Ultimate Goal of Businessmen is Monopoly

[KendallJ]

Whew, someone needs to read the history of AT&T a little bit better or at least get through Capitalism The Unknown Ideal. Utilities are commonly claimed to be examples of how natural coercive monopolies can come to exist. State control is at their roots. Not the free market.

Here's an excellent article by a good friend of mine on another such touted utility, electricity.

http://www.theobjectivestandard.com/issues...ectric-grid.asp

[shadesofgrey]

Whew, someone needs to read the history of AT&T a little bit better or at least get through Capitalism The Unknown Ideal. Utilities are commonly claimed to be examples of how natural coercive monopolies can come to exist. State control is at their roots. Not the free market.

Here's an excellent article by a good friend of mine on another such touted utility, electricity.

http://www.theobjectivestandard.com/issues...ectric-grid.asp

Yes, I know that. That's why I said it was a government-sanctioned monopoly. Your tone isn't exactly friendly and I don't think you have to perpetuate the stereotype of "The guy who's been on the forum a long time, is intelligent and well-versed, and therefore feels the need to talk down to other people".

I hope this doesn't degrade into bickering because I think it's an interesting forum.

ANYWAY, In the case of AT&T, specifically, I would like to hear your views on what side of the fence objectivism would fall and why. I'm not interested in what you think about me, my knowledge base, my views, or anything else at all. I'm trying to keep the post as succinct as possible as all of our time is valuable.

Incidentally, I did think the article on the history of the electric industry was interesting.

Edited July 1, 2009 by shadesofgrey

[softwareNerd]

... every right of way through private property (because it was considered an essential service), basically free reign. ..., AT&T's monopoly was government sanctioned for 50-some years, so the option to compete was extinct for all practical purposes.

Well, there you go then. As I said in the original post, when the monopoly is a government privilege as opposed to being earned by right and contract, it is wrong. If it is a mix of both, the force component is not legitimate.

The abstract answer is that someone else could have jumped through the same hoops that AT&T did, to get the same easements, similar rights of way, and so on. If AT&T could get all it could without using government force, then there is no reason someone else could not. On the other hand, if AT&T did use government force, that aspect was not legitimate. I strongly suspect that some degree of government force was used -- as you've hinted too. So, that is not legitimate.

The illegitimacy is because government force was used, not because of the existence of a single company. In the same way, a taxi-cab driver in NYC uses government force, and such use of force is not legitimate. [Aside: it does not follow that it is evil to own or drive a taxi-cab in NYC.]

[shadesofgrey]

Well, there you go then. As I said in the original post, when the monopoly is a government privilege as opposed to being earned by right and contract, it is wrong. If it is a mix of both, the force component is not legitimate.

The abstract answer is that someone else could have jumped through the same hoops that AT&T did, to get the same easements, similar rights of way, and so on. If AT&T could get all it could without using government force, then there is no reason someone else could not. On the other hand, if AT&T did use government force, that aspect was not legitimate. I strongly suspect that some degree of government force was used -- as you've hinted too. So, that is not legitimate.

The illegitimacy is because government force was used, not because of the existence of a single company. In the same way, a taxi-cab driver in NYC uses government force, and such use of force is not legitimate. [Aside: it does not follow that it is evil to own or drive a taxi-cab in NYC.]

Well, it depends on the taxi driver

OK, I follow that. So it looks like it's kind of a mixed answer in AT&T's case because for a long time it was a private company and for a long-time its actions were government-sanctioned. That's kind of what I suspected. I know from the purely capitalist POV, there isn't anything wrong with some company being #1 of it's own accord, and I know that objectivism objects to government intervention in industry like that. So it seems there's a bit of both worlds there. Probably has to do with the length of the company's life.

Do the rights of the consumer fall anywhere in objectivist business theory? Within a monopolistic situation, legitimate or not, do the customers matter at all? Assume it's a service that is "essential", like clean water or electricity.

[Chris.S]

Water and electricity are values (if you value them) to be treated like any other: if you want it, you go and buy it from whoever is selling at the agreed price, or get it yourself. Whether there is a monopoly or not doesn't change that, and I'd certainly question the ability of a business to have a monopoly on water.

The only issue you could have with a monopoly is if it's government-supported. In that case, consumers could rightfully try to change the law that supports the monopoly, because a) the government is favouring certain individuals who own the business above others, and B ) because the government is preventing other people from doing as they please with their property (setting up a competing business vs the monopoly).

