From: johnkc@well.com
Date: Mon Jul 29 1996 - 00:34:46 MDT
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On Sat, 27 Jul 1996 Ben Goertzel <ben@godel.psy.uwa.oz.au> Wrote:
>Free markets don't seem to stay "free" -- they seem to drift
>into attractors consisting of MONOPOLIES or OLIGOPOLIES.
True, often they don't stay free because armed men, called "governments",
put a gun to your head, or threaten to, and force you to make economic
decisions you would never do of your own free will. The result is that the
only really free market is the black market, fortunately this seems to be
taking up a larger and larger share of the economy.
I think it's odd that people worry so much about the bad things that a
corporation might do someday, but ignore the HUGE evil that countries have
actually done. Companies may sometimes be rough with their competition and
be rude to their employees and customers, but then don't put millions of
people in death camps and then shove them into ovens.
I don't think your worries about monopolies are well founded because the only
successful cartels in history are the ones that have government support. No
need to pass laws against monopolies, the market will stop them automatically:
Your company and mine produce all the steel made in the world. We make a
good profit now, but we want more, so we get together and double our prices.
Now we each make a huge profit on each ton of steel sold, so we would both
like to make lots and lots of steel. However, because the price of steel is
now very high demand is down, so part of our sinister plot must be an
agreement to limit production. The higher the price gets, the greater is the
temptation to secretly cheat on the agreement and produce more steel than
was agreed to, and that would kill the cartel.
There are even more problems for our poor cartel. Now that the price of
steel is sky high and the profits are huge, other companies will want to
get in on the act and start making steel. Also, consumers of steel will
not want to shell out all that money for that metal and will start looking
for replacement materials like wood or plastic or aluminum or composite
fiber.
No need to pass laws to protect the little guy, the market will do that
automatically too:
I manufacture 99% of the worlds widgets, you make 1% . I want to drive you
out of business, so I figure I'll lower my price until you go broke and then
I can jack them up to anything I want. So now you lose money on each widget
you sell, the trouble is I do to. I have 99 times as much money as you do,
but I'm losing it 99 times faster. Even worse, because the price is very
low, the demand for widgets is huge, and if prices are to remain low I must
build more factories and increase production. I'm losing money faster and
faster, meanwhile you just temporally halt production in your small factory
and wait for me to go broke. It won't be a long wait.
OK I will admit that one type of monopoly, called a "natural monopoly" would
work in a free market, but they don't bother me. In a few, very rare
instances, the most efficient size of a factory is so big that there is only
room for one, the best example is aluminum production. A larger steel mill is
not more efficient than a smaller one, it's just bigger, but for physical
reasons that's not true for an aluminum plant, the bigger the better.
However even a natural monopoly is limited to what it can do. If they rase
prices too high a competitor with a smaller factory will step in. The small
factory is not as efficient as the big one, but by accepting a smaller profit
margin they can still charge less for aluminum than the big company. And of
course, there is always the competition from other materials.
This logic did not phase the US government when in it's infinite wisdom it
decided to break up Alcoa Aluminum. What dreadful crime had Alcoa committed?
The government said it had kept competitors out. What dastardly method did
Alcoa use to do this? The government said Alcoa used the most advanced
technology available to produce Aluminum that was just too cheap for
competitors to match. How very dreadful! I wish I was joking about this, but
I am not. If you can't beat them in the market place, lobby the government to
send in their goons to destroy your competition.
>Look at the software market, which is a free market, but is
>dominated by MicroSoft to everyone's detriment.
Everybody loves to hate Microsoft, perfectly understandable, large
concentrations of power make people uncomfortable, but the ONLY way to
prevent it is if there is an even larger concentration of power to put it
out of business. The software industry is beyond doubt the fastest growing,
most productive part of the world economy, but could it do even better? Sure
it could, nothing is perfect, not even the free market, but can you really
tell me with a straight face that the "help" of government bureaucrats would
make this sector of the economy grow even faster?
Just how "detrimental" is Microsoft anyway?
I've cursed at DOS just like everybody else, and I've looked at the Apple
system with some envy. So why isn't Apple the world standard instead of
fighting for it's life?
I think it boils down to 2 things, the free market is not perfect and
standards are hard to change. No point in denying it, the market is not
perfect, but then neither are regulators, and it's ridicules to claim that a
gaggle of politicians and bureaucrats are smarter, or more honest than market
forces. Yes, standards are resistant to change, but that's OK because that is
exactly what a standard should do. The lack of popularity of the Apple
operating system is not an example of market failure because in the context
of the real world it is in fact an inferior system. If everything else was
equal Apple would be better than DOS\Windows but everything else is not
equal. The Apple system has some small technical advantages but that is
countered by enormous practical disadvantages, it will not operate on the
type of computer most people have and it will not run billions of dollars
worth of popular software. It's perfectly valid to take such things into
account when deciding what system is really superior.
When a standard is set it's just not worth going to a new one unless you get
an astronomical improvement. That's why we still use feet, yards and pounds
even though the metric system is better. The market has decided that the
Apple is not a huge advance that was worth the trouble of conversion, it
could be wrong about that, but I think the market has a better understanding
of such things than a bunch of hack politicians.
>What is needed is some kind of "institutionalization of
>experimentation" -- some kind of overall structure to
>prevent the spontaneous emergence of repressive governmental
>and corporate structures.
Whatever this "institutionalization" is it will have to be far larger and
far more powerful than any corporation and that is a recipe for repression,
it is also a recipe for poverty. We can design an airliner so we can make it
fly in any direction we want just by moving a few controls, can we do the
same thing with an economy and point it in the direction of prosperity? No,
because nobody can understand the economy in which they live, the more they
understand it the more they change it. Airliners are ridiculously simple
machines compared a human being, and a human being is a ridiculously simple
machine compared to a modern healthy economy.
You can control a plane because it has an enormous mass compared to air, and
it's moving at an enormous speed, and drag will not slow it to a stop because
it has an enormous engine, so it's easy to make a prediction about how the
plane will behave when the control surfaces are in a particular orientation.
Also, when you learn more about the airplane that doesn't cause the plane to
change. The idea that an equivalent economic machine could be built and that
our fearless leader could just "point and shoot" it in the direction of
prosperity and provide individual freedom as a bonus is just plain loony.
We don't need the State, Anarchy is very workable, (just look at the Internet)
its the best way to get things done. It's true that large projects can't be
accomplished without good organization, but government is not the only way to
get organized, or the best. A command economy, the kind governments like, is
inherently inefficient. If you doubt this just look at the pitiful situation
in Eastern Europe. Even if we make the ridiculous assumption that all
politicians are honest and have boiling water IQ's they could never do as
good a job as the free market because they are lacking a vital ingredient,
price information. The true price of an object is determined by an enormous
number of variables and is much too complicated to be calculated from first
principles, but the market will tell you what the price should be, no trouble
at all. Whenever you change jobs, travel or make a purchase you are casting
a vote and sending an exquisitely sensitive message to the economy to change
in a way you want. In a Democracy all you can do is vote for a grab bag of
promises every 4 years.
John K Clark johnkc@well.com
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