Module 5 - Monopolies

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What is a monopoly?
Dr. Per Bylund first begins by asking various audience members what a monopoly is and what is power. He makes a point saying that the first person to innovate a product is a monopolist. They have no competitors, and as such are a monopoly. I guess that is true, but in an emerging market I believe that that is a really crappy definition. The first doesn’t make you a monopoly, it just makes you the first. He says that Apple was a monopoly, and they had a lot of power because they were the only place to get a smartphone. Again though, the market was emerging, so they aren’t a monopoly in the traditional sense. People always had the choice to just not choose the new product, and then companies like Samsung and whatnot made their own, diminishing Apple’s “fake monopoly”.
Power
He then asks if Apple has “power” over consumers who sleep on the sidewalk. He says that they don’t have power, but I entirely disagree. Apple has done such a great job with advertising that these people will literally give up days of their lives to get their hands on a new Apple product. Their brain is wired differently, and THAT is power over a consumer. *That, right there, is monopoly power, but in an entirely different sense than the power of, say, Proctor & Gamble. *
Monopoly Formation
He then begins going into Nokia, and how people feared they were heading towards a monopoly. He says that people CHOSE to use Nokia phones, insinuating that this is NOT a bad monopoly to form. It is the best company, so them being a monopoly and having all the power wouldn’t be a bad thing. Consumers choose what to spend their money on, so if the can do better than everybody else, they would become the monopoly. This is the definition of Monopoly I tend to agree with. He says that a competitive market only needs 1 seller. That makes no sense. Competition requires more than 1 entity. He then goes into a market where there is one seller which has complete control over a market, where one can not enter.
Government Sanctioned Monopolies
Industries like power generation have no competition, they can overcharge you because they are government sanctioned monopolies. There are NO other choices, its not that they are innovative or that they offer great service. Trust me, I’ve tried calling utilities companies for help, they suck. So GOVERNMENT SANCTIONED monopolies are where a lot of issues lay. Want to start a new hospital? Well the other hospitals in that city must send a letter to the government asking for a new hospital. Seeing as it is a private business, no sane businessman would want MORE competition. You can’t really innovate and bring down prices in these fields because it is ILLEGAL for you to do so.
What are we missing out on?
All of these government regulations for doctors and whatnot are an ethical tradeoff. What more could we get innovation wise if Doctors were not so heavily regulated? It is an ethical issue at its heart. Taxicabs held a monopoly on that type of transportation, it was a government sanctioned monopoly. Governments only gave out a certain amount of taxicab licenses per year. Then, Uber came in and completely disrupted that market, and Uber was a much better service. Could there be a similar effect with hospitals, power generation, etc?
Antitrust
It seems that Dr. Bylund also thinks that antitrust issues are directly caused by the government, just as much as a monopoly is the issue of a government. The one actor causes all the problems. With no barriers to entry, there are no issues. This, I agree with. Government giving an oil company the exclusive rights to a huge amount of America’s oilwells, and then turning around and forcing that company to breakup because it has “too much power” is ass backwards. Standard oil lowered the cost of production a lot, yes, but the US Government also gave them a lot of breaks in order to allow them to scale up. Once again, the government messing it all up.
Conclusion
I agree mostly with what Dr. Bylund had to say. Federalism would most definitely create less monopolies because businesses in different states would be competing across state lines because each state has different rules and regulations. The government regulating businesses inevitably leads to a type of corruption where companies continue to “donate” to the politicians and the politicians continue to introduce new regulations. Hell, I would do the same if I was a politician. Even if somebody new comes along that could provide better service, government always has the ability to lock that new person out of the market through regulation and rules. I don’t believe that a natural monopoly is an issue. If a monopoly naturally outcompetes everybody else in it’s industry or sector, then they deserve it. They should not be broken up. If the monopoly was gifted (more or less) by the government, however, then obviously that sucks for everybody except for the politicians and the company leaders.