Edited July 1, 2009 by Chris.S

[shadesofgrey]

Water and electricity are values (if you value them) to be treated like any other: if you want it, you go and buy it from whoever is selling at the agreed price, or get it yourself. Whether there is a monopoly or not doesn't change that, and I'd certainly question the ability of a business to have a monopoly on water.

The only issue you could have with a monopoly is if it's government-supported. In that case, consumers could rightfully try to change the law that supports the monopoly, because a) the government is favouring certain individuals who own the business above others, and B ) because the government is preventing other people from doing as they please with their property (setting up a competing business vs the monopoly).

Cool, I see. Thanks for the answers everyone. Signing off this thread

[KendallJ]

The premise fo the question contains the same problem that Rand points out. That is the confusion between political power and economic power.

There is absolutely nothing wrong with non-coercive economic monopoly. And yes, since the way to that end is to provide the absolute best most efficient products at the best possible service, yes my goal is complete economic monopoly, and that is a good thing.

[Mixon]

So, here's the case:

The goal of businessmen is to expand their business and to increase efficiency as much as possible. The end result of perfection in business must then be a monopoly. If I am wrong here, please enlighten me. But, assuming that what I said is true, I will proceed. Ayn Rand has said that in a rational society, a monopoly would be impossible. Wouldn't there then be a lot of unhappy and unsatisfied businessmen? Thanks.

Even in a completely lazzez-faire capitalist system, a legitmate monopoly could arise. However, it would be far more difficult to create and maintain due to the constant spectre of competition. Those businessmen who had been accustomed to maintaining their empires by means of political coercion would certainly be upset by this, but legitimate competitors would welcome it. Moreover, allowing markets to function more freely increases the incentive for individuals to create wealth and promotes a more efficient allocation of resources. This causes a long term sustainable increase in a peoples' standard of living.

When I was in grade school, one of my teachers gave a horribly flawed explanation as to why monopolies were "bad" and the Sherman anti-trust Act was "good." The argument was based on the premise that a monopoly has the ability to set prices since it has no competition. This is simply not true for two reasons. First, a company cannot set a price that customers are unable to pay. If companies that sell gasoline tried to charge $1,000 per gallon tomorrow, very few could afford it. The quantity of gas demanded would fall, along with the companies revenue and profits. It would be irrational for a company to pursue this course of action since its goal, even as a monopoly, is to maximize profit. Second, a business with high profit margins tends to invite competitors which undermine its ability to maintain a monopoly status.

[Eiuol]

Second, a business with high profit margins tends to invite competitors which undermine its ability to maintain a monopoly status.

But if something actually were a monopoly, "inviting competitors" wouldn't even occur. I really don't think it's possible for a monopoly to arise in any LFC system, so it doesn't matter if it could be legitimate. Force is really the only way to maintain being the -only- competitor in an *entire* market (government privilege is the easiest way).

[DavidOdden]

But if something actually were a monopoly, "inviting competitors" wouldn't even occur. I really don't think it's possible for a monopoly to arise in any LFC system, so it doesn't matter if it could be legitimate. Force is really the only way to maintain being the -only- competitor in an *entire* market (government privilege is the easiest way).

A monopoly can arise in a capitalist society, when the market is small or specific enough. For example, Microsoft has a monopoly on the sale of the Windows operating system, because that is its exclusive property: thus they monopolize the Windows market. Roche monopolizes oseltamivir in the US, because they own the right to that drug.

Smith Produce can monopolize the entire market for pomegranate-flavored olive oil because there are only 500 customers world-wide and nobody else cares to cater to such a small market. As long as you can provide the goods that your customers demand in such a way that there is no demand for a competitor to "break" the monopoly, you can have a monopoly.

Remember also that a "monopoly" does not mean "complete control over absolutely all of a market", it also includes control over a substantial majority of a market.

[Mixon]

But if something actually were a monopoly, "inviting competitors" wouldn't even occur. I really don't think it's possible for a monopoly to arise in any LFC system, so it doesn't matter if it could be legitimate. Force is really the only way to maintain being the -only- competitor in an *entire* market (government privilege is the easiest way).

