To Bail or Not to Bail...

[iKotomi]

Ok. So once we do away with intellectual properties (among other pesky noncompetitive practices like anti pollution statutes etc), we'll have a free market for the first time ever?

That wasn't the point. You just made a totally bunk statement that free markets create monopolies which is about as far from the truth as possible.

 

[Marginal]

That wasn't the point. You just made a totally bunk statement that free markets create monopolies which is about as far from the truth as possible.

Then you said that stuff like patents (intellectual property) helps artificially create monopolies.

You'd be better off explaining how Standard Oil either wasn't a monopoly, or how it was built by the government.

 

[iKotomi]

Patents do create artificial monopolies. There is nothing you can really argue against, as that is a positive, not normative statement. If you invent something and you don't have patent laws, you think that the market would just be nice to you and let you scoop up all the profits? I don't think so. Patents are just legal documents that prevents people from copying your idea. There is quite literally nothing else stopping another person from using that idea to better effect than you are, and ultimately create inefficiencies. Again, that is a positive, not normative statement.

Yes Standard Oil, US Steel were monopolies that weren't created because of government interference. Note how companies like that are few and far between, and even then, they don't remain monopolies in the long run. Monopolies exist because the monopolist can exclude competitors. This can be because of prohibitively high startup costs, as well as very limited resources, as the case was with standard oil. It's a little hard to compete against a monopolist in the oil industry because you can't just set up a factory anywhere you want and start producing oil.

Markets like that however, are exceptions and not norms. I'd prefer not to start nitpicking at the abundance of natural monopolies in infra-structure heavy industries like energy, telecommunications, etc. If you want to say that most markets follow that example, than I can't really argue against you, except say that they don't.

I'm just pointing out the economic facts, and have not really infused any opinion. Note that I never said that we shouldn't have patents. They create an incentive to think of new ideas, and that's a good thing. But nothing changes the fact that they are an artificial barrier to entry into a market.

 

[Marginal]

Yes Standard Oil, US Steel were monopolies that weren't created because of government interference. Note how companies like that are few and far between, and even then, they don't remain monopolies in the long run. Monopolies exist because the monopolist can exclude competitors. This can be because of prohibitively high startup costs, as well as very limited resources, as the case was with standard oil. It's a little hard to compete against a monopolist in the oil industry because you can't just set up a factory anywhere you want and start producing oil.

Especially when that company's actively working to shut any competition down as well. I do wonder how long they would've held on without government interference.

Markets like that however, are exceptions and not norms. I'd prefer not to start nitpicking at the abundance of natural monopolies in infra-structure heavy industries like energy, telecommunications, etc. If you want to say that most markets follow that example, than I can't really argue against you, except say that they don't.

Doesn't that really depend on the operators in the business? The sure way to ensure success is to remove your competition.

Are newspapers a natural monopoly?

I'm just pointing out the economic facts, and have not really infused any opinion. Note that I never said that we shouldn't have patents. They create an incentive to think of new ideas, and that's a good thing. But nothing changes the fact that they are an artificial barrier to entry into a market.

Yes. What I'm curious about now is, was there ever an operating free market? Just sounds like a pie in the sky economic form of anarchism the more I hear about it.

 

[Egg]

Marginal Master of the Multi-Quote. People have tried copying him in the past, all have failed. Please continue I have nothing intlectual to add. Except for it turning into Socialism for the wealthy.

 

[ArmLegLegArmHead]

i dont know about you guys but i cant wait to see what california does in the next couple weeks. prisoners being ordered to start releasing, holding welfare and tax returns and college grants. its not even isolvency its default. they are in trouble. soooo, is the gov going to bail them out. if not seniors needing assistance for mental health arent going to get help and neither are disabled. uh oh. domino #1 is about to fall.

check out what some states are doing.
HOUSE CONCURRENT RESOLUTION 6:
A RESOLUTION affirming States’ rights based on Jeffersonian principles.
SPONSORS: Rep. Itse, Rock 9; Rep. Ingbretson, Graf 5; Rep. Comerford, Rock 9; Sen. Denley, Dist 3
COMMITTEE: State-Federal Relations and Veterans Affairs

That should any such act of Congress become law or Executive Order or Judicial Order be put into force, all powers previously delegated to the United States of America by the Constitution for the United States shall revert to the several States individually. Any future government of the United States of America shall require ratification of three quarters of the States seeking to form a government of the United States of America and shall not be binding upon any State not seeking to form such a government

thats the start of it. other states are getting legislation ready in the case of martial law that they can call service men back to their home state to defend it, making that state sovereign.

