Monopoly and Regulation: Excerpt from Two Lessons book

by John Quiggin on December 17, 2016

Here’s another excerpt from my book-in-progress, Economics in Two Lessons. Rather than work sequentially, I’m jumping between:

Lesson 1: Market prices reflect and determine opportunity costs faced by consumers and producers.
and
Lesson 2: Market prices don’t reflect all the opportunity costs we face as a society.

In the section over the fold, I’m looking at monopoly and regulation. Next up, public ownership.

As usual, praise is welcome, useful criticism even more so. You can find a draft of the opening sections here.

A crucial requirement of Lesson 1 is that prices are determined in competitive markets. But free markets are not necessarily competitive. If the technology of production involves economies of scale, as is the case for most kinds of manufacturing and many services, large firms will have lower average costs than small ones.

Over time, therefore, the number of firms will shrink through exits or mergers, until economies of scale are exhausted. In the limiting, but not unrealistic, case of natural monopoly, unrestrained competition will lead to the emergence of a single dominant firm.

Once a firm attains a dominant position, it can hold that position for a long time, even after any initial advantages have disappeared. Suppliers and dealers can be locked into long term contracts. If vital parts are produced to a standard design, patents over those parts can be used to exclude competitors. As an example, the AT&T Bell monopoly in the United States required that only phones made by its subsidiary, Western Electric, could be connected to its network. This and other restrictions excluded all competition for decades.

In a natural monopoly industry, production by a single firm is technically efficient. But the price that maximises profits will be higher than the opportunity cost of production. Some of the potential benefits of technical efficiency will be lost, while the bulk of what remains will go to the monopolist rather than to consumers [in a very simple model of monopoly pricing, the monopolist gets half of the potential benefits from the supply of the good, consumers get a quarter and the remaining quarter is lost because of the divergence between price and opportunity cost]

The situation is even worse where monopoly is maintained through costly devices used to exclude competitors. Not only will prices be higher than opportunity costs, they will exceed the competitive market price. Even the monopolist will dissipate much of its profit in its efforts to exclude competitors (Tullock).

These problems first emerged on a large scale in the late 19th century, as the growth of rail networks made it possible, and profitable, for firms to operate on a national scale. The railways themselves were one of the most important industries in which the benefits of scale economies, along with the appeal of potential monopoly profits, led to an rash of mergers.

These mergers were often undertaken using a legal device known as a ‘trust’, and the term came to be applied to monopolies and cartels in general. The most famous trust was John D Rockefeller’s Standard Oil company, which secured a near-monopoly (88 per cent in 1890 https://en.wikipedia.org/wiki/Standard_Oil) over the refined oil market. One of Standard Oil’s main advantages was the capacity to secure lower prices from railway companies in return for higher volumes.

The initial response, commonly referred to as ‘trustbusting’ involved breaking up large corporations into separate firms that were expected to compete against one another. Standard Oil was broken into 34 firms, the most successful of which were the Standard Oil Company of New York (later Mobil) and Standard Oil of New Jersey (later Exxon). Under the influence of the Chicago school of economics, trustbusting policies were gradually abandoned in the late 20th century. The last big corporate breakup was that of the former AT&T telephone monopoly in the 1970s. The shifting in thinking was symbolised by the 1999 merger of Exxon and Mobil to produce one of the largest corporations in the world, comparable in many ways to Standard Oil.

The logic of opportunity cost applies here, as usual. Breaking up monopolies reduces the extent of monopoly power, at the cost of forgoing opportunities for improved scale economies arising from mergers.

For much of the 20th century, the loss of scale economies was seen as an acceptable price to pay to keep monopoly in check. However, with the resurgence of free market ideas from the 1970s onwards, support for antitrust policies waned. The last big example of trustbusting was the breakup of the AT&T telephone monopoly, which took place in 1982 after nearly a decade of litigation.

As trustbusting has declined, attention has turned to various forms of regulation. The core idea of regulation is to fix the prices charged by monopolies at levels that reflect the opportunity cost of resources used in production, but not to allow the extraction of monopoly profits. In practice this balance has proved hard to achieve. The common result has been that regulated monopolies have been highly profitable.

