Capitalism Will Bring World Peace

Nero your rhetoric is becoming a bit too much. Answer my questions , please.

Okay, you asked the question "what safe guard is there in capitalism", right?
It's competition. No, it's not some person making a law and then everybody being subjected to it. It's not something tangible like that. It's a mechanism that just works.
If one company offered you bread with mold on it, you would buy from the company that has fresh bread. Which forces that first company to make fresh bread. That's why you have all the things you have, because of competition, not because of some government mandate, but because of greed.
That's the safeguard. - Competition in free markets.
And in a free market there is no reason that a company can't compete with another. Every reason you bring up is either anti-free market or it's not a reason that actually stifles competition.
You see how that must be a constant pain in the ass for producers. You always have to keep up with the competition. It's so hard... So if you're a bread maker that wants to save money on the storing of it's product, you might get government to help you out with a little law.

What are you on about, fresh bread, mouldy bread? You have not given one reason why monopolies would not exist or expand under a capitalist system, not one reason. All you give are assurances, that's not answering, its propaganda of the worse kind. Monopolies stifle competition as it was so able explained to you by Josh.

Josh is wrong, and I am discussing him on that.

Monopolies do not per definition stifle competition. I don't know how I can tell you these things without you calling them 'rhetoric' or 'propaganda', I really don't.
A monopoly is subjected to the same market forces as everybody else. Unless it has some form of protection from market forces, which is separate from it "being a monopoly".

josh0335,
sorry for not responding to your whole post in specifics. It was a well written dream, and it certainly does sound logical. But that's just not how it works. If there are two mutually exclusive theories about how the market will behave, and both sound logical, that still means one is incorrect. Lets say that one theory postulates that free markets will concentrate wealth and market shares, much due to the mechanisms you describe. The other theory postulates that in free markets, in the absence of government barriers, it is very, very hard for "rich people" to maintain their wealth and market shares against competition from below. Both theories can use wordy, logic sounding explanations for why they are accurate. They both sound logical. Yet only the one theory accurately explains what actually happens in the market. So I cannot tell you anything else than that I believe it to be an empiric fact that free markets do not behave in the way you describe in your dream. Wealth and market shares do not concentrate like that in free competition; they spread out. But I wouldn't know how to convince you of that, since both theories sound logical. I can only urge you to look up the empirical studies that prove me right, some of which I have been quoting.

But that was a side note to our main point of disagreement. Which is that you are saying that a monopoly will always have control over the market. I here use the term monopoly in the meaning of there being one seller delivering all of a product in a particular market. As I noted in post 277, that all off a product comes from one seller isn't by itself a bad thing for the customers or how much standard of living society as a whole gets out of a limited number of resources. I hope you agree with that. (And I claim that only the 'good' kinds of monopoly happen in a free market, not the ones that can exploit.)

Thus the way you used the term monopoly, in the meaning of "a seller that is protected by barriers to entry" is of more interest in an economic discussion of market control. But since that term is confusing - and assuming something that isn't the case, as I explain in a moment - I use monopoly in the meaning 'one seller', and it's supposed effects I will describe as 'having control over the market' or 'being protected by barriers to entry'.
My point here, as was before, is that you can't assume that one seller, or anybody else, must control the market just because of his situation in the market, without some physical barrier to entry. If you can somehow show this to be the case, I concede and you 'win'. But there always needs to be some reason why competitors can't compete.

Be it government barriers, that the monopoly is the only shop in a rural mountain valley, that the market simply is too small for there to be another competitor, that a competing company can't lay another rail track or telephone line, or such. Just market forces in a free market, like economies of scale, high entry cost or other costs such as high rate of failure, are not enough to insulate a producer from competitors.

All these mechanisms will be changed by market forces, for example if prices go up it will be worth the risk of failure for investors to invest in getting part of the high profits.

Crudely reworded, you keep saying something in the way of "it is a monopoly, it controls the market, no competitors can compete with it, because of the barriers to entry, because it is a monopoly".

You always say that these barriers to entry follow from the existence of a monopoly.

I think that that is begging the question. And that's what you would have to show me that this assumption is correct. Barriers to entry are a insulated occurrence from the existence on a monopoly.

It's like saying that a boat (a monopoly) floats (is the only seller) because it doesn't sink (others can't compete). And when I say "what about boats that are too heavy to float?", you answer "you're not accepting the behavior of a boat, the behavior of a boat is that it doesn't sink".
(Where I think this comes from is that in a free market, monopolies will usually only exist with some form of artificial barrier to competitors, which might be why you assume that this is a natural attribute of a monopoly. But it's actually the other way around.)

Your not debating your giving a political speech with no substance. All promises and no details. Im trying to think of a monopoly that failed through competition, can you? I tell you what, try starting up an import business with sugar or bananas.

