Caleb,

I think part of the problem we (libetarians) have is that we /do/ see
mergers, acquisitions, cartels, etc all around us and there is a
definite sense in which the market is consolidating and leading to
monopoly. So many conclude that markets themselves must lead to monopoly.

There are a couple considerations here, however.

1) In some instances the merging of two smaller firms into a larger one
may be more economically efficient due to economies of scale. It could
be a case of the market moving from incorrectly sized firms (given
consumer preferences for choice and price) to firms that are correctly
sized. Such a move shouldn't be considered a bad thing since it is
welfare enhancing and still leaves room for competitors to emerge and
try to do things better.

2) There are more government regulations on the books than an individual
could read in his lifetime. The end result is to erect rather large
barriers to entry, protect incumbent firms, and make it legally
impossible to compete. How much of the consolidation and monopoly is
caused by government? My guess is most of it. And it's unfortunate
because the default assumption people make is that it's the market not
the regulations.

Back in the day economists defined monopoly, not as a single firm in an
industry or by some herfindahl index but rather it was 'a grant of legal
privilege handed out by the government'. The reason was they knew that
if the industry was free there is nothing the incumbent firm could do to
keep out competition. Any so called barriers to entry (start up capital,
advertising, research, etc) also have to be navigated by the first firm
in the industry. If the first firm can overcome those barriers, then so
can subsequent firms.

I my opinion the education establishment really pushes the narrative
that markets lead to monopoly without the government saving us from it.
I learned that in public school. I suppose you did as well. It's even to
the point where it is a "well known fact" that prior to anti-trust in
the late 19th century, that free markets were creating monopoly all over
the place.

The problem is that narrative is 100% false. If you take a look at the
prices and output of the industries that were allegedly monopolized in
the 19th century, you find that output was expanding and prices were
falling almost across the board. Harley indicative of monopoly. What was
happening was #1 above. The market was moving from less efficient,
unmechanized modes of production, to mechanized production, which
obviously has larger economies of scale. So the number of firms was
going down, but so were prices while output expanded. That's how markets
work. People with either a lack of knowledge of economics, or a
political agenda have wrongly interpreted that period as a period of
monopoly run amok.

Anti-trust largely came about, not as a response to monopoly, but rather
inefficient businessmen complaining that they were being out-competed by
larger mechanized firms. It was a rent-seeking measure not an
anti-monopoly measure as we are told.

Here's a journal article on the topic:
http://mason.gmu.edu/~trustici/LAW108/The%20Origins%20of%20Antitrust-%20An%20Interest%20Group%20Perspective.pdf



On 10/22/2014 02:29 PM, Caleb James DeLisle wrote:
> On 10/21/2014 10:18 PM, Chris Pacia wrote:
>>> tl;dr wealth and power are interchangeable, wealth/power pools
>>> up in certain lucky and industrious individuals, without
>>> redistributing it, democracies devolve into oligarchies and then
>>> eventually into monarchy or chaos. The US is in the oligarchy
>>> phase.
>> This likely does apply to democracies since those with access to power
>> to use it to their advantage. Some gain at the expense of others. But
>> for your indictment of libertarianism to stick you need to show that
>> pure free market would do the same thing. How? What are the causal
>> mechanisms?
> 2 good questions, is there a historical record of monopolization of
> free markets and if so, why.
>
>> Despite public schools doing their best to indoctrinate the
>> belief that free markets lead to wealth consolidation from which we need
>> the government to save us, there is really nothing in economics
>> supporting this claim and economic theory and the bulk of economic
>> history disprove it.
>>
> I'm not sure how you define The Free Market, some definitions bear
> a resemblance to the physicist's "weightless vacuum", an unattainable
> state which may not may not do much for explaining things but
> certainly protects The Economist's beautiful model from a fickle and
> unforgiving reality.
> If we imagine The Free Market as something concrete like the local
> bazaar, we run into a dependency on The State's monopoly of violence
> to prevent Bad Harry (the antisocial .01%) from shooting you and
> taking your goods rather than paying, or more realistically,
> establishing his own "state" and charging you sales tax.
>
>
> To what history are you referring? It seems to me that history has
> been a long story of thugs uniting to form gangs, warlords then
> states while professionals united to form guilds, corporations and
> then eventually oligopolies and monopolies.
>
>
> Thanks,
> Caleb
>
>
>>
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