have gotten something for their dollars (even if they didn't want it, like Vietnam or Iraq wars for example) then they can't expect to get 2 things for 1 dollar they paid.

But the point is that if gov't actually cared about people's ability to save money and be set for their retirements and future, they wouldn't be taxing income, they would allow the people to invest the money into their own savings and businesses. Instead the

Re:It's crashing the economy

[Anonymous Coward]

wow. Even by the (frankly bizarre) standards of the US that's a fairly extreme viewpoint. Whilst I don't want to feed the (very dedicated) troll too much, a few points:

1. You seem to think that the reason that China is producing is lack of government interference. Firstly that is simply not true as many industries in China are effectively nationalised. Secondly, some level of government regulation is generally recognised as a Good Thing, to try and reduce excessive pollution and other externalities. Growing the economy has to be balanced with keeping your cities inhabitable. Judging by the air quality in many big Chinese cities, some might say they haven't got the balance right yet.

2. The idea that if the government would only stop interfering then everything would be great is demonstrably wrong. For one thing, you can look at countries where there is little to no governance (Yemen for example) to see that things are far from great. Whilst less government interference can indeed lead to great gains for some, the experience has too often been that the majority of people experience something very different. The industrial revolution brought great gains, but in the short term the life expectancy of the UK dropped. Yearning to return to a Dickensian age where great industrialists make lots of money whilst the majority live in grinding poverty seems somewhat perverse.

3. Monopolies have tended to spring up around many new industries: railways, Bell telephone, Standard Oil etc. By and large these have started as unregulated businesses, but economies of scale have tended to benefit the largest companies. This then leads to a small number of companies dominating the field. Often it has been up to governments to step in and break up companies (Bell, Standard), and is why competition commissions have been set up to try and maintain a competitive market by breaking up cartels.

4. You seem to have a pet peeve about income tax. I realise this is a matter of personal conviction, but one of the jobs of government is to try and correct what we (the people / voters) perceive as inequalities or injustices in the (mainly) free market system. Whilst you might be perfectly happy with huge inequalities, I think most people prefer a world in which there was some sort of safety net, and in which losing your job doesn't mean living on the street. If only for the selfish reason that those on benefits/welfare are probably less likely to rob you out of desperation.

Re:Nope. It's the credit supply

[unity100]

irrelevant. even if there was no credit, in the long run all the assets would consolidate at the hands of more successful competitors. that is even assuming they started off equally, which is never the case.

read the post i linked down in the grandparent.

More sensationalist meaningless drivel

[siddesu]

This article is full of sensationalist bullshit.

Facebook, Amazon, Skype, Twitter, Apple, eBay and Google

Yes, one can do comfortably without all these. I don't shop at Amazon, instead, I shop at several other places, which vigorously compete with Amazon.

I've never used online auction site, and still manage to buy shit online cheaply.

I check my facebook account once a week if that, and I still manage.

I switch between several search engines, and I think they've gone more or less on par.

Twitter and Apple? Monopolies? Lolwut.

It seems the author isn't very well versed in economics and uses words like "monopoly" and "free market" colloquially.

Also, he has his bearings wrong. The only thing that allows any kind of "monopoly" in information is the government and its fucked up system of copyright and related rights, which is being tended by lawyers who are probably students of the author in the quagmire of "Intellectual property". Now, this is the REAL danger, but he somehow misses it altogether.

Not impressive at all.

Maybe the professor should concentrate on his studies in law, and not venture with superficial sensationalism in areas he doesn't know much about -- like economics -- before learning the basics.

Re:De facto, or de jure?

[owlnation]

"Google is a de facto monopoly because they're pretty awesome."

That's not true at all.

Google is a monopoly because there is currently no better alternative. Altavista was a monopoly for exactly the same reasons, until Google came along.

Ironically in fact, 13 years on, Google is currently no better that Altavista was. Since every POS on Earth has figured out how to game Google, the number of link-farm results in the first page is becoming as overwhelming as the tag-spammed results in Altavsita once was.