Let me restate the concept in my earlier post to make it more concrete. If a monopoly attempted to raise its prices because it had no competition, that would increase its profits. In a free market system this would signal to producers that attractive returns are available for their capital in that industry. This would invite competition to enter the market. In a free market, a business may become a monopoly only by using resources more efficiently than its competitors. It could not maintain that monopoly by becoming inefficient. Why don't you think it's possible for a monopoly to arise in any laissez faire capitalist system?

[Eiuol]

Why don't you think it's possible for a monopoly to arise in any laissez faire capitalist system?

After doing a bit of research, there are quite a few definition of what "monopoly" is, I may be too literal about it. I'll have to read up on it. My reasoning was that if a company *could* enter a particular market, then no company in that market is a monopoly. More specifically, the barrier of entry is no more than what is normally expected (to have a logging company, you'd need land or permission to use land with trees). Of course, how specific you define a market matters a whole lot. No company can go into the market for Windows, so Microsoft has a monopoly on Windows. But any company can go into the market of operating systems if they take the time and effort.

[Mixon]

After doing a bit of research, there are quite a few definition of what "monopoly" is, I may be too literal about it. I'll have to read up on it. My reasoning was that if a company *could* enter a particular market, then no company in that market is a monopoly. More specifically, the barrier of entry is no more than what is normally expected (to have a logging company, you'd need land or permission to use land with trees). Of course, how specific you define a market matters a whole lot. No company can go into the market for Windows, so Microsoft has a monopoly on Windows. But any company can go into the market of operating systems if they take the time and effort.

Here is Webster-Merriam's definition of Monopoly:

http://www.merriam-webster.com/dictionary/Monopoly

1 : exclusive ownership through legal privilege, command of supply, or concerted action

2 : exclusive possession or control

3 : a commodity controlled by one party

4 : one that has a monopoly

A business is defined as a monopoly based on its exclusive control of a product. It is defined neither based on barriers to entry, nor with regard to its potential competitors. If you defined a business as a non-monopoly provided it could experience competition, then no monopolies would be possible. Even a monopoly that utilizes coercion may experience competition. For example, a railroad monopoly may still face competition from alternate forms of transportation. Do you still think that it would be impossible for a business to have a monopoly in a lassez faire capitalist system?

[Eiuol]

A business is defined as a monopoly based on its exclusive control of a product.

That's the problem though, how specific should you be about what a "product" is? If defined too narrowly, everything is a monopoly. If defined too broadly, nothing is a monopoly. My use of "barrier of entry" was more to suggest that the only thing preventing a person from starting a business is their initial resources. "I don't have enough money" would not be a good enough excuse to claim someone has a monopoly. The monopoly in question wouldn't have much of a command of a product supply if anyone *can* compete. Anyway, the dictionary definition comes across as too broad for me. Which of course means I have to do some detailed research to be able to get a really good definition.

[Mixon]

That's the problem though, how specific should you be about what a "product" is? If defined too narrowly, everything is a monopoly. If defined too broadly, nothing is a monopoly. My use of "barrier of entry" was more to suggest that the only thing preventing a person from starting a business is their initial resources. "I don't have enough money" would not be a good enough excuse to claim someone has a monopoly. The monopoly in question wouldn't have much of a command of a product supply if anyone *can* compete. Anyway, the dictionary definition comes across as too broad for me. Which of course means I have to do some detailed research to be able to get a really good definition.

Definition of product:

http://www.merriam-webster.com/dictionary/product

2 a (1) : something produced; especially : commodity 1 (2) : something (as a service) that is marketed or sold as a commodity b : something resulting from or necessarily following from a set of conditions <a product of his environment>

Microsoft has exclusive control of the sale of the Windows operating system, but it does not have exclusive control over the sale of all operating systems. Microsoft still faces competition. Again, a monopoly is tied to a specific product. So if you claim a business is a monopoly, that means it has exclusive control over a specific product. Monopolies still face competition.

I think your confusion stems from the use of an arbitrary definition for the word monopoly rather than an objective one. Ask yourself, what is the purpose of a definition? To define something is to identify it. If you define a term so broadly that identification becomes impossible, of what use is the definition? None. If you define the word monopoly as a business that has no competitors, then there are no monopolies. You are attempting to identify a thing which does not exist. That definition is a contradiction. There is no reality free from the threat of competition. Your definition is too broad to serve any function other than to confuse you. Do you still think that it would be impossible for a business to have a monopoly in a lassez faire capitalist system?