Economics is Fun, Part 11: Competition

[Chris]

Trying to catch up with his latest releases! This is an interesting topic.


http://www.youtube.com/watch?v=EHKgcLkniUc&list=PL06A6035D1EAF3D0E&index= 11&feature=plpp_video

[Conley]

The sun never shines in London...each time I see a new video the background is even more gloomy than the last one.

On topic, great video and it underscores the importance of preserving competition. If the government prevents competition, then a company can set prices at whatever they want. I worry about state sponsored monopolies in this country ((say cable television). With all the corporate money in politics these days I believe it's more of a risk than ever.

[Peter1469]

Good video.

The rational behind monopolies in the utilities area was that it would be economic waste to have two or more companies expend the resources to provide utilities to the same geographic area. That is why government stepped in to negotiate a fair price for the service. Of course if the government does a poor job negotiating or allows the utility provider to get away with substandard service, then we have a problem.

[Chris]

But such monopolies are foreign to the Invisible Hand.

[RollingWave]

Good video.

The rational behind monopolies in the utilities area was that it would be economic waste to have two or more companies expend the resources to provide utilities to the same geographic area. That is why government stepped in to negotiate a fair price for the service. Of course if the government does a poor job negotiating or allows the utility provider to get away with substandard service, then we have a problem.

Which tends to be why a lot of country simply nationalize such services....

There is also the prolem of say... you only have one dam in the area, if that dam is owned by a company how in the world is another one suppose to compete with them to begin with? and I'm fairly sure even the most free-market oriented folks would agree that private companies can't just dam whereever they like.

Alot of other such problems exist, in taiwan for example there's basically only one rail way going around the whole island, which kinda makes it difficult to have more than 1 train service companies. the US have gotten around this somewhat because they are large enough and have many seperated railways.

Though the nationalization also brings the problem the other way around, the government have surpressed he rate on the train service for so long and have ran a lot of rather unprofitable routs that the train company is in fact losing a lot of money, which goes on the taxpayers eventually. though the alternative doesn't seem a whole lot better. for example, Greece is now forced to privatize their trains, and unsurprisingly there's no bidders that want to get into the hellhole that is Greece right now, so the Greeks are looking at no train service at all soon.

[Peter1469]

But such monopolies are foreign to the Invisible Hand.

Of course.

And it is not practical for 2 dozen businesses to load up the landscape with their own telephone poles and wires. Not they they could afford it if they wanted to.

That is why we allow monopolies.

[Peter1469]

Which tends to be why a lot of country simply nationalize such services....

There is also the prolem of say... you only have one dam in the area, if that dam is owned by a company how in the world is another one suppose to compete with them to begin with? and I'm fairly sure even the most free-market oriented folks would agree that private companies can't just dam whereever they like.

Alot of other such problems exist, in taiwan for example there's basically only one rail way going around the whole island, which kinda makes it difficult to have more than 1 train service companies. the US have gotten around this somewhat because they are large enough and have many seperated railways.

Though the nationalization also brings the problem the other way around, the government have surpressed he rate on the train service for so long and have ran a lot of rather unprofitable routs that the train company is in fact losing a lot of money, which goes on the taxpayers eventually. though the alternative doesn't seem a whole lot better. for example, Greece is now forced to privatize their trains, and unsurprisingly there's no bidders that want to get into the hellhole that is Greece right now, so the Greeks are looking at no train service at all soon.


I generally agree with you on this point. The free market cannot solve all issues.

[Chris]

Of course.

And it is not practical for 2 dozen businesses to load up the landscape with their own telephone poles and wires. Not they they could afford it if they wanted to.

That is why we allow monopolies.
The lines are shared. Only one line comes to the house but I could select among any number of telephony services--I chose actually to go digital and get phone service via cable. No need for monopolies at all.

[Chris]

Traditionally natural resources like rivers, air, fisheries, etc are held to be shared as the commons. Tragedy of the commons problems like you two are discussing are sometimes worked out by people, in the free market simply by recognizing the need to cooperate as much as compete, and sometimes not worked out, and government can be a cause of such problems.

[Peter1469]

The lines are shared. Only one line comes to the house but I could select among any number of telephony services--I chose actually to go digital and get phone service via cable. No need for monopolies at all.

Lines are shared today. I don't believe that was the case in the past. I agree that today tech is making the need for monopolies less.

[Peter1469]

Traditionally natural resources like rivers, air, fisheries, etc are held to be shared as the commons. Tragedy of the commons problems like you two are discussing are sometimes worked out by people, in the free market simply by recognizing the need to cooperate as much as compete, and sometimes not worked out, and government can be a cause of such problems.

My favorite example is the levy system for a town in a flood plain. A free market likely wouldn't protect the entire town. Just the really important parts of that. Which is OK, if you are part of that important part.

[Stoney]

Levies and flood dams have not prevented flooding or flood damage. They just provide the perception to some that they are protected and maybe a reason to pay for the losses. The free market wouldn't have people building homes where tax payers are sure to have to pick up the tab for the losses.

[RollingWave]

Levies and flood dams have not prevented flooding or flood damage. They just provide the perception to some that they are protected and maybe a reason to pay for the losses. The free market wouldn't have people building homes where tax payers are sure to have to pick up the tab for the losses.