One illustration of this is the fact that the ‘asset base’ of a regulated monopoly is typically valued at around 40 per cent more than the cost of its provision, as estimated by the regulator. This asset base premium reflects the fact that the regulated price is more than the opportunity cost of the resources used in production.

Regulation constrains the exploitation of monopoly power but it entails compliance and enforcement costs and may prevent firms and consumers from reaching bargains that are mutually beneficial. Where a natural monopoly business involves large scale investment, it may prove difficult to set a price that accurately reflects opportunity costs, while providing incentives for efficient investment.

The crucial trade-offs involve the distribution of income and property rights. To encourage appropriate levels of investment, it is desirable to offer high rates of return. However, this implies that monopoly profits will be enhanced at the expense of the community as a whole. One solution, discussed in the next section, is public ownership.

{ 32 comments }

1

Kurt Schuler 12.17.16 at 3:58 am

1. Your idea of competition seems static. Competition often arrives indirectly, as we have seen with online firms challenging old established dominant firms in bookselling, newspaper publishing, travel reservations, video entertainment, and quite a few other fields. Competition can also be effective when only implied but not actual, if costs of entry are low. You should be more Schumpeterian here.

2. AT&T gained much of its monopoly power through government regulation, often at the level of U.S. states, that discouraged or forbade multiple telephone carriers. So, if you want a fairly pure example of industry dominance deriving from successfully meeting continual challenges from competitors, AT&T is not it. Maybe Intel and Google are.

3. I hope that your discussion of public ownership will acknowledge that where everything is publicly owned, almost everything stinks. (Ever visited a communist country?) Moreover, public ownership need not mean public operation. Government can own the waterworks, for instance, but auction the right to manage them (including undertaking capital projects) for a specified period under specified conditions. The idea goes back at least as far as Edwin Chadwick.

2

Kevin Cox 12.17.16 at 7:14 am

In the case of a monopoly, the underlying economic assumption of efficient markets producing efficient prices is obviously wrong. It is wrong in almost all markets. Our economic system now goes to great expense and effort to correct the wrong prices. Get rid of the efficient prices idea and use a different underlying approach based on the following idea.

Economic efficiency is an economic state in which every resource is optimally allocated to obtain the greatest value for the least cost to the community using the resource.

Note there is no mention of prices as prices become secondary. Here is what this means in practice.

https://kevinrosscox.me/2016/12/16/economically-efficient-monopoly-pricing/

It will work the case shown as the cost to the community of providing water infrastructure will be 50% of the current cost. I hypothesise that it will work for any large market. It gets rid of a lot of complexity and effort that makes all investments lower cost.

3

Grant Musgrove 12.17.16 at 8:15 am

In the real materials economy state actors (soes) activively engage in stockpiling and dumping, meaning global markets a not markets. A recent victim of this is the primary and secondary metals processors globally from multiyear dumping by China, which continues. Policy makers/ regulators here provide advice that the market will clear, which of course it can’t.

4

reason 12.17.16 at 9:13 am

Monopoly rents are just another example of economic rent. Taxes come mostly out of rents (since rents are dependent on ability to pay). Tax the rents and redistribute as a “national dividend”. The beauty of this is that it involves no contentious regulation, no opportunity for regulatory capture and it caters for other problems such as technological unemployment.

5

reason 12.17.16 at 9:16 am

P.S. A particularly attractive feature of a national dividend based on taxation of profits (actually equivalent to passive public ownership) is that the more businesses extract surplus value from workers, the more independent the workers become (i.e. the more bargaining power they have).

6

nastywoman 12.17.16 at 12:11 pm

– agreed with all theory – but as Germany seems to have (kind of) a monopoly in high quality manufacturing -(with the help of a lot of regulations) – how do we break up such a monopoly?

7

Layman 12.17.16 at 12:53 pm

Trivially, paragraphs 8 and 10 both include the same AT&T example:

“The last big corporate breakup was that of the former AT&T telephone monopoly in the 1970s.”

“The last big example of trustbusting was the breakup of the AT&T telephone monopoly, which took place in 1982 after nearly a decade of litigation.”

I thought I’d lost my place on the first read-through.