and this.
That any Act by the Congress of the United States, Executive Order of the President of the United States of America or Judicial Order by the Judicatories of the United States of America which assumes a power not delegated to the government of United States of America by the Constitution for the United States of America and which serves to diminish the liberty of the any of the several States or their citizens shall constitute a nullification of the Constitution for the United States of America by the government of the United States of America. Acts which would cause such a nullification include, but are not limited to:

I. Establishing martial law or a state of emergency within one of the States comprising the United States of America without the consent of the legislature of that State.

II. Requiring involuntary servitude, or governmental service other than a draft during a declared war, or pursuant to, or as an alternative to, incarceration after due process of law.

III. Requiring involuntary servitude or governmental service of persons under the age of 18 other than pursuant to, or as an alternative to, incarceration after due process of law.

IV. Surrendering any power delegated or not delegated to any corporation or foreign government.

V. Any act regarding religion; further limitations on freedom of political speech; or further limitations on freedom of the press.

VI. Further infringements on the right to keep and bear arms including prohibitions of type or quantity of arms or ammunition; and

That should any such act of Congress become law or Executive Order or Judicial Order be put into force, all powers previously delegated to the United States of America by the Constitution for the United States shall revert to the several States individually. Any future government of the United States of America shall require ratification of three quarters of the States seeking to form a government of the United States of America and shall not be binding upon any State not seeking to form such a government;

what are they anticipating?

 

[iKotomi]

Especially when that company's actively working to shut any competition down as well. I do wonder how long they would've held on without government interference.

Where's U.S. Steel now? When you can't easily exclude other firms, monopolies are impossible to maintain in the long run. Something like Oil can be easily excluded because of the nature of the supply.

Doesn't that really depend on the operators in the business? The sure way to ensure success is to remove your competition.

I disagree. Under a perfectly competitive market, as long as you sell everything you produce, you are guaranteed success. Engaging in "uncompetitive" practices introduces risk and potential to lose. What happens when you start a price war? You are guaranteed a net loss, but you have the potential to gain a monopolist status in the long run. How much that helps you is completely dependent on the market conditions like elasticity, but it is far from a guaranteed success, especially when it doesn't change the fact that people will enter the market when the price is inflated high enough for them to get at some of the profit.

Are newspapers a natural monopoly?

Hmm, I think there are good arguments for newspapers being a natural monopoly. Newspapers are an interesting commodity because of the increasing returns to scale. Once you have the reporting, the cost of producing an additional newspaper is negligible if you are capable of operating at a large scale. When you are a small independent paper company, that cost is not negligible. The value of large amounts of capital, and the returns to scale lend itself towards becoming monopolistic. Furthermore, the main source of revenue for newspapers, is advertising. If you're a large newspaper, people will be willing to pay more for advertising.

But that's only in relationship to physical newspapers. The news industry is clearly not a monopoly, because anybody can put up information on the internet for a very cheap price. There's really no reason for me to buy a newspaper now, since there are so many sources on the internet to get news from.

Yes. What I'm curious about now is, was there ever an operating free market? Just sounds like a pie in the sky economic form of anarchism the more I hear about it.

The problem with free markets is that all the theory lies on the existence of long run equilibria, and the necessity for the market to dictate prices. Because there are a variety of industries that are considered vital to society, short run shocks lead to the government intervention. What it comes down to is the fact that theory assumes that you will make trade-offs, but in practice, people don't want to make these trade-offs and pay the price for it (government regulation).

You need stability and security for markets to work. You can't have a free market if you have a mafia, rebels, military regime, etc. physical preventing you from competing. Furthermore, free markets need distinct property rights, or else the result is a market failure with externalities.

Once you have these pre-conditions though, the free market will tend to get you an efficient allocation in the long run. You need to be in a state to worry about the long run first though. But once you have that foundation, societies tend to be more prosperous when the markets are more free, because there is no waste (everything that is demanded becomes produced).

 

[Archangel]

Under a perfectly competitive market, as long as you sell everything you produce, you are guaranteed success.

Yeah, and in a perfect world communism would work fine. But guess what? It doesn't.

Engaging in "uncompetitive" practices introduces risk and potential to lose.

And potential to gain, which is why everybody does it. What naive school of economics did you go to?

