From: das@unislc.uucp (David Shorten)
Subject: Re: Open letter to the libertarian right
X-Newsreader: TIN [version 1.1 PL6]
Organization: Unisys Corporation SLC
Date: Mon, 12 Oct 1992 22:58:28 GMT

Atit Dinkarrai Desai (adesai@leland.Stanford.EDU) wrote:
: In article <parvin1.718565086@husc11> parvin1@husc11.harvard.edu (Douglas Parvin) writes:
: >craig@jido.b11.ingr.com (Craig Presson) writes:
: >
: >>I see no equations here -- and that's the problem. The initial case is
: >>ill-stated, and can be indefinitely shaded toward Parvin's and your
: >>pro-regulation stance, because you fail to do two fundamental checks
: >>at the beginning: 1. Give an existence proof; 2. Do the numbers; and
: >>when you do 2, don't forget to count in the costs of regulation and
: >>the inefficiency introduced by using the Fed. government, which are [enormous].
: >
: >1) See my previous posts for a mathematical explanation of how the situation 
: >I described is a stable equilibrium that wouldn't be countered by market
: >forces.
: 
: ad: Where does this exist in the real world?, I can't think of any industry
: where this is the case. So maybe this argument is worthless. The only
: place I can see this happening is some small towns where there is only
: one supplier of some products( say a general store). I don't hear them
: calling for government intervention. Certainly the prices are higher in those 
: stores,due to increased distribution costs as well as "gouging". Its easy
: to visualize that 2 stores coundn't make it. Yet it is voluntary, you can
: choose to pay or not. If prices are too high, people always find a substitute
: or invent one.(like oil and solar cells)
: 
: >2) The federal subsidizing is limited to offsetting start-up costs, after
: >which it plays no part in the subsequent competition.  There is very little
: >governemt involvement, so your "costs of reguation and inefficiency" are
: >miniscule.
: 
: ad: again where is there no intervention? Whats to prevent the 2 companies
: from colluding by keeping the same price and splitting the profits. In this 
: case your and my taxpayer dollars have just gone into someone elses pockets.
: Be careful, don't say anti-trust! I'm sure anyone or any government who 
: makes such as investment is going to require that prices be lowered, which 
: in turn is going to require watchdogs.
: 
: Ideally, you would want price to be at marginal cost to capture the most
: surplus, but that also requires a lot of monitoring. You if you anything
: about utility rate regulation then you know what a fiasco that is. The 
: utilities run circles around the regulators with a myriad of tricks and
: loopholes.
: 

I'm not for the idea of government subsidizing start-up costs, but total
deregulation of monopolies doesn't work either.  Once a company gets
a large enough share of the market, it can guarantee itself a virtual 
monopoly through techniques that are unethical, and definitely not in 
the public interest (read: result in price-gouging).  A level playing 
field for would-be competitors must be legislated, or corporations will 
again resort to the tricks common in the early part of this century.

Some of the favorite competition-killing tricks were:

   Control Required Industries:  E.g -- a car company tells all it's 
                steel suppliers to not sell steel to competing car
                maker, or it won't buy steel from them anymore.

                In oil and cattle industries this was done with
                the railroads, so even though production by competitors
                couldn't be curtailed, they couldn't get their product
                to market.

   Price Fixing:  This where the large company drops price of commodity
                below the production costs of the weaker competitor.
                Knowing that after the the competitor goes bankrupt,
                the large company can raise the prices again to
                more than recoup it's losses.

: 
: Finally, in your complex set up. how do you know its not profitable
: for another firm? you can't predict future profits! alright, say some
: companies have failed in trying. Well, I might have a better idea and
: we willing to give it try. To say its impossible and the government
: should step ignores the uncertainty.
: 
: Also, there could be positive shock in the future that makes it viable
: for 10 companies to share the market. If you built the government plant first,
: it would be wasted because companies would have enetered anyway. Or, they
: discover natural gas underneath. cheap fuel for everybody. The old
: monopolist dies of a heart attack! The lone lone ranger rides into the
: sunset, ....
: 
: The problem with government planning is they take the status quo and 
: project it to infinity. The world just is not that way. 
: 

But price-gouging monopolies on (near) essential commodities can last long 
enough to make a lot of people's lives miserable!

: 
: O.k. last point: If this was a truly surplus producing endevor. Then,
: all those people benefitting would in their own self interest put up their
: own money to build the plant. They would realize all the benefits as you
: said. Why does the government have to do it through the use of force?
: If you want to get into the coordination costs or "free rider problem"
: we can get into that too. But, think about this point carefully.

In a guaranteed level playing-field a cooperative venture is a great 
solution, but when the big boys are free to use the above strategies,
small start-up companies don't have chance.


Dave S.		(das@unislc.uucp  I think)
Newsgroups: alt.politics.libertarian