The Idea of a Natural Monopoly is a Fallacy

Thank you for accepting this challenge. Good luck J A Natural Monopoly Has Never Occurred I will start off by stating that there has never been a recorded natural monopoly. One might look at this statement and think, “Well what about the robber barons of the early 1900s?” Truth be told, these were not monopolies at all! A good example that everyone thinks of is John D. Rockefeller and the Standard Oil Company, who is demonized for basically, being a good businessman. Rockefeller did an amazing job at running a business. He devised so many ways for reducing the amount of money he had to spend and still make a great product. Rockefeller was known for being extremely generous with his money. He paid his employees significantly more than the competition did. He also believed in rewarding his most innovative managers with bonuses and paid time off if they came up with good ideas for productivity improvements, a simple lesson that many modern corporations seem never to have learned. Kerosene went down 90% due to Rockefeller. Carnegie, another robber baron, decreased the price of steel by 90% as well. Rockefeller purchased many of these poorly managed operations and put their assets to far better use. There was never any threat that these "horizontal mergers" — the combination of two firms that are in the same business — would create a monopoly, for Standard Oil had literally hundreds of competitors, including such oil giants as Sun Oil, not to mention its many large competitors in international markets. Why am I supposed to hate these people? One of Rockefeller’s harshest critics was Ida Tarbell, who was actually the brother of the treasurer of the Pure Oil Company, who could not compete with Rockefeller’s low prices. She published propaganda-like articles that were often illogical, emotional, and lacked any serious attempt at economic analysis. Through the process of “rent-seeking,” where a competitor uses political tactics to harm a superior competitor by creating laws and regulations, the smaller companies were able to eliminate the Standard Oil Company. Smaller competitors finally crippled the Standard Oil Company by lobbying the federal government to enact the antitrust regulation. Government Can Only Create Monopolies The very term "public utility" … is an absurd one. Every good is useful "to the public," and almost every good … may be considered "necessary." Any designation of a few industries as "public utilities" is completely arbitrary and unjustified. — Murray Rothbard, Power and Market Public utilities are a good example of government-made monopolies. Government grants monopolies to certain water, electricity, and natural gas companies. Competition is excluded from these companies with horrible results. Americans have to deal with shortages all the time with these public utility industries such as hot water shortages, while in the free market, such as with groceries, Americans experience little to no shortages at all. This is a good example of why legal monopolies cause disaster in many industries. “Without the dynamics of a fully free market, utility providers have no way of knowing how to work to their and to consumers' advantage — and everybody's quality of life inevitably suffers as a result.” –Friedrich A Hayek The Impossibility of a Natural Monopoly on the Free Market Competition on the free market eliminates the possibility of a natural monopoly as long as there is no regulation hindering the competition on the free market. A good example of how competition stopped a so-called natural monopoly would be in 1880. “In 1880 there were three competing gas companies in Baltimore who fiercely competed with one another. They tried to merge and operate as a monopolist in 1888, but a new competitor foiled their plans: "Thomas Aha Edison introduced the electric light which threatened the existence of all gas companies."[21] From that point on there was competition between both gas and electric companies, all of which incurred heavy fixed costs which led to economies of scale. Nevertheless, no free-market or "natural" monopoly ever materialized When monopoly did appear, it was solely because of government intervention. For example, in 1890 a bill was introduced into the Maryland legislature that "called for an annual payment to the city from the Consolidated [Gas Company] of $10,000 a year and 3 percent of all dividends declared in return for the privilege of enjoying a 25-year monopoly.[22] This is the now-familiar approach of government officials colluding with industry executives to establish a monopoly that will gouge the consumers, and then sharing the loot with the politicians in the form of franchise fees and taxes on monopoly revenues. This approach is especially pervasive today in the cable TV industry."Another example of a so-called natural monopoly is cable tv. The idea that cable tv was a natural monopoly is a false as well, for there was a very longstanding existence of competition in the cable industry for years before the government issued anti-monopoly regulation upon the industry. A natural monopoly cannot exist because there is always competition on the market.http://mises.org...http://mises.org...http://mises.org...