 

[iKotomi]

Yeah, and in a perfect world communism would work fine. But guess what? It doesn't.

Perfect competition and perfect world are two very different uses of the word perfect. Firms sell goods at quasi-market prices every day. I never open a newspaper to find that every single good is undergoing a price war, because firms are for the most part happy to settle for the market price.

And potential to gain, which is why everybody does it. What naive school of economics did you go to?

Umm...what? I didn't say that firms don't take risks, and I definitely stated that some firms have an incentive to take such risks given market conditions. Trying to knock down an argument as a strawman by stating a claim made in the original argument doesn't work very well. People compete, but most firms do not aggressively try to get rid of the competition, because any plan to do so has such high risks and low probability of success that it would be stupid to even try, regardless of potential to gain. You don't see much commotion of run of the mill generic products being taken over by brand names for a reason.

 

[Marginal]

Umm...what? I didn't say that firms don't take risks, and I definitely stated that some firms have an incentive to take such risks given market conditions. Trying to knock down an argument as a strawman by stating a claim made in the original argument doesn't work very well. People compete, but most firms do not aggressively try to get rid of the competition, because any plan to do so has such high risks and low probability of success that it would be stupid to even try, regardless of potential to gain. You don't see much commotion of run of the mill generic products being taken over by brand names for a reason.

How many does it take? McDonald's deliberately went this route even though the idea of cornering the hamburger market's absurd.

"The competition, send them south. If they ain't gonna drown, put a hose in their mouth." ;)

The school of thought is definitely out there. Some would argue that MS has aimed for the same thing.

This is an interesting conversation. (Even if you don't agree with me.)

 

[iKotomi]

How many does it take? McDonald's deliberately went this route even though the idea of cornering the hamburger market's absurd.

McDonald's introduced a system of getting people hamburgers faster and cheaper than anybody else, and had a business model that was better than anything else out there. Given that, they just produced to the point that maximized profits, and that was too much for other restaurants to compete with. Though this can hardly be seen as a bad thing, unless you were a competitor, or you just hate Mcdonalds.

Even then, McDonald's can't act as a monopolist, though they have a huge command over the market. If they increase the prices a non-trivial amount, people would just buy hamburgers elsewhere. The competition is better described as "monopolistic competition" because of McDonald's ability to differentiate their product as different from every other hamburger.

Firms will always try to become monopolies if possible, that's a given. Only with a monopoly can you achieve economic profit in the long run. But as long as the market has open entry, most firms can not actually exercise the monopolist's privileges (price setting), and would have to settle for product differentiation at best.

Microsoft has attempted the same thing, but the success of that is more due to the ignorance of the consumer. If the consumer is unable to recognize substitutes, then the model fails. This is sort of related to the reason why most monopolies in existence are the first firms to enter the market. Consumers tend to rely on their trust for brand name rather than actually investigate the alternatives that may be cheaper.

 

[D_Matt_Ma]

Before we start debating what can get us out of recession, we should focus on what got us INTO the great depression. To this day, I think it was the Smoot Holey (I know I butchered the name, oh well) where protectionism lead to a pullback on all capital markets. I do think the New Deal prolonged the depression, but I also feel that it was the former that lead us into depression in the first place. That is why I don't think the ridiculous 1trillion dollar plan is going to destroy America.

And yes, the fact so many want a bail out is disappointing. America, land of the wimps... so sad...

Anyone seeing Obama's performances as he stops by for town halls to pitch the "stimulus?" I hear some townhalls were filled with Obamamaniacs, while others were filled with people that didn't want to talk.

And let's not get into patent theory here. That has nothing to do with bail outs at all.

And if you study the history of Mcdonalds, they actually are successful because of their ability to adapt, not their ability to do one thing well. It started with a simplified drive through simple menu. It then evolved into variety to meet people's needs (fish fillet, chick nuggets, happy meals). It then evolved into meeting healthier needs (introduction of salad and apple substitutes). It now goes into snack/coffee to capture the budget snacker. There is nothing one-shot about Mcdonalds. They're good because they're good at whatever they want to be good at.

 

[Tanegashima]

My favorite economists take. I willl let him speak for himself. I will just say he has an article called The New Kleptocracy.

http://www.michael-hudson.com/

 

[Marginal]

Anyone seeing Obama's performances as he stops by for town halls to pitch the "stimulus?" I hear some townhalls were filled with Obamamaniacs, while others were filled with people that didn't want to talk.