8

rootlesscosmo 12.17.16 at 3:00 pm

As I understand Gabriel Kolko’s “Railroads and Regulation,” an important driver of early railroad rate regulation was not to keep rates down but rather to prevent competition from driving them so low as to force some competitors into bankruptcy. I suspect similar mechanisms may be at work with some sectors today (sugar, corn). Just how much of the modern US economy actually follows the model of competitive price-setting, and how much exhibits one or another distortion owing to monopoly, oligopoly, or non-economic policy choices in areas like critical raw-material stockpiles?

9

Mike Huben 12.17.16 at 9:24 pm

Wow, this is really bloodless and passive sounding. It certainly cannot move people the way the purple prose of “Economics in One Lesson” does. There, at least, the author is addressing the readers directly. Take a look and compare. http://steshaw.org/economics-in-one-lesson/

It might also be useful to make a distinction between free market is an economic MODEL (that assumes a large number of things such as perfect competition) and the propaganda meaning of free market as an unregulated market (which can contain any number of variances from the economic assumptions of the model.)

10

bruce wilder 12.18.16 at 12:06 am

As a general proposition, the conventional view in industrial organization economics has long been that a monopoly based on economies of scale should not restrict output to elevate a single price: that’s neither the socially optimal course for a public regulator nor the profit-maximizing course for the firm. From either perspective, the right thing to do is to devise a scheme of price discrimination that allows the firm to expand output and achieve the cost reductions available from an increased scale of output.

So this isn’t right:

“In a natural monopoly industry, production by a single firm is technically efficient. But the price that maximises profits will be higher than the opportunity cost of production.”

As another commenter has already noted, regulation of railroad rates in the 19th century, the pioneering example of monopoly rate regulation, aimed at maintaining a system of ad valorem rates, and many railroads would have hazarded bankruptcy otherwise, because they could not credibly commit to administering such rate structures without government sanction.

Rate regulation of public utilities similarly aim at rationalizing systems of price discrimination.

One of the main public benefits to such rate regulation seems to have been policing the hazards of crony corruption and hold-up that could become acute when a railroad was the only way to or from a place or a utility is the only way to get electric power, say.

11

pnee 12.18.16 at 12:32 am

@1 Kurt Schuler

On your point 2, agree with you on use of AT&T as an example. I would suggest Coca Cola as another possible example?

To digress a bit, Intel and Google are interesting cases. Intel was largely successful because IBM (an existing tech monopoly) anointed their architecture for the PC. They also did their best to subvert the licensing deals that stemmed from IBM’s second source requirements, in ways that got an anti-trust wrist slap at least once.

Google is an odd case, because it’s not clear that scale of production applies to search engines (it’s only necessary to have enough servers to serve one’s user base, more than that won’t help) and also because their service is “free” (ad supported) so they did not compete on price. When the search market was competitive, google had the best results for long enough at the right time to become the de facto standard. The common pattern in tech of a de facto standard fueling the complete dominance of a single company in a given market is so common that it really challenges the idea that competition really works as billed in econ 101 textbooks, IMHO.

IBM owed some of its dominance to this de facto pattern, embodied in the old aphorism “Nobody ever got fired for buying IBM”.

12

John Quiggin 12.18.16 at 1:01 am

@1 I plan to mention these points briefly when I describe the Chicago anti-anti-truest position.

@2-6 Thanks for these interesting points

@7 D’oh! I’ll fix this

@8 I should probably say something about regulatory capture

@9 I’ve been worried about tone, for the reasons you suggest. I can’t make the kind of argument I want with purple prose, and it’s hard to write interestingly about regulation without distorting the facts. See how you like the public ownership section.

13

Jimbo316 12.18.16 at 2:08 am

Well, no one has mentioned the problem of internalizing externalities, which is the role that the government plays because it is never in the interest of profit-maximizing corporations to do so. What I mean is to give a simple example: Corporation X produces something that includes a poisonous waste. It dumps the waste in the river and people downstream die as a result. Corporation X suffers no consequence but thousands of people die because it is not required account for that waste and take care of it (i.e. internalize it in their cost structure). This is the actual GOP model of ideal governance. Not actually what most Americans favor but enough Southerners are indifferent to their own fate to vote GOP.

14

Marco 12.18.16 at 7:58 am

Thank you for posting the draft, very interesting read as all other posts on your book.

