This is all a result of a lack of active market regulation. The government needs to step in actively to keep a free market from collapsing into one of the natural end states. But the US has consistently been far too passive and accepts greedy companies far too readily.
If a single company can sell almost 100% of an essential good, they need to atomatically lose the power to set their prices and margins independently. Let them go through a cumbersome govenment approval process for price changes or something to cap margins. Price fixing cartels need to be busted more aggressively.
> If a single company can sell almost 100% of an essential good, they need to atomatically lose the power to set their prices and margins independently.
The fallacy is assuming that the government will make everything cheap for consumers.
In practice, government regulation of prices just changes the game. Look at any market with rent control: There are numerous meta-games around building or not building new supply, landlords are incentivized to not fix units because they know tenants don’t want to give up their rent control and move, and a new market emerges where people illegally sublet their rent controlled apartments because it becomes attractive to take advantage of the market demand that landlords aren’t allowed to capitalize on.
The other fallacy in all of this is thinking that companies control both supply and demand. For nearly all commodities, there is a price where consumers won’t pay for it. If rents get too high, people move to a different city. If gas gets too expensive they start carpooling and looking for WFH jobs. If eggs are too expensive they eat something else. These choices make people angry as hell, but there’s no denying that these choices exist. Companies can’t push past these limits and force people to buy at any price. They still have to discover that point on the supply and demand curve.
> If rents get too high, people move to a different city.
With what money? It takes three months rent up-front to move (first+last month rent and a deposit equal to one month rent) up front. People _need_ a place to live and will spend every last dollar to not be homeless.
The government won't make things cheaper. The point of the regulation would be to actively encumbered the monopolist company and either give strong incentives to split up or make room for nimble competitors.
What. Are you advocating for monopolies? Obviously there is a point where people stop buying essentials. The point of capitalism is to deliver goods as cheaply as possible. If toothpaste costs $60 I would still buy it because I need toothpaste. But that extra money now goes to someone who isn’t producing, they are mooching. It’s a welfare check to a billionaire. In a monopoly pricing is fixed at maximum profit, which could make goods 10x or 100x for things with relatively inelastic demand.
The government does not make things cheaper, competition does. The government’s role is to protect competition. Otherwise companies will collude not to compete.
"But the US has consistently been far too passive and accepts greedy companies far too readily."
All companies are greedy. That's the reason for existence. Your point that monopolies and oligopolies need to be crushed is very valid though. I wish more mergers were rejected in the first place.
Regulating prices is a recipe for disaster though.
That's an assertion, not a statement of fact. Pricing in natural monopolies is a mature subject, and public utilities have been a thing for over 100 years. Also, pricing for medical procedures is regulated in Europe, and it works extremely well.
Yes, it's preferably over allowing a monopoly to set prices. However, wherever possible you should break up the monopoly or prevent it on the first place. Of course there are conditions where that's very hard and you mention some of them.
Setting prices where you could just have a functioning market has historically been well proven to lead to disaster. Look at any communist country. The GDR ended up allowing luxury stores that were not price bound and they were a huge hit for a reason.
The wait time for medical procedures is extremely long in places with price caps.
It does not work “extremely well” at all, it results in shortages and wait times exactly as you would expect from economics 101. I’m speaking from personal experience having been through it myself but feel free to look up how many Canadians go to the US every year and pay out of pocket for more evidence.
I feel that US companies are consistently more ruthless and cut-throat than companies in other countries I have visited. I see that as cultural rather than a pure economic issue.
That's not really how that works. It's more along the lines of saying "we're doing this good thing because I want to and I have majority control so I don't have to care about the other shareholders" vs. saying "we're doing this good thing because it's good PR that may increase sales or help placate regulators" even though the thing you're doing is the exact same thing.
There are a lot of rules whose de facto consequence is to prohibit describing the true reason someone is doing something instead of actually prohibiting them from doing it.