That way, he knows who to arrest.

 

[Archangel]

The town halls are filled with whoever comes. It's refreshing to see an American president meeting with people who haven't signed a loyalty oath.

What a piece of bullshit that was.

 

[D_Matt_Ma]

The town halls are filled with whoever comes. It's refreshing to see an American president meeting with people who haven't signed a loyalty oath.

What a piece of bullshit that was.

Huh? I'm not sure I follow. You saying that as a good thing for Obama or a bad thing for Obama?

Marginal's comment on the other hand... clearly is hillarious. If I were in there, I would put on headphones and try not to listen/talk in hopes of staying out of trouble.

Although I agree Commnism would work in a perfect world, I disagree that Capitalism fails in an imperfect world. I believe Capitalism works because the world is imperfect. There is no other system that can effectively allocate resources when factoring people into the equation. Yes, I can allocate resources better than 99% of the world, but will I ever be the dictator? No. So the next best thing is to let us fight for it amongst ourselves (aka no bailouts). The alternative is to risk a psycho M.Bison/Vega Dictator deciding when I can have Mcdonalds and when I can't (for some reason, when I think of a dictator, Bison comes to my head first)

 

[Jaxel]

FREE MARKET= WORLD PEACE...
Capitalism is only failing because its not a free market when the government puts their hands in the pot (read: Socialism).

Let me explain why FREE MARKET= WORLD PEACE...

Lets say Bob creates a product, and Jane wants it. Without the free market, Jane would walk up to Bob, shoot him in the head, and take the product. This is bad for everybody... Bad for Bob, cause he is dead; and bad for Jane because should she need another of that product, Bob is no longer around to create it. Now, Bob's allies are pissed and put a Jihad on Jane. Sure, its an extreme example, but this is how the world works without the free market barter system.

Now, lets take that same situation and put it on the free market. Bob creates a product, and Jane wants it. Jane would walk up to Bob, offer him a trade (in money or goods), and Bob could accept the trade. This is good for everbody. Nobody gets killed, and if Jane needs another of this product, she can go back to Bob and trade for another. Bob likes Jane because Jane is a good customer, everyone is happy, and there is peace...

Now, lets take that free market situation, and throw in socialism. Here comes Joe... Joe is Bob's boss (read: governing body). Joe tells Bob that he has problems with Jane, he simply doesn't like here for some reason or another, and for that reason Bob is no longer permitted to sell to Jane. Now Jane is trying to get Bob's product, but she cant because Bob is refusing to sell to her. So what does Jane do? She walks up to Bob, shoots him in the head, and takes the product.

Socialism is the exact opposite of the free market... and it negates any progress the free market has towards world peace.

 

[D_Matt_Ma]

Jaxel... I wouldn't have tied free market to world peace. Nonetheless, the imagery behind your post is hillarious. I guess the moral of the story is women walk over men in socialism and capitalism.

 

[Archangel]

Jaxel, total free market fails for the same reason communism/socialism does: People get greedy and they start cheating. Enron was the first sign of things to come.

Matt: It's a good thing for America. Obama can handle himself. He might not be doing what you want him to, but he's handling himself fine so far.

 

[Jaxel]

Jaxel, total free market fails for the same reason communism/socialism does: People get greedy and they start cheating. Enron was the first sign of things to come.

Matt: It's a good thing for America. Obama can handle himself. He might not be doing what you want him to, but he's handling himself fine so far.

You're assuming that the Enron fiasco was the fault of greed on the free market... or was it the fault of greed on a government regulated market? Without the government regulations and systems, the Enron fiasco may have never happened. You forget that the Enron fiasco was related to "institutionalized, systematic, and creatively planned accounting fraud". Basically, systems that don't matter when the government isn't involved. You also forget that many people in our government were gaining TONS off what as going on in Enron...

The Free Market is a Libertarian ideal (this country was founded liberatarian); it stresses LESS government interaction and a reduction of power. This country was founded on the ideals that the government should be working for the people, not the other way around. Minimum federal government lets the country work on its own, as it should. The way our government is handling the market, it is pretty much making it impossible for startups to survive anymore; as it gives preference to big business. This kills competition and ends up letting these big companies (read: Bob) treat its customers (read: Jane) like garbage.

According to Thomas Jefferson, a country's people should overthrow its government every 20 years in order to keep the balance of power in check. We are over 200 years behind, and now our government has so much power, it has been systematically taking away our rights.