And why would my banana import business fail, because of free market forces or because of anti-free market forces?

All these mechanisms will be changed by market forces, for example if prices go up it will be worth the risk of failure for investors to invest in getting part of the high profits.

You state this as if it is necessarily true. Why would high entry costs, high exit costs, being on the wrong end of predatory pricing etc. not be enough to insulate a monopoly? Entrepreneurs and investors are not idealists where they would take on a lost cause for the sake of capitalism.

So you need to show me that either these barriers to entry can't possibly exist in a free market system, or that these barriers are easily overcome.

I'm essentially saying "it is a monopoly, it controls the market, no competitors can compete with it because of the barriers to entry."

I've accepted your definition of monopoly as being a single seller. But do you accept that a single seller in a free market is still subject to the basic rules of profit maximisation?

What I should make clear is that not all markets will become subservient to monopolies in a free market. I actually agree that it would increase competition in many many industries. But in some markets, monopolies will emerge and so will the barriers to entry. I'm saying this is highly likely (not necessarily true) because of profit maximization. If the aim of a company is to maximize profits by holding as much market share as possible, it will go about manufacturing barriers to stop competitors having a peice of the pie. Do you accept this? If you do, then you have to explain why these barriers to entry will be ineffective in a free market system.

I've always been interested in Microsoft as a company. It seems every year they're taken to court for behaving like a monopoly. Microsoft's rise to domination is a good example (in my opinion) of barriers to entry which have very little to do with government protection. There was no government help when it launched Windows 95. It cemented its place as the leader through a great innovative product and went on to develop it and innovate it further. The reason it is now on its 7th version of Windows, is because of the success of Windows 95. From the success of Win95, its capital grew to the point that they were able to continue to develop their product faster than their competitors. Not only that, Gates had bought up many smaller companies along the way who threatened to challenge Windows in the early years. You have a situation now where their brand is so strong, that a brilliant OS like Ubuntu are forced to make their work free. Why? Because no hardware producer like Dell or IBM is going to pay Ubuntu rights to put their OS on their machines. It wouldn't give them a return worth the trouble. No one would buy a Dell Ubuntu over an IBM Windows. And this has nothing to do with government protection of Microsoft. How, in a more capitalist system would Ubuntu take away market share from Microsoft?

Once again Nero you have given a lot of reasons why you dont like government interference and how capitalism is better, but not once have you explained how a monopoly would be controlled by the free market. I know your opinions but i want to know how the almighty monopoly would be stopped from exerting its power on a smaller company. Give me an example where an established monopoly with aggressive trading record could be made to relinquish its monopoly. Lets play a game. Give me an example of a monopoly you would like to compete with? I will be the monopoly, you the new boy on the block.

I'm sorry xris, but we just have to accept that we have 'irreconcilable differences'.
That post addressed your questions in particular, if you don't get it I can't help you.
Have I not spent a lot of time explaining these things to you over and over again? At some point I have to say: Go ahead and believe what you want to believe.
I suggest picking up any book on "basic economics". I will ship you one as a gift if you want. Hit me with a PM if interested.

The books you read are most definitely not the type I would attempt reading but thanks. Will you not accept my friendly game of chase the monopoly, with your knowledge of economics you should beat me easily. Think of the glory thrashing a die hard socialist.

We could play a game of monopoly. :sarcastic:

The thing is that it's not so much about existing monopolies, it's more about market forces that don't make them possible in the first place.
I don't even know if I could name an existing monopoly.

You argue that the free market can create monopolies, it would have to be you to show me what market forces could insulate a monopoly from competition. Either by example or theoretically, I take either. So far you have only a priori assumed this to be the case.
I made a few long posts, which you said to have read, that explain why there are no forces in the free market that allow monopolies to be protected from competition. There are only anti-capitalistic forces that create monopolies.

Take the casino situation in California. Gambling is illegal, but if you are an Indian casino it is allowed. Government grants Indian casino's a special monopoly for casinos, because of some stupid historical reason that won't interest you. That could easily be relinquished by changing the laws and letting everyone open a casino.

---------- Post added 02-01-2010 at 11:38 PM ----------

xris, just a guess. But you are born in winter, am I right?

As for easily overcome, as I just mentioned, there's investors flocking to any market segment with high profit margin. And since we can assume a profit-seeking company to direct any competitive advantage it has into profit, and not merely into waste or something else, we can assume that a company with an competitive advantage will have higher profit margins.

Those barriers that aren't overcome by that effect don't exist in a free market, they are anti-free market, such as government control. So yes, at least theoretically those two conditions are taken care of.
I don't know whether it is ever realistically possible to create such a society. But what matters is that it is theoretically desirable and there is no harm in trying to get as close as we can.
All we needed to do was educating children about how the free market works instead of how evil capitalism and greed is.