One race-to-the-bottom phenomenon that (to me at least) appears to aggravate the impact of "corporate greed" is the social loop that goes as follows:
1. company decides to push the boundaries of the socially acceptable when it comes to cutting corners (e.g. screwing their customers, or employees, or environment, or debtors)
2. People don't like it, but rationalize this as being a natural consequence of incorporation and the profit motive. Hence while they grumble, there negative impacts to public perception don't actually cost the company as much as you might think
2b. Even if there's a boycott, there will be vocal minority that thinks it's all a bunch of whiny <target audience we're better than>. They'll actively harass or undermine said boycott or backlash, even if in a purely egotistical sense their interests are actually aligned with the boycotters
3. Social norm is reset; we all collectively expect even less from companies. That doesn't however mean the new norm is better or maintained, because as soon as there's some new major conflict between short-term profit and maintaining a decent reputation in public, we go back to step 1 from the new, lower baseline.
Stuff like increasing partisanship, and decreasing incentives for journalist (whether profession, citizen or influencer) to maintain their professional standing (as opposed to targeting clickbate) probably smears those gears nicely.
Many companies have historically clearly paid well over the odds to maintain their reputation, and done well doing so. It's just not true that nihilistic short term greed has always paid; obviously it didn't and still doesn't really. It profitable to do the little, but simultaneously also to do as many cheap things that materially affect public standing as possible.
By promoting the profit motive past a merely utilitarian means to an efficiency-optimizing end into a matter of national identity and point of distinction vs. in particular the USSR, we've shifted our culture beyond what's really rational. We (as a society) don't merely respect and understand the profit motive; we see it as a sign of merit - and significant enough merit that "winning" on that scale excuses a lot of other bad behavior.
I'm curious what you base that on. For instance, we've never really allowed literally cutthoat competition, nor things like fraud and we've generally not allowed misrepresentation. Governments intervene heavily and always have to set those kind of boundary conditions - but there are really lots of them. Economies of scale seem to be very, very common ever since the industrial revolution; and even more so in today's information-economy platform era.
I'm sure there are plenty of cases where significant competition is a natural end state, but how common those are in comparison? I'm curious.
The observation that the least regulated markets are typically the most competitive ones and that large companies rarely tend to maintain their lead over long periods of time. And at least one Nobel Prize-winning economist agrees with me: https://www.youtube.com/watch?v=tdLBzfFGFQU
While a humorous response by Milton and an interesting debating point, the argument he makes is pretty weak because it almost inevitably reduces to complete lawlessness, doesn't really define which government "granted" monopolies he's willing to give up, and ultimately relies on a fairly arbitrary definition of what government even is - and one that if you really let it go to the extreme not only obviously just doesn't work well for most people, it also does not avoid monopolies as is witnessed every day around the globe.
After all, the natural inclination of a powerful elite is to protect their interest. It's business 101 to want a moat, and tearing down one set of artifical legal protections that allows for a moat allows on the other hand for the far more extreme quite physically violent moat in the form of a putin-esque kleptocracy.
The argument merely sounds convincing because it's very selectively implying that certain monopolies are created by state power and might be weakened by free market principles without considering what a free market even is (generally a regulated one), nor addressing the fact that other monopolies will arise precisely because because the lack of regulation allows winner-take-all brute force strategies to work.
That doesn't mean Milton's ideas are without merit - but that there is a breaking point; dogmatically hoping for anarchy to avoid harmful centralization of power is problematic because of the dogma; not because it's never a valid approach.
But sure, if you're going to embrace Milton's (intentionally) vague proposition in the way it was likely intended - to provoke thought - then sure; there are state regulations that are in part to blame for some of today's near monopolies - the interaction between intellectual property, incorporation, and state-enforced contract law. As a matter of debate, sure, it'd be interesting to weaken all three and in particular their interactions. I just highly doubt that's very practical, nor would it be very easy to predict the outcome, especially once international power-plays start circumventing even the best of intentions.
1) Government imposes regulatory barriers to entry, inhibiting new businesses from entering the market
2) Incumbents buy each other and raise prices
If you only had the second one then as soon as the incumbents tried to raise prices, new businesses would want a piece of it and enter the market, causing prices to fall until it was no longer profitable to enter the market.
The argument that you are making is that a single entity controlling the pricing of a good is bad. That's not a counter-argument, it's the same argument. It's bad when a government does it, it's bad when an oligopoly does it. More than one thing can be bad.
