Comment by mothballed
9 days ago
I think you have it backwards. Regulation is what enables monopolies. There is no monopoly for any of the major industries like cow herding or cellular telephone service in Somalia despite almost no effective regulation. There is not even a monopoly of pirates despite them willing to use violence to try and enforce a monopoly.
If you look at the history of the US, for instance, railroad regulation was brought forth largely by the railroads because they found it impossible to form a cartel to keep up prices (due to "secret" discounting) so instead they created regulation that outlawed the kind of discounting that breaks cartels apart. A similar thing happened in banking where the banks asked for a central bank to cartelize the interest ranks to stabilize their oligopoly. And the same in pharma industry -- big pharma loves high regulatory barriers because it keeps competitors out.
A large portion of the regulation in the US was brought about as regulatory capture by corporations to increase the monopolizing effects and destroy the free market.
> Regulation is what enables monopolies
That's patently false. AT&T was a monopoly and they were broken up by antitrust regulation. The absolute most you can say is that some regulations enable monopoly. I contend that we simply should pass the good kind of regulations instead.
Monopoly is enabled by market forces such as economies of scale. Monopolization is a natural market process which happens on its own unless it is actively prevented.
> big pharma loves high regulatory barriers because it keeps competitors out
The FDA, for all the flaws of its current incarnation, is the archetype of necessary regulation. Pre-FDA, the free market did nothing whatsoever to prevent nauseating practices like the adulteration of milk with powdered plaster, lead, and cow brains. The history there is fun but quite gross.
> Somalia
What is notable about Somalia is not its lack of regulation, but the fact that it is perhaps THE least stable country on the planet. It is not the basis for any useful comparison here.
>> Regulation is what enables monopolies
>That's patently false. AT&T was a monopoly and they were broken up by antitrust regulation.
This is patently false in the context of the reply you have made -- after the invention of the telephone more and more and eventually hundreds of telephone services popped up. Then in 1918 (circa WWI), the government effectively quasi-nationalized AT&T by controlling it via a commission and the postmaster general and then AT&T leveraged politicians to create "universal telephone service" provided by AT&T and regulate competitors out of the market while using regulatory capture to use commissions to regulate rates, effectively creating a cartel that drove competitors out of business via regulation.
the whole idea of a "natural market process" here is absolute and utter hogwash. The majority of the market was AT&T competitor up until the regulators stepped in and turned it into an unnatural monopoly enforced by regulatory capture.
>The FDA, for all the flaws of its current incarnation, is the archetype of necessary regulation. Pre-FDA, the free market did nothing whatsoever to prevent nauseating practices like the adulteration of milk with powdered plaster, lead, and cow brains. The history there is fun but quite gross.
You're now arguing why we need regulation rather than whether they create monopolies or not. I see this as a complete red herring, although an interesting topic, that there are some counterpoints to.
> What is notable about Somalia is not its lack of regulation, but the fact that it is perhaps THE least stable country on the planet. It is not the basis for any useful comparison here.
What is notable is that the whole thesis is without regulation it turns into this monopolized hellscape and every inspection of that theory turns out to be false, and sometimes even the opposite.
> the whole idea of a "natural market process" here is absolute and utter hogwash
Might I introduce you to the concept of a "natural monopoly"? https://en.wikipedia.org/wiki/Natural_monopoly
Anyway, what regulation is responsible for Walmart and Amazon putting local retailers out of business?
> the government effectively quasi-nationalized AT&T
After a big merger put AT&T in charge of the majority of telephone lines in the US, the company used its control over infrastructure to drive its competitors out of business and increase its portfolio. The Justice Department tried to break up AT&T but failed; it was in the settlement of this case that AT&T was first federally regulated in 1913. Yes, AT&T's monopoly grew between 1913 and 1982, but your causality is backwards. They regulated it because it was already a monopoly.
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This is not a personal opinion of mine, it is pretty much established science. I think only think-tank backed sources would claim the opposite.
One should understand the phenomenon as a common pattern of dynamics in unregulated markets. Not every snapshot will showcase an end state of monopolist dominated markets.
You bring up a valid point though. Regulatory capture is a indeed a weapon in the hands of anti-competitive players to prevent incumbents. Good policy usually applies differently to different strata: the small players are exempt from certain rules, or have to deal with less stringent ones than big players do, to prevent killing the market. At the risk of sounding like an llm: it is not just about policy, it is about good policy.
> There is no monopoly for any of the major industries like cow herding or cellular telephone service in Somalia
Kinda a terrible example, as cellular telephones are highly regulated in Somalia: https://en.wikipedia.org/wiki/National_Communication_Authori...
This is a crude but misguided attempt to bypass what I say which was "effective regulation." FGS only controls a minority of Somalia -- most of it is controlled by Somaliland, Puntland, Al-Shabaab, directly by xeer (customary) law, or only FGS hanging on by a thread.
Even in cases where FGS is in control -- even then xeer law on property rights and law often supersede written law of FGS. For instance, on occasion Somali population has straight up killed FGS soldiers/police and Somalian government has deferred to xeer courts and said "welp that is fine." Xeer law in particular has a very liberal free-market view on inter-familial entrepreneurism (although with a lot of intrafamilial and tribal dues which hinder it in practice) which is at odds with what outside law has tried to impose upon it.
NCA has rather limited influence in somalia, and definitely not of the sort that could break up a monopoly if one existed.
> major industries like cow herding
The food industry is filled with regional monopolies.
> cellular telephone service in Somalia
Ah yes, excellent example, all you have to do is completely destabilize your nation and you too can have free market capitalism.
Investors love monopolies, they fix prices and profits so their investments are not at risk. Investors hate too much competition, it lowers profits and puts their investments at risk.
Free markets need investors. Investors hate free markets. I hope you see the problem here.