From: egl1@cunixf.cc.columbia.edu (Elizabeth G. Levy)
Subject: Re: Privatization
Reply-To: egl1@cunixf.cc.columbia.edu (Elizabeth G. Levy)
Organization: Columbia University
Date: Sat, 23 Jan 1993 02:35:00 GMT

In article <1993Jan22.224811.26050@mcc.com> amck@rowdy.mcc.com (Alan McKendree) writes:
>
>Actually, strictly speaking, there's regulation because the industry
>and the bureaucrats like it that way.  Addressing the issue, however,
>note that *there has never been a monopoly arise in practice except
>where the business is protected by the government*.
>
>This is a classic case of the government selling the citizens the idea
>that without government protection, their lives will be worse.  So
>government controls over key industries are instituted which pleases
>the bureaucrats, and they repeat the falsehoods about impending
>monopolistic doom if the controls were to be lifted.
>
>In real life no company can ever fend off competition in the
>relatively short term and long term if it sells at above-market prices
>(keeping in mind that that price is always changing, sometime
>day-to-day).  OPEC tried in the early 70s and failed miserably.
>
>Theoretically, one company could, perhaps, become the sole supplier in
>a market, but it could only become so and remain so by offering a
>better product and/or a better price than its competitors.  We need
>not fear this unlikely scenario even if it were to occur.
>
>The undesirable form of monopoly, in which no competition is possible,
>*has only happened by government's explicit prohibition of
>competition*, examples being the postal service and the old
>pre-breakup Bell Telephone Co.
>
>Government is the only source of coercive monopoly, which it claims to
>protect us against.  All in all, a masterful job of propaganda on its
>part.

OK.  I'm simply arguing that there are natural monopolies.  The
distribution network of, say, an electric utility, the phone company
before the advent of alternatives to wires, etc., are such: clearly,
these networks have diminishing average costs.  Small companies will
always compete with a price disadvantage in these situations.

This situation will not last forever, as technological changes will
make, say, copper wire, obsolete.  AT&T breaks up because something
like MCI can compete with it.  The Baby Bells will face stiff
competition as cellular phones proliferate and cable companies start
carrying voice signals.  These technological changes, however, didn't
happen for, what, 70 or 80 years after phones were first installed.
That's a lifetime, and you're letting a natural monopoly have free
rein for quite the long-term.  (Of course, you can argue that the
phone network itself would be the natural monopoly, and you can have a
number of service providers competing with each other (as is the case
with AT&T, MCI and Sprint), but the switching technology didn't exist
until about 20 years ago.)

Oh, OPEC is not a company.  OPEC is a cartel, which are inherently
unstable.  The members have no incentives to obey agreements, as the
overarching organization has no coercive power.  We're talking about
monopolies in this discussion, not loose collections of
self-interested actors.

>
>More info in D. T. Armentano's _Antitrust:  The Case for Repeal_,
>which I strongly recommend to your attention.  I trust the readers of
>this newsgroup will not be unduly skeptical of the concept of reduced
>government interference in the economy; this book will give you
>valuable ammunition against the opposite position.

I'll check it out when I have the chance.  Who's the publisher?



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