Well let's see, the Russian market collapsed primarily because of sanctions. The Venezuelan market also collapsed primarily due to sanctions. And of course the Cuba market collapsed primarily due to sanctions.
It seems to me that the US and other nations locking these countries out of the global market has been a pretty major factor in their current economic situation. Do you disagree? I'd also posit that it might be the case that an autocratic takeover in each of these nations has negatively impacted them.
Redbaiting in 1950s turned out to be absolutely right thing to do, as latest unclassified documents showed. The problem is that now huge amount of us population live in the capitalism but preach socialism, even though there’s quite good choice of leftist countries where they can migrate to.
> The problem is that now huge amount of us population live in the capitalism but preach socialism, even though there’s quite good choice of leftist countries where they can migrate to.
If you can’t be intellectually curious why even be on HN?
Strawmanning like this may make you think you’re clever but it signals to the “average person” that your mind is made up.
I don’t read articles here because my mind is made up but because I like considering different points of view and data. Maybe start with that spirit next time?
If the government owns all it is FAR worse. Intel used to be a monopoly in practice. Now it’s not. The manufacturer of CPUs in USSR though never ceased to be the one and only. Is it dumbed enough for you to understand?
That's pretty funny coming from someone attempting to manipulate people who have read the comments but not the linked article, or the original reporting that is linked to in said article.
You left out all four companies feeding data to PotatoTrac, all four companies announcing raising their prices by the same amount at exactly the same time, executives shifting which company they work for like it's a merry-go-round, the four companies communicating extensively between each other in a way not even remotely natural for competitors, the companies demanding suppliers not take on other customers, restaurant distributors forcibly bundling fries with other foods so that restaurants have to sell them, and so on.
> The government needs to step in actively to keep a free market from collapsing into one of the natural end states.
Which is what, exactly? The US is per capita richer than almost all EU countries by a huge margin (with a few small exceptions mostly enabled by regulatory arbitrage targeting US money), so forgive me if I don't take your seething commentary about the US economic apparatus very seriously.
Any free, unregulated market will eliminate competitors until they create an oligopoly or even a single monopoly. It's an immediate consequence of the rules of the market.
The content of the article shows that it is still a problem. You think that landlords and food suppliers colluding to raise prices to just below the breaking point is not a problem?
It's not a "breaking point", it's the market rate. There's no landlord cartel; anyone can easily defect and lower their own prices.
The entire food production and provision supply chain has razor-thin margins. If you're hyperfocusing on that industry, it's a sign that your heuristics are pointing you at the wrong things.
Outright monopolistic pricing is also "the market rate". Frankly, virtually any price somebody is willing to pay is almost by definition "the market rate". It's a meaningless defense for an artificially high price.
Standard Oil: Its monopoly was already crumbling before antitrust action. By 1911, market share had plunged from 90% to 64% as competitors like Gulf/Texaco emerged and new oil fields broke its grip.
Carnegie Steel: Government intervention. The federal government imposed steep tariffs on imported steel, shielding domestic producers like Carnegie from foreign competition. Without those tariffs, cheaper British/German steel would have kept Carnegie’s dominance in check.
Southern Pacific Railroad: Government intervention. The federal government gifted it, through the Pacific Railroad Acts, millions of acres and subsidized loans. This state-sponsored land monopoly let it block competitors from critical routes.
Google. Microsoft. Facebook. If it weren’t for antitrust, there’d be a lot fewer cell phone companies or airlines. I mean, it’s harder to name an industry where there hasn’t been consolidation. The only thing stopping it is the law. Consolidation was basically illegal until the 1980s. If you wanted to grow, you had to compete.
Google was literally declared a monopoly by a court recently. Facebook and Apple both are oligopolies or monopolies in certain market segments. Apple has a monopoly on app store and on device payments. These things are bad enough that they’re being litigated.
If a single company can sell almost 100% of an essential good, they need to atomatically lose the power to set their prices and margins independently. Let them go through a cumbersome govenment approval process for price changes or something to cap margins. Price fixing cartels need to be busted more aggressively.