Monopoly

Government, and resources. It’s self-evident that humans have fought for, created, or been coerced into government interaction throughout history. The modern idea is that this organization of ‘government’ is the best way to allocate ‘public’ resources for the collective good. To protect and regulate, for the collective good. The words ‘fought for,’ ‘created,’ ‘coerced,’ and ‘collective good’ are fodder for debate in all political and social science realms. The indisputable economic fact about government, germane to this body of research, is that governments can always allocate more resources, by force, than any free market actor. The critical question is, at what cost?

For example, during the famous ‘Space Race’ in which the capitalist United States squared off against the communist Soviet Union for supremacy in space, many forget the Soviet Union dominated in ‘firsts.’ The Soviets were the first in the world, ever, in all humankind, to launch a satellite into space, a man into space, a woman into space, a dog into space, and they took the first picture of the dark side of the moon, among other firsts (and not in said order). The critical question will always remain—at what cost? These presumably heroic firsts were achieved by an authoritarian, censored, autocratic, communistic bureaucracy that doesn’t even exist anymore to ‘serve’ its people. The Soviet Union dissolved at the end of 1991, replaced by some nation states that were more liberal, and some nation states that were more authoritarian. Yet the communist Soviet Union is dissolved nonetheless, and the capitalist United States remains. There is a lesson here, and it’s called opportunity cost.

Opportunity cost. Opportunity cost is the opportunity lost from any economic decision.

Government, and everyone else. Continuing with the above story between the Soviets and the US, this author hastens to stress that the ‘people’ are an entirely different economic class from the ‘government,’ and too often we confuse this. From the ‘Romans’ invaded ‘Germania,’ to the ‘French’ invaded ‘Vietnam,’ to the ‘Americans’ invaded ‘Vietnam’ (again), to the ‘Soviets’ invaded ‘Afghanistan,’ to the Americans invaded ‘Afghanistan’ (again), the history books paint this as if all the people inside those geographic lines were completely analogous to the parliaments, executives, and generals of similar label. This research is not trying to redefine anything here. It should simply be more top of mind, always, that the extremely tiny percentage of people that are making these decisions—from planning boards atop the government—are an entirely different class of individuals from the ‘people’ themselves. This holds true whether the government lines drawn around the map of your nation are controlled by capitalist states, or more tyrannical states.

Monopoly. When governments enter the marketplace, the crucial economic factor to understand is that, by their very nature, they discourage competition. Governments naturally drive costs up and quality down, as opposed to private enterprise, which naturally drives cost down and quality up. They do this primarily by favoring select producers. This is the very real and critical definition of monopoly. Governments by their nature do not produce anything in the market. What they do is ‘favor’ specific producers and firms with licenses and special privileges to carry out their goals.

As Salvadori and Signorino posit, this is one of Adam Smith’s original definitions of monopoly:

Smith classifies the circumstances which make market price to be persistently above its natural level […due to…] ‘particular regulations of police’ (legal monopoly granted to an individual or a trading company, the exclusive privileges of corporations, statutes of apprenticeship etc.).

This monopoly license / privilege encumbers competition, and always favors the licensee, over competitors. It is paramount to understand that in the real world, there is no other definition of monopoly. A monopoly can only ever be created by government. The author highly suggests exploring the works of Thomas DiLorenzo to more fully understand this topic and its historical implications in a simple, readable way. Many other famous economists, from Ludwig von Mises to Murray Rothbard, have exploded the myths surrounding ‘natural monopoly.’

So the board game ‘Monopoly’ does not play out in the real world. No matter how ‘dominant’ or ‘ever-present’ any firm is, that firm will not be able to continue on ‘raising prices’ or ‘price gouging’ forever. In the marketplace there is always at least the threat of competition. The only organization that can hinder this positive, free market force of competition, and indeed forcefully elevates one licensed firm above the rest of the marketplace, is the government.

Caveat emptor. There is an axiomatic principle codified in common law that encapsulates the boogeyman of ‘the scammer.’ Caveat emptor. Let the buyer beware. This is a principle the world’s marketplace actors have long lived by, admittedly or not. As a consumer, do not get disillusioned if any one producer lets you down. Sure, you can litigate; but more importantly, be cautious. Do more research. Warn others. Shop elsewhere.

The consumer is always, always right. From the standpoint of coordinating actors in a free market, the individual / consumer is always in control of the producer, not the other way around. If it seems as if the producer is overpowering and ‘taking advantage’ of you, simply look for the government, it won’t be far away. Do those producers you can’t stand have a ‘cozy’ relationship with your government? Do they have a monopolized, licensed protection?

Producers need to supply precisely what you demand in the market in order to earn a profit and carry on. Otherwise, ceteris paribus, some other producer will, and those that ignore this demand eventually lose market share or go insolvent.