I`d like to elaborate on @9 point about addressing the reader, which has caught my attention in other parts you shared here earlier. Note that this is not about tone, it`s about the best way to respond to an economics bestseller.

A more conversational approach could really help, particularly on the openings and endings of the sections. For example, instead of “a crucial requirement of Lesson 1 is that prices are determined in competitive markets. But free markets are not necessarily competitive”, a more conversational approach would be “Lesson 1 strongly suggests that free markets are conductive to competitive markets, but that is not always the case. There are many restraints to competitiveness that are not addressed by free market solutions.” – and so you go as usual … “If the technology of production involves…

Regardless of the specific words used, the rephrasing brings the reader to the point more gently and also more clearly. Instead of throwing the concept of competition as a “crucial requirement” (which it is, of course) right away, as if it was presupposed, you remind an important, almost naturalized element of lesson 1 (competition), and then simply state afterwards “well, not always”. From there you can point to the limitations of lesson 1 (aka lesson 2) as usual.

The idea behind it is trying to “defend” lesson 1 before bringing the limitations, and then wrapping it up at the end of the section. It is a quite useful rhetoric device for this type of writing, where the critique is so strong that the reader may find it one sided when in fact it is not.

Btw, I liked your presentation of Hezlitt`s book here on CT. I think it could fit in the introduction of your current draft, again engaging the reader more slowly.

15

Peter T 12.18.16 at 9:42 am

You might find this article in the London Review of Books on British municipal provision relevant:

http://www.lrb.co.uk/v38/n24/tom-crewe/the-strange-death-of-municipal-england?

16

Brett Dunbar 12.18.16 at 10:15 am

There are more recent examples than AT&T just that was the last big US example. Most UK privatisation involved breaking up the state owned monopoly and introducing competition; such as electricity and gas. The early BT privatisation without a breakup was later regarded as a mistake. The BAA effective monopoly was broken up several years after privatisation, with BAA forced to sell Gatwick and Stansted.

Lloyds TSB, after it bought HBOS, was forced to spin off part of the operation as a new TSB Bank. When Wm Morrison bought Safeway they had to sell off a number of stores when they would have had a local monopoly.

Generally there is a preference for blocking anti-competitive mergers in the first place rather than a post facto breakup.

17

Plucky Underdog 12.18.16 at 10:57 am

I’m gobsmacked by your throwaway assertion that ExxonMobil is comparable in many ways to Standard Oil. OK, sure, it’s an amalgamation of two Standard Oil successor companies (out of thirty four!), and it’s not without … ahem … influence, but the economic, corporate, political, geographic and technological architecture of the hydrocarbons business changed bigly between 1911 and 1999. Look at stuff like resource ownership, market share, shareholder concentration and regulation before identifying Standard with XOM. Heck, the term antitrust was invented to describe what happened back then. John D Rockefeller would never have allowed unrestricted shale oil development to upset his tidy monopoly.

18

Plucky Underdog 12.18.16 at 11:15 am

Pedantry corner: compare to means to compare two things of different order to bring out the similarities. compare with introduces two things of the same order, bringing out the differences. I’m sure you knew this, but what did you want to do in that sentence?

19

TF79 12.18.16 at 1:45 pm

It may be worth distinguishing monopoly with upward vs downward sloping marginal costs – the latter is what I think of when I think of “natural monopoly.” For electricity for example, the regulated utility model created a regulated monopoly in generation (upward sloping marginal cost) and transmission/distribution (downward sloping). The case for the latter is much stronger than the former.

20

Mike Huben 12.18.16 at 2:36 pm

Perhaps you should start with something like:

“In unregulated markets, some of your money will be legally stolen by monopolists. Money you would keep if regulation kept the markets competitive.”

EIOL talks ***TO*** the reader. It does not indulge in passive description of economic theory: it makes ***moral arguments*** about why its viewpoint is important.

Do you have a moral argument in mind? Then speak it openly and convincingly. Your opponents already have. How will you differ from them? You can be more honest. But without persuasion of some sort, your efforts will be wasted.