Okay, would you say that this sentence conveys any different meaning when leaving out the monopoly part: "it controls the market, no competitors can compete with it because of the barriers to entry"?
I think not.

So saying that it is a monopoly does not add any additional information, being a monopoly is just an effect of barriers to entry. So what we should be discussing is not the nature of a monopoly, but the nature of market barriers. As we have done in the recent posts. Since monopolies are not something that has consequences, it is a consequence.

So I absolutely agree that any company will do anything in their power to get barriers that protect them. I think it is important to distinguish what kind those barriers are. You could see offering a better product as a barrier to competition, but obviously that is desirable and we shouldn't outlaw it.

There are 'barriers' that follow the rules of free competition, such as high entry costs, cross-subsidization, brand development, high exit costs, cutting prices below production cost, innovation, ... These are not a loss to society, so they are 'good' barriers. I wouldn't even call them barriers in the market.

As for Ubuntu, it could be said that it only exists because of the large market share of Microsoft. The people that program it for free are motivated with delivering a blow to the big, bad monopoly. It could even be said that the whole open and free software movement, that I enjoy very much, only exists because of Microsoft. Looking at it in an economic way, Ubuntu is an externality caused by Microsoft Windows, you get Ubuntu by paying for Windows.
So to answer your question, I don't know if Microsoft's position would have been different in a more capitalist society, or whether Ubuntu would have a stronger position. But I also don't know whether the way things developed really were an inefficient allocation of societies resources. The benefits of capitalism are a little more hidden sometimes.
Doesn't it make sense to put scarce programming talent into one program that we all use instead of re-programming a bunch lesser of operating systems?
I also think it is the wrong question to ask. People tend to look at the accomplishment of capitalism, take it for granted, and then postulate that if we had focused on some issue they care about, we'd be better off.

Im surprised you cant find one considering you tell me governments invent them. Tate and Lyle's the sugar people are renowned for their monopolies, their artificial sweetener's have kept the competition away for years, that's apart from their almost strangle hold on sugar cane production.It has only been recently that they may get a certain competition from India. How did governments legislation assist them in forming a monopoly?

The Indian protection laws are historically valid considering the Indians had their lands stolen from them and where prohibited from farming the land that was stolen from them. Give them back their lands and I bet they wont mind giving up the right to open casinos.

How many investors would flock to a market where the monopoly uses predatory pricing? Or how many investors would be willing to put in investment to go towards developing a highly advanced bit of technology to take on a monopoly which has a history of innovating at a rate no one else can match? Note here, the high exit costs. How many investors would resist when the monopoly offers to buy their business? Flocking investors is not a check for monopolies. You've acknowledged that there are two forces at work, the actions of the monopoly to protect its position, and the forces of the free market to dissolve the monopoly's grip. There is no logical reason to believe flocking investors will always win the day for the free market when the monopoly holds the position of influence.

Let's say I agree that flocking investors can overcome high entry costs and maybe even high exit costs. How would flocking investors prevent a monopoly slashing prices temporarily, perhaps even below production costs, til the new competitors are bust? I think you're failing to see that a monopoly can and will combine all of these barriers if there is an opportunity to do so. Maybe two or three of these mechanisms would be enough to simply stop a competitor getting any market share. For example, a company that has massive exit costs i.e. the capital is so specialist that no one will buy it if the business fails (e.g. theme park rides), a track record of innovating every year, and the threat of cross subsidizing losses, would scare off all investors.

What is "it" in this sentence? A company amongst many? If so, how would it control the market? If it controls the market, it doesn't have any competitors. And what do we call a company with no competitors? If it has competitors then it doesn't have barriers to entry because other companies have already entered and are competing.

I think the problem we're having here is that you believe that a monopoly will always behave as if there is competition, rather than take advantage of the fact that there isn't. The threat of competition will not result in a monopoly not charging a monopoly price. The threat of competition will typically force the monopoly to behave in a way that allows it to charge a higher price whilst protecting its market control.

No, of course not. But a highly innovative company can charge a monopoly price because no competitors can challenge its better products.

Surely we're not going to have to define what a barrier is? They are barriers, even if you think they are not harmful. And if you accept that they are barriers, then you must accept the consequence of monopoly pricing which will inevitably follow.

I understand that you think Microsoft emerged as a natural monopoly because the industry required it. But Microsoft's pricing structure will not be challeneged by Ubuntu who charge nothing and have almost no market share. So Windows will always be sold at the optimum for Microsoft, which is higher than what it woud be if there were competitors driving the price down.

So what did he conclude? That no government control is the best system?