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rebelconservative
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How am I supposed to answer this question from a 3rd year economics course?

‘The best way to ensure that markets deliver an appropriate level of economic welfare is to prevent industries from becoming too concentrated and ensure strong competition.’ Discuss.

I am thinking to address the false premises and inaccuracies in the question in the intro, then to try to answer the question as best I can that a free market actually achieves their goal best of all... but they just want you to parrot from their textbook so I don't know if I should bother fighting them.

The textbook section actually starts so well:

In March 2004, the European Commission found that Microsoft had abused its dominant position in the market for PC operating systems and ordered Microsoft to pay a fine of €497 million. What had Microsoft done to deserve such punishment? One of the issues was that Microsoft allegedly refused to supply timely information about its Windows operating system interface to some of its competitors in the server market. But why should Microsoft be forced to share

information about its own technology? A second issue was the presence of Media Player within the Windows operating system. This made it hard for independent suppliers of products competing with Media Player to survive: since most customers had to purchase the Windows package anyway, they saw little point in spending more to get another music/video management application. But, should we really object when a firm offers an additional feature for free? Shouldn’t a firm be allowed to choose its commercial strategies?

then just goes and spoils it all by saying something stupid like...

the European Commission intervened in the Microsoft case not because it wanted to second guess Microsoft’s business acumen but because it feared that what might make commercial sense from the point of view of Microsoft might not be in the best interest of society as a whole.

That is it. The State said "It is not good for society" so problem solved, there is no need for any further discussion apparently. :dough:

It then goes into 38 pages about "market power," "monopoly," "barriers to entry," "anti-competitive behaviour" etc

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How am I supposed to answer this question from a 3rd year economics course?

I am thinking to address the false premises and inaccuracies in the question in the intro, then to try to answer the question as best I can that a free market actually achieves their goal best of all... but they just want you to parrot from their textbook so I don't know if I should bother fighting them.

The textbook section actually starts so well:

then just goes and spoils it all by saying something stupid like...

That is it. The State said "It is not good for society" so problem solved, there is no need for any further discussion apparently. :dough:

It then goes into 38 pages about "market power," "monopoly," "barriers to entry," "anti-competitive behaviour" etc

I think it all depends on how open your Prof is to knew ideas/having his ideas challenged. After spending three years in college, I'm sure that you've realized that Professors aren't the bastione of open mindedness that they profess to be. Having said that, if your prof doesn't mind controversy and won't grade you down for saying something that he disagrees with, I'd stick with your current plan.

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I am thinking to address the false premises and inaccuracies in the question in the intro, then to try to answer the question as best I can that a free market actually achieves their goal best of all... but they just want you to parrot from their textbook so I don't know if I should bother fighting them.

Fight them, to do otherwise would be bad for you. The discussion topic is arbitrary. You should start by asking not "the best way to ensure...." but why, and how markets should deliver economic welfare at all. It says "discuss", not "agree", so unless the professor is a dogmatic leftist (woudnt surprise me), its in your best interest to be honest and call bullshit on the whole topic. Or you could say, its not the markets job to deliver economic welfare, its the governments, he'll probably like that.

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How am I supposed to answer this question from a 3rd year economics course?

Without knowing your professor, I don't see a problem with the statement, or the write up in the book. The write up appears to be pretty factual in ascertaining the EU's motivation was fear that what's good for Microsoft might not be good for society.

The best way to answer this is to take the statements at face value. He does say to "discuss" the statement, not "back up" the statement.

The subjective terms in the statement are : "best way," "ensure" (twice), "appropriate level," "economic welfare," and "strong competition."

Each of these terms represents an assertion/premise and provides an opening for discussion for and against the assertion and the conclusion. In order to understand the issue fully, you would be well served to notionally accept each side of each assertion and lead it to its logical conclusion, if you can. Otherwise, you are just going to be making counter assertions.

You would do this, not to convince anyone else that you are right, but to find, isolate and dissect the contradictions (if any) in the statement. I say "if any" so you don't fall into the trap of assuming they are contradictions before you understand why.

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I'm just graduating with an Econ degree, and unfortunately for the professors I've integrated their disparate concepts a little bit.

If you apply a dynamic money-based model to Monopoly profits then those profits will lead to more money in the Monopolist's bank account that he can't spend this period, which in turn lowers interest rates. In the end, economic theory assumes that no one would hold excess value past the end of their lifetime, so the 'Dead Weight Loss' would be restored to the economy.

Just think about the real economy - if Monopolist profits make people work less to afford that product, then they'll have more time to work towards affording other things. Total production is theoretically the same. In the multi-period aggregate, only the proportions by which different sectors produce differently affects distribution of income. In fact, an anti-trust authority - by pure economic theory - wouldn't even necessarily harm the monopoly's long term gains by forcing it to charge 'competitive equilibrium' price.

However what anti-trust authority does is forbid the monopoly from making production-level decisions - and that DOES affect the total productivity and thus 'welfare' of society negatively.

Now, an economist who supports anti-trust measures would argue that 'market power' either hurts equitable distribution of wealth, or otherwise diminishes 'choice' in society. That's not true in the latter case because a 'natural' (non-government) monopoly maintains market power by offering better products at lower costs - something not even considered in the monopoly profits models (that better quality brands lead to market power and therefore by having differentiated products you can obtain greater market share - something that raises value because presumably your better products are in fact cheaper and more highly valued). In the former case, the only thing to prevent this is public ownership of the means of production - pure socialism.

The only 'mixed market' justifications for anti-trust are as follows:

1) 'Market power' can lead to political power if big evil corporations pay off politicians, bureaucrats, and the like. This is only true in societies where government is empowered to interfere in economics. If all parties agree to separate state and economics, there's no place for this sort of 'special interest'.

2) While long-run equilibriums might make monopolist profits indifferent, short-term disruption, sticky prices, inefficiencies, inadequate information, etc. can make the effects of market concentration in the 'real world' really "harsh and unbearable". And economists and their political allies only want to help "smooth things out a little". This, by the way, is the same argument for public monetary policy - to "smooth out the business cycle just a little so everyone's lives can be a little easier". Well, any cursory and honest examination of the negative effects of anti-trust would seem to overrule any "smoothing out" arguments.

Those are my conclusions from college econ.

One last thing. "Competition" in economic theory ultimately means that nobody makes any money. Seriously, only 'real world' imperfections provide the 'nicks' in the system that allow for any money to be made. I'm not kidding, under many models it's more profitable to sit down and die then work and produce anything.

Well, that's about in line with the philosophical implications of collectivism - anyone here should understand why. And that's the main problem with economic theory: it's utilitarian - anywhere in society where there's any extra value, the assumption is that everyone equally attempts to acquire it. Uh?

Here's the one profound truth no collectivist will accept, but which is fundamental to real economics: value is produced because some people are better at producing it than others. There is a division of labor - the whole reason why trade is necessary. If it weren't for unequal production and the resultant 'unfair' distribution of wealth in society, we'd all might as well be building sandcastles instead of skyscrapers.

Edited by ZSorenson
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