Monday, September 24, 2007

Reader comments #2: on Gov't Regulation and Big Business

Comments on The History of Government Regulation and Big Business

Anonymous said

"I have read somewhere too that too much competition can lead to monopoly. Price undercutting and even selling some items at a loss, just to attract the customer to buy the higher valued products as well at the same time. This is because competitors will be driven to the wall, until one or a few firms dominate the market. I know you are saying that this is unlikely in a pure free market where there is no state, to intervene or create an elite. But the process described above is possible in such a situation is it not?"

My reply:

If a corporation drops prices, let's say until it sells an item at a loss, in order to block a newcomer from making a profit, the consumer benefits from the reduced prices. If said corporation does this in order to maintain a monopoly, then I think the corporation "deserves" that monopoly, because it is able to drop prices lower than all other competitors. Consumer wins. If this corporation starts becoming fat and happy, then competitors will be able to undercut the first corporation, by having lower costs.

As for the case of "selling some items at a loss" in order to "sell other higher valued items", and the consumer ends up paying more, then it's the consumer's fault for not going elsewhere for the higher valued item. If the consumer likes to have a one stop shop, then it's still a win-win.

Here is another link I found on Government Regulation:
Most of the harmful effects of deregulation are caused by incomplete deregulation — in particular, by deregulating X while neglecting to deprive X of special governmental privileges that consist of regulations or taxes on everybody else. Three examples leap to mind: First, there are cases in which governments, invoking "free market" values, have "deregulated" (i.e., permitted a broader range of pricing and other options to) industries that are either monopolies (e.g., power companies with a legal guarantee from competition) or near-monopolies (e.g., industries dominated by powerful corporations who are insulated from competition through regulations and tax codes that make it more difficult for newcomers to enter the market).

Second, there is the notorious S & L scandal, when the Reagan Administration gave Savings and Loans greater freedom to make decisions with depositors' money, while at the same time retaining federal deposit insurance and so ensuring that the taxpayers, rather than the lenders, would bear the costs of the lenders' mistakes.

Third — in an example that shows that big government is no friend to the environment — politicians have given loggers greater freedom to log on federal lands, at a fraction of the cost that a private landholder would demand. In all these examples, partial deregulation amounts in fact to a fascist grant of quasi-governmental privilege, without accountability, to private entities — a practice that can only lead to skewed incentives and abuse of power. (Governments are socialist to the extent that they seek to exercise direct control over the economy, and fascist to the extent that they delegate this task to the powerful "private" beneficiaries of state privileges and protection. Socialism means rule by bureaucrats; fascism means rule by plutocrats. The current American system seems to be a mixture of the two.) Those who complain of the harmful effects of deregulation are quite correct, if they are referring to what passes for "deregulation" under a statist rĂ©gime. (The statists have similarly appropriated the term "privatization" to refer to the fascist process of "contracting out," i.e., of granting to private companies an exclusive monopoly to perform services usually monopolized by government directly — as opposed to the original libertarian meaning of "privatization," which was that such services were to be turned over to the competitive market free and clear.)


Marc said...
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FSK said...
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