Comment by skybrian
8 years ago
Desert of profitability is an evocative phrase, but remember that deserts can be beautiful.
It means free stuff or low prices for consumers. This is another consequence of the "invisible hand" which is sometimes used to justify capitalistic competition.
A commodity market working well is also a desert of profitability.
The opposite of a desert of profitability is economic rent.
> “The opposite of a desert of profitability is economic rent.”
Or perhaps an Amazon ;)
I don’t know if the analogy makes any sense, I just couldn’t resist
> It means free stuff or low prices for consumers.
The "free stuff" is an illusion, a monopolistic sleight of hand. Consumers are subsidizing "free stuff" in one market by paying excessive rent in the neighbouring market. In the end, consumers pay more, not less.
> This is another consequence of the "invisible hand" which is sometimes used to justify capitalistic competition.
These deserts are not a feature of competition, they are an attempt to avoid competition by shrinking the pool of viable competitors.
> A commodity market working well is also a desert of profitability.
No, it's the opposite of that. A commodity market working well is what you get when monopolistic tricks such as "deserts of profitability" have failed, and you are forced to compete the old-fashioned way.
> The opposite of a desert of profitability is economic rent.
Again, the exact opposite is true. Deserts of profitability exist to protect economic rent. Show me any "desert of profitability" and I will show you the economic rent that is subsidizing it.
None of your arguments make any sense when you take in account the fact that such business model has enormously benefited consumers.
It just doesn't make any sense.
Would you also say that the original phone system model (basically, ATT owns everything, including your handset) was equally immune to such criticism?
After all, consumers benefitted enormously from the phone system coming into existence. It only cost everyone else their ability to do anything with telephony ATT didn't like.
(Yes, government monopoly vs. private action. It doesn't change anything in terms of the presence or absence of actors in the space.)
1 reply →
> None of your arguments make any sense when you take in account the fact that such business model has enormously benefited consumers.
I think I already explained my position pretty clearly, which is that consumers benefit from the free stuff less than they suffer from the monopoly subsidizing it.
I'm happy to defend my position but you need to give me an argument of your own first, besides "it just doesn't make any sense".
1 reply →