from The Daily Bell:
Monopolies Are Worse Than We Thought … Economists are increasingly turning their attention to the problem of monopoly. This doesn’t mean literal monopoly, like when one utility company provides all the power in a city. It refers to market concentration in general — when an industry goes from having 20 players to having only 10, or when the four biggest companies in an industry start taking a bigger and bigger share of sales. This sort of creeping oligopoly acts much like a literal monopoly — it raises prices, limits market size and tends to make the economy less efficient. – Bloomberg
Market concentration hurts workers according to this article. It’s true, but makes no distinction between voluntary monopolies and imposed monopolies.
In some cases, monopolies are valuable and adopted voluntarily. For instance, light bulbs are standardized. This is a form of voluntary monopoly and customers do not react against it from what we can tell.
Then there’s the Federal Reserve, which has been given the power to regulate and print money.
The Fed is a government monopoly with all the negatives we associate with this kind of monopoly. It runs money for the sake of a handful of people and not for the larger good.
Additionally, the idea that the Fed could run money and regulate banks for the larger good is suspect anyway. It is not going to turn into an eleemosynary institution just because it has the ability to exercise a monopoly.
I suspect that creeping monopoly will prove to be one of the main reasons for decreasing business dynamism. And it could even be a contributor to slow productivity growth.
In other words, many of the diseases in our economy can probably be traced, at least in part, to the problem of market concentration. In a previous post, I mentioned a couple of potential causes. The obvious culprit would be a more lax attitude toward antitrust enforcement.
If free-market fundamentalism caused the U.S. to be friendlier toward big mergers since the 1990s, this could have encouraged concentration. One problem with this story is that antitrust fines have actually been on the rise: Regulation can increase monopoly power by raising barriers to entry.
Even within a couple of grafs the author says two contradictory things. First he says the antitrust enforcement has made monopolies more common. Then he says that antitrust fines have been on the rise but that they too can encourage monopolies by creating barriers to entry.
The article says that if regulation is the main reason for monopolies than he will have to become “much more libertarian.” In fact it is already established that regulation is a main cause of monopolies.
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