21

mrearl 12.18.16 at 7:50 pm

@20: One of those “schemes of price discrimination” is known as Ramsey Pricing, which, to over-simplify, soaks the inelastic demand at prices above (considerably) marginal cost.
A diluted variation of it was fairly widespread in American utility rate regulation in the middle of the last century, in the form of declining block rates. Perhaps “perfect” price discrimination would be setting rates at individual marginal cost (say, time-based), but the precise implementation of it is well nigh impossible. So we suffer some averaging and the attendant cross-subsidies.

22

derrida derider 12.18.16 at 11:29 pm

One of the points where you see students beginning to move beyond Econ101 is when they get the insight that EVERY transaction in a market (including Beckerian markets that are only markets under a broad definition of “market”) has rents from the transaction that must be allocated (this is often a good leadin into applied game theory, BTW). The size and allocation of these rents varies hugely with the rules of the game, and it is these rules that we should focus on rather than naively assuming that any change that pushes us closer to perfect competition must improve efficiency (and that’s without even talking about the theory of the second-best).

So I agree with Kurt that you need to cover off the “contestability rather than competition is what’s needed” approach that the more sophisticated privatisers push – because contestability only matters as it affects the allocation of rents. The way to do this is to hammer home that the issues are fundamentally about AGENCY problems.

This is a broader set of arguments than the traditional “natural monopoly” argument that the privatisers have some quite plausible answers for. Those plausible answers are precisely vulnerable to analysis focused on which agents have the power to appropriate the rents – you can then talk sensibly about such arrangements as “retain public ownership but periodically auction management rights”.

Not sure this is really helpful, John, but only because I’m not sure how you would reframe things to capture all this.

23

Kiwanda 12.19.16 at 12:29 am

I don’t think there was an “AT&T Bell”, it was “AT&T”, part of the “Bell System”.

Not that it’s quite on-topic but: I see that Microsoft and Google are mentioned, but not how their “natural” monopolies are maintained. Microsoft’s monopoly on operating systems, office software, etc. is maintained via network effects encompassing non-Microsoft software developers, and Google’s possibly by the scale needed to build an effective search engine, and/or “brand”. Facebook, a monopoly of almost pure network effect, is not mentioned.

The “great lightbulb conspiracy” and the American Medical Association also represent monopoly/cartel power, of yet other kinds.

24

nastywoman 12.19.16 at 3:10 pm

– and perhaps – last not least – what’s about including some new rules in such lessons?

Like rule number 1.
All one dimensional economical theory has to be adjusted to – at least- some contemporary three dimensional reality if trying to apply it globally.
Like the trading examples only work if one compares comparable systems or societies and unintended consequences from a sudden ‘beef rejection’ to (underpaid) angry boatworkers are not forgotten…

25

nastywoman 12.19.16 at 3:17 pm

– and about the comment 22 – it was a reaction to a current post of Dean Baker who wrote:
‘We have free trade in manufactured goods but rigged protectionist measures that no one knows about to protect doctors, dentists, and other highly paid professionals.’

and the comment:
We don’t have ‘free trade in manufactured goods’ – because – as it should have been noticed by now – ‘manufactured goods’ which are produced in foreign countries by workers who only earn a small percentage of the wages ‘our’ workers earn – might give you the illusion of ‘Free Trade’ but let’s call it what it really is ‘An Illusion of Free Trade’.
-(or ‘Unfree Trade’?)

Which could bring us to your (favorite?) point: ‘The protected doctors and other high paid professionals’.
What’s about protecting our workers in exactly the same way we protect doctors and other high paid professionals’?

I mean – that would be the ultimate ‘win win’ situation instead of this (American?) way (always?) trying to reduce costs just by cutting and damaging ‘Human Capital’?

Let’s try to bring up the wages or salaries of workers much, much closer to what ‘high paid professionals’ are earning? And don’t tell me it is not possible as there is this Goldsmith living in my house – who definitely makes more money than my Dentist who is struggling with the high costs of his ‘Praxis’.

And pleeeaze! –
Researcher even in the US should know – that the idea of ‘We have free trade in manufactured goods’ is nearly as silly as the comparison of countries, where workers are paid decently and get six or seven weeks of vacation to some ‘jungle’ – where lots of Orange Orang Utans like to swing from tree to tree….