Ok, that is just not true, go back and read some history, it use to be everyyear that hundreds if not thousands of folks die to flooding a year in almost ANY country , and if we're talking about China, then it's usually in the upper thousands. and back then population concentration was much lower, if we use a more recent example, when the Nationalist army blew up the Yellow River dams in WW2 to try to stop the Japanese advances, it reported killed something in the range of 800 thousand people (a number folks often argue to be too low!). aka more than the two nukes dropped on Japan combined..... by about 4 times!!

Flood prevention is the oldest form of public project in man kind history, you think everyone over the last 6000+ years have been wasting their time on something they don't really need?

[Chris]

My favorite example is the levy system for a town in a flood plain. A free market likely wouldn't protect the entire town. Just the really important parts of that. Which is OK, if you are part of that important part.
We've argued this before. The initial efforts at building levees were private, free market undertakings.

Have to agree with Stoney here.

If people want to risk living along a river known to flood, have at it, but don't expect others to bail you out.

[Conley]

We've argued this before. The initial efforts at building levees were private, free market undertakings.

Have to agree with Stoney here.

If people want to risk living along a river known to flood, have at it, but don't expect others to bail you out.

The thing is there are risks everywhere. Can't build in the Midwest - tornados. Southeast? Hurricanes. California? Wildfires and earthquakes. These regions all contribute to the tax base so when occasional disasters happen how are they being bailed out by others?

[Mister D]

Ok, that is just not true, go back and read some history, it use to be everyyear that hundreds if not thousands of folks die to flooding a year in almost ANY country , and if we're talking about China, then it's usually in the upper thousands. and back then population concentration was much lower, if we use a more recent example, when the Nationalist army blew up the Yellow River dams in WW2 to try to stop the Japanese advances, it reported killed something in the range of 800 thousand people (a number folks often argue to be too low!). aka more than the two nukes dropped on Japan combined..... by about 4 times!!

Flood prevention is the oldest form of public project in man kind history, you think everyone over the last 6000+ years have been wasting their time on something they don't really need?

Humans have settled along rivers from time immemorial. I agree with what you've said.

[Chris]

Along rivers, yes, in flood zones? Flood zones make good farming land.

[Chris]

The thing is there are risks everywhere. Can't build in the Midwest - tornados. Southeast? Hurricanes. California? Wildfires and earthquakes. These regions all contribute to the tax base so when occasional disasters happen how are they being bailed out by others?
By the feds or states declaring disasters and legislating relief.

[Peter1469]

We've argued this before. The initial efforts at building levees were private, free market undertakings.

Have to agree with Stoney here.

If people want to risk living along a river known to flood, have at it, but don't expect others to bail you out.

The free market did not erect a levy system along the entire length of the Mississippi River. Without that system much of the most profitable farmland in the nation would be piratically unusable at least part of the year and a bad snow melt could cripple farmland for years; unless you wanted to grow rice....

[Stoney]

This is what I posted above.

"Levies and flood dams have not prevented flooding or flood damage. They just provide the perception to some that they are protected and maybe a reason to pay for the losses. The free market wouldn't have people building homes where tax payers are sure to have to pick up the tab for the losses."

Two posters have suggested those words aren't true. But they absolutely are. Do I have to show evidence of the floods that happened last year, or the year before, or the year before that. I've been going to Grenada Lake, a flood control lake off the Mississippi River near Grenada, Mississippi for 40 years and have watched some flooding in that town almost every one of those years.

Government providing levees that prevented flooding might be a good thing. But when they don't prevent floods they provides us with an obligation to pay for the damage caused. If levees are what's needed for entrepreneurs to profit from the "delta" of the Mississippi then they'd figure it out, or a better solution.

[Peter1469]

That the levies don't protect against every flood is a given. The "free market levies " would be non-existent and provide zero protection 100% of the time.

[Peter1469]

This is what I posted above.

"Levies and flood dams have not prevented flooding or flood damage. They just provide the perception to some that they are protected and maybe a reason to pay for the losses. The free market wouldn't have people building homes where tax payers are sure to have to pick up the tab for the losses."

Two posters have suggested those words aren't true. But they absolutely are. Do I have to show evidence of the floods that happened last year, or the year before, or the year before that. I've been going to Grenada Lake, a flood control lake off the Mississippi River near Grenada, Mississippi for 40 years and have watched some flooding in that town almost every one of those years.

Government providing levees that prevented flooding might be a good thing. But when they don't prevent floods they provides us with an obligation to pay for the damage caused. If levees are what's needed for entrepreneurs to profit from the "delta" of the Mississippi then they'd figure it out, or a better solution.


Let me know when you discover your libertarian utopia.

[Peter1469]

Along rivers, yes, in flood zones? Flood zones make good farming land.
And good land for population control via drowning.

BTW, where is the libertarian utopia these days? Other than in my dreams?

[Stoney]

Let me know when you discover your libertarian utopia.

You need to try F & I. Your willingness and ability to formulate a reasoned response would fit right in.

[Chris]

And good land for population control via drowning.

BTW, where is the libertarian utopia these days? Other than in my dreams?
Arguing with oxymorons is weak.