The difference between a virtual monopoly and a physical one is that the price of entry in the market is much lower. Google busted Altavsita with a good idea, a few employees and cobbled together gear. Someone can do that again. It won't be another monopolistic big corp like MS to do it, because they are too bureaucratic to innovate as much as is Google now.

Google's monopoly could crash and burn in a year by the actions of a couple of guys with a good idea. And, by god, we really need that to happen. Search is currently no better than it was 10, 15, 20 years ago.

I quit reading TFA at;

[forgottenusername]

> Forgoing Google and Amazon is just
> inconvenient; forgoing Facebook or Twitter
> means giving up whole categories of activity.

I don't use facebook or twitter, but use google on a daily basis & amazon on a weekly basis.

Anyone that claims to not be able to live without twitter/facebook is not someone I wanna hang out with regularly. Or read what they have to say about tech :P

'Free market' means muddled thinking

[ShanghaiBill]

The term "free market" is used to mean "competitive market" and is also used to mean "un-regulated market", despite the fact that few markets are both competitive and un-regulated. When someone uses the term "free market" with out clarifying which they mean, they are either confused, or they are trying to confuse you.

Re:'Free market' means muddled thinking

[timeOday]

No. All unregulated markets devolve into monopolies - ultimately, political as well as economic. That's why dictatorship is the norm throughout human history.

The political innovation that made markets work so well is to counterbalance them with democracy, where the guiding principle is "one person one vote" (i.e. votes can't be traded away - the opposite of markets).

Governments are associated with monopolies when market forces overcome democratic forces within the government. Then you get illicit market activity, such as kickbacks, blackmail, and unwarranted granting of monopolies.

Re:'Free market' means muddled thinking

[next_ghost]

When a monopoly grows big enough, it becomes the effective government. No support from formal government is required. Free market alone has no means to break down huge monopolies that have reached the stage of effective government. This stage of monopoly is impervious even to ridiculous amounts of internal incompetence which could bring down earlier stages quite easily. If you disagree, please tell me just one feature of the free market that is capable of bringing monopoly in this stage down that doesn't require existence of another monopoly of similar size and explain how this feature works while interacting with said monopoly.

Re:'Free market' means muddled thinking

[Suki I]

When a monopoly grows big enough, it becomes the effective government. No support from formal government is required. Free market alone has no means to break down huge monopolies that have reached the stage of effective government. This stage of monopoly is impervious even to ridiculous amounts of internal incompetence which could bring down earlier stages quite easily. If you disagree, please tell me just one feature of the free market that is capable of bringing monopoly in this stage down that doesn't require existence of another monopoly of similar size and explain how this feature works while interacting with said monopoly.

Oh PLEASE stop with this business that the 'corporations' are really the government! (Some of the) People who own them can vote in elections, the shares don't vote for politicians. In a truly free market, the government is not erecting barriers to competition. Even Standard Oil was getting competition back before they were 'broken up' (if you want to call it that) from companies out west. The phone company was ONLY a monopoly when the government made it a monopoly. If YOU want to argue, rather than lie, YOU show an example of a monopoly that survived without the government protecting it.

Re:'Free market' means muddled thinking

[poopdeville]

A market isn't functioning, let alone "free", if there is a monopoly player in it. A monopoly is a market failure, and cannot be solved by the market. This is because the market for a monopoly product is a monopoly and its consumers.

You should study economics instead of Libertarianism. The differences are vast.

Re:'Free market' means muddled thinking

[Arker]

If the "market" buys this outcome with corporate lobbyists and campaign contributions (i.e. regulatory capture) then the market is a huge part of the failure.

The "market" has no lobbyists or campaign contributions, the market is not a player, it is the field on which the players compete. Blaming the market itself for the actions of would-be monopolists is nonsensical. Like claiming the field is at fault when players cheat. The field is an inanimate object, it cannot be at fault in any meaningful sense. But the umpires - the umpires who have tremendous power and the obligation to use that power fairly, justly - they may be at fault. The umpires in the market are created by the state - no other organisation has that power.

Imagine a huge corporation lobbying their way into a monopoly type situation. And then rather than call it a market failure, you say, "Well it's the governments fault for essentially taking our bribes! You should have known better than to listen to us!"

Not for taking *our* bribes but for taking *their* bribes, thank you, and yes, the root of the problem is clearly on the government side.

It's a CEO's job to look after the business. If paying bribes is necessary to continue doing business, of course the CEO will be paying bribes. He didnt create the distorted market, he is just playing on the field he finds himself. It is NOT his job to look out for the general welfare, and even if he wants to he isnt in a position to do so.

It is the state, not the commercial enterprise, which is tasked with looking out for the general welfare, and which has the power to do so. It is the state alone which has the power to "regulate" the market, for good or ill. If the state chooses to use that power to seek bribes, and to rig the market against those who do not pay them, this is no failure of the market, and it is no failure of the businesses who do what they must in order to compete.

Re:'Free market' means muddled thinking

[Jessified]

A good response.

Do note that I used the quotation marks on "market" for a reason. Of course the market is inanimate.

The point I am trying to make is that the same people who blame the politicians for effectively taking corporate "bribes" turn around and complain that regulation is an unfair infringement on free markets. The whole point is that free markets cannot be simultaneously competitive and unregulated. You seem to recognize this, because you are saying that it is the responsibility of politicians to make sure that CEOs can't, for example, make bribes (that is, that the government, like an umpire, needs to put limits on players in the game...i.e. regulation). Every game has rules.

BTW the same arguments you make to apologize for inscrupulous CEOs can be applied to less-than-ethical politicians. Politics is an expensive and dirty game, you can't get by without monetary contributions. That line of reasoning could be used to excuse any common crook ("He's just trying to make his way through this tough game of life. He didn't create this distorted situation, so he has no ethical obligations.")...it's just really weak logic.

I believe you are saying that in an ideal world the free market should work perfectly and monopolies would not occur. Maybe!! But in an ideal world communism would work, too. There are variables like human nature which prevent either of these ideal situations from working in real life. IRL, free markets cannot be both competitive and unregulated.

Re:'Free market' means muddled thinking

[Rockoon]

Standard Oil controlled a vast majority of the refined oil market and did it without the force of government.

What a bunch of shit. I think the AC is right, you people ARE regurgitating crap from tenured socialists.

The railroad monopolies, created by the government, enabled the Standard Oil monopoly.

This is all right there in the decision by the courts in the Standard Oil anti-trust suit of 1909, where the court stated:

Almost everywhere the rates from the shipping points used exclusively, or almost exclusively, by the Standard are relatively lower than the rates from the shipping points of its competitors. Rates have been made low to let the Standard into markets, or they have been made high to keep its competitors out of markets. Trifling differences in distances are made an excuse for large differences in rates favorable to the Standard Oil Company, while large differences in distances are ignored where they are against the Standard. Sometimes connecting roads prorate on oil—that is, make through rates which are lower than the combination of local rates; sometimes they refuse to prorate; but in either case the result of their policy is to favor the Standard Oil Company. Different methods are used in different places and under different conditions, but the net result is that from Maine to California the general arrangement of open rates on petroleum oil is such as to give the Standard an unreasonable advantage over its competitors

Now stop using Standard Oil as an example of a monopoly that wasnt created through government influence. The government created the Railroad monopolies, and the railroad monopolies created the Oil monopoly.

Re:What a shocker

[sourcerror]

Maybe you should look up the East India Company.

Re:De facto, or de jure?

[bmo]

Search is currently no better than it was 10, 15, 20 years ago.

20 years ago?

Really?

--
BMO

Re:De facto, or de jure?

[maxwell demon]

Search is currently no better than it was 10, 15, 20 years ago.

20 years ago?

Really?

--
BMO

Yes. 20 years ago I could very easily search all existing web sites. :-)

Re:Nope. It's the credit supply

[Mr. Slippery]

You make money by pushing your competitors out of the market and taking their business. Credit is what allows you to do that. In addition, the fact that you have loans to pay means you are largely required by your creditors to grow.

It's not just credit, but all forms of investment where the investor -- who is not involved in the actual production of goods and services -- supplies capital with the expectation to receive profit later. (And that profit has to be skimmed off the top of the productivity of the people who are actually doing the work, so that they can never receive the full value of their labor.)

In other word, capitalism -- which, despite the confusion its apologists like to engender, is a very different thing than free markets -- is at fault. If you get the backing of the investment class, you can push others out of the market, even if their product is superior

Re:What a shocker

[poopdeville]

The idea is that to make a higher profit, to be more efficient, one has to serve the demands of the customer to gain the business required to make a higher profit.

This is not what economic efficiency means.

And the idea is wrong.

A monopoly will be economically inefficient, specifically because it maximizes profits, and is in a position to control prices. That means that the prices it sets will be greater than the marginal cost of production.

In a competitive market, the marginal cost of production equals the marginal benefit equals the price. No one firm has the ability to set prices, because others will eat their lunches. On the other hand, a larger business can easily grind away smaller businesses by providing exactly the same quality of service and price on a large scale, because its cost of capital will typically be lower. This means that markets tend toward monopolies.

god.

[unity100]

dear fool, WHAT identifies a government, and a corporation ?

if, a private entity owns all rights to a vast swath of land, all the resources and amenities that come from that swath of land, any rights that can be conceived over that land, arent they de facto ruler of that land ?

so, if someone owns a vast swath of land as large as idaho or arkansas, then arent they de facto the government of that land ? because they own all rights to it.

it is even the case today. the ONLY thing that is limiting their sovereignty there, are the laws that GOVERNMENT put out. if those laws had not been there, they would be able to do anything with that tract of land. its as simple as that. if they said that 'no people will drink water in this land, without paying to us', everyone would have to abide. if they said 'noone will be able to make homes in hilltops', they would have the right to it. if they said 'we are going to sell all the iron in this land to pygmies', it would happen.

so, if you take the government out of the picture, any owner of anything becomes RULERS of what they own. its as simple as that. there is no discussing this. this was the historical foundation of feudalism and aristocracy. im not even saying this is a fact - this is the way things, societal dynamics work. if you let anything happen, you will eventually see some parties overpower others, and rule over them, in any manner conceivable.



read some history, and less right wing bullshit.

Bullshit

[copponex]

3. I don't care if ANYBODY thinks gov't regulations is a 'good thing'. Gov't is terrible from my perspective for every single one thing completely and fully.

So, children should still be working underground until they die from exposure to their working conditions? Workers should be born into debt to the company hospital? Slavery should still exist if it's economically viable?

Really, no one takes you seriously except for yourself.

MPAA controls the US news media

[tepples]

The political innovation that made markets work so well is to counterbalance them with democracy, where the guiding principle is "one person one vote" (i.e. votes can't be traded away - the opposite of markets).

Mass media broke this. The parent companies of five movie studios control U.S. television news, which in turn controls the general public's awareness of issues and of candidates. Notice that TV news hasn't covered ACTA or other issues where the public could stand to gain at the expense of the MPAA or vice versa.

Governments are associated with monopolies when market forces overcome democratic forces within the government.

This has in fact happened. U.S. voters by and large do what the TV tells them.

Re:Nope. It's the credit supply

[sjames]

Start with The Wealth of Nations. Keep in mind while reading that he was writing about a very different world. Consider his examples and how they are changed in a world where corporations far more common (in his day it was possible for an individual to never do business with a corporation without even trying).

Then search on Adam Smith market regulation. Have a pound of salt handy, you'll find everything from insightful analysis to the worst sort of economic fundamentalism.