26

Kenny Easwaran 12.19.16 at 3:21 pm

Will an earlier part of the book already have explained why pricing things incorrectly leads to missing gains for everyone? If not, then readers that aren’t familiar with economics might be very surprised to see that monopolists only get half the benefit of economies of scale, and why consumers get a quarter of it, and why a quarter is totally lost. They might just naively think that the monopolist gets all of it, or even that the monopolist somehow makes the consumer *lose* value and thus gets *more* than 100% of the value created by economies of scale.

27

Stephen 12.19.16 at 8:32 pm

Query whether trade unions’ monopoly of labour in some circumstances may not also call for government intervention?

Declaring an interest: my Christmas holiday plans seem likely to be extensively disrupted by strikes occurring, by an astonishing coincidence, in the holiday season and to hell with the customers.

Confessing a memory: the three-day week in a rental with no heating that worked without electricity.

28

bruce wilder 12.19.16 at 9:35 pm

mreal @ 21

Yes, I suppose, though it wouldn’t be my idea to open the door to arcane debates about whether Ramsey-Boiteux prices are monopoly prices, what the welfare implications might be or any of that. Even if monopoly implies some deviation from true opportunity cost, I doubt the popular reader is going to by enlightened by an exposition on the Amoroso–Robinson relation. If I were to say something, I think it would be to the effect that true social opportunity cost becomes somewhat ambiguous under conditions of increasing returns (internalized as scale economies or externalized as network economies). Beyond that, my general observation would be that in the real world, actual prices are typically controlled variables: that is, prices are administered, whether subject to public regulation or not. That is, bureaucracies set a price schedule and then other aspects of production and distribution are controlled and managed with the price as a strategically willed constraint, as much on the supply side as the demand side. The hands are visible if you look. What this implies for true social opportunity cost is a large margin of uncertainty, where contingencies and risk matter a lot. Prices are not simple point estimates of opportunity cost; every price comes with contingencies and warranties, profit with residuals, and there’s a lot of slack and insurance and economic rent. The distribution of income is mirrored by and co-determined with the distribution of risk. (Obviously, I am writing these last couple of sentences in an abstract and telegraphic manner; nobody who wants to be understood by someone who doesn’t already understand should write like this.)

JQ, as a committed neoclassical economist, faces a serious challenge in replying to Economics in One Lesson with another lesson. Hazlitt presents himself as the classic hedgehog, who knows one thing and that one thing is enough. That one thing, in JQ’s formulation, is that a competitive price fairly reflects opportunity cost.

And, in the model implicit in Hazlitt’s narrative — which is also the archetypal model of market price in neoclassical economics — that’s true, in the sense of being logically valid for the simplifying assumptions that neither buyers nor sellers, producers nor suppliers act strategically and everyone experiences diminishing returns. In other words, everyone is a price taker and, for the firm (and for its factor suppliers), due to decreasing or constant returns to scale, marginal cost is rising and close to average cost in the relevant range of firm output. For this extremely simple analytic setup, market price corresponds very precisely to opportunity cost. In fact, this analytic setup defines opportunity cost conceptually in a way that highlights the importance of marginal considerations to decision-making — the central insight of the Marginal Revolution that historically made neoclassical economics.

The whole of neoclassical economics might be conceived of as (often too) clever foxes with many, many ideas yipping and yapping at the hedgehog with this one idea. All the good neoclassical foxes affirm the one idea as a matter of true faith, and then argue among themselves over the import of their very many clever ideas that variously interpret deviations from the base idea.

JQ’s idea, apparently, is that Lesson 2 is that market prices deviate from true or real opportunity costs in a great many realistic scenarios. He invokes Francis Bator’s account of the canon of market failure in support of this narrative. The problem with this narrative choice is that it is liable to run out of control, a galloping fox chase over a vast landscape where one can only point in fleeting glimpses at examples and hope against hope that one’s reader has some understanding of the cases one points at. Unfortunately, that’s what the snippet in the OP appears to me to be.

There’s nothing wrong with the fox chase, if you’ve prepared the reader to understand the glimpses you can give of the fox in the field. I admit I am a little unclear about the preparation and therefore the narrative context of the snippet offered in the OP, though I have scanned the linked draft.

The ideological use of Lesson 1 as a sufficient idea asserts that the market economy works well enough much of the time and it really isn’t necessary to deal with the confusing complexity and the reactionary may rest in the assurance the state will mess