IMHO, we need to replace the web of small regulations with a few big ones. Do away with corporate personhood entirely and enforce corporate charter being contingent upon the public interest. Then we should probably enshrine in law that being "too big to fail" is intrinsically against the public interest.

Re:Nope. It's the credit supply

[jc42]

Adam Smith pointed out the need for regulation to avoid exactly that fate.

can you provide a link to a source. it would be great to clear out some misconceptions in future discussions.

Nah; it wouldn't clear up anything. I've read the Adam Smith comments on the topic in other /. discussions and in numerous other forums. It never has any effect. The True Believers never accept that Smith wrote such things, and others Who Knew It All Along just skim over them and go onto more interesting things. Quoting him once again won't have any more effect than it did elsewhere.

Let's face it, very few of the Free Market types have ever bothered to read Adam Smith. It's a lot like the way that most people who "believe" other religious texts like the Bible or Koran don't bother with reading them, or don't keep their minds in gear while reading them. All they need to know is that the sacred texts support their beliefs.

Quoting actual passages from the sacred texts rarely if ever affects the believers.

Slashdot Economics

[tabdelgawad]

Only on slashdot would such economic bullshit (and the socioeconomic bullshit referenced within) get modded +5 insightful and repeated ad-nauseum. Free markets do NOT tend towards monopolies eventually. The vast majority of markets are not monopolies and are in no danger of becoming so, regardless of government intervention or regulation. The evidence on this is so overwhelming I wouldn't know where to begin. In fact, there are so few examples of natural/existing monopolies (where the efficient scale of production exceeds the size of the market) that we tend to use the same examples over and over in classrooms and textbooks (public utilities).

The internet and information goods have some interesting characteristics (e.g. network effects) that tend to encourage consolidation, but even in this area, changing technology and consumer preferences tend to overthrow dominant firms (e.g. Microsoft).

And yes, I'm an economist.

Re:Slashdot Economics

[tabdelgawad]

First, oligopoly is a far cry from monopoly. Barring collusion (which is illegal under anti-trust law) oligopoly markets can be extremely competitive, leading to razor-thin profit margins, low prices, rapid technological change, and consumer choice: compare the current mobile OS market to Windows in the 90s, or even the cell phone service market to pre-1980s AT&T.

Second, successful companies continue to grow to achieve scale efficiencies, but at some point, 'bigger' starts to bring its own problems of lack of agility and innovation and uncoordinated management. Anyone who watched Microsoft or Detroit's big three stumble can see this. So there's a limit to how large a company can/should grow based on the nature of its business.

Third, whether a market becomes an oligopoly or not depends on the overall size of the market relative to the efficient size of a company. The extreme case of a natural monopoly happens when the size of the market is smaller than the efficient size of the company (so there's room for only one), but in most cases, the market is large enough to accommodate several firms of efficient size.

Finally, just because a market is an oligopoly doesn't mean the same players remain successful and continue to control the market. Changing technology and innovation create a lot of churn (Schumpeter's creative destruction). This is particularly true in the IT world where leaders can quickly lose their edge to small upstarts and the game is changing at break-neck speed. A few years ago, Asus was a name known only to geeks, now it's a household name churning out millions of netbooks each year. A year ago, nobody gave a shit about 'tablets', now it's the rage with a few unlikely names poised for success (Samsung?!). There's still plenty of room for 'garage' innovation here, and lots of venture capital to see it through to commercial success.

Re:Slashdot Economics

[shutdown -p now]

In fact, there are so few examples of natural/existing monopolies (where the efficient scale of production exceeds the size of the market)

According to libertarian party line, there is no free market today, and there has, in fact, never been a true free market before (when the failure of the markets in 19th century which lead to the Gilded Age is pointed out, they're quick to say that it was still not free). So the low number of monopolies is entirely consistent with the claim that government regulation is required to keep it that way.

And yes, I'm an economist ... Imposing Libertarian views

That does not speak well of your credentials as an economist, then. It's like saying "I'm a physicist, promoting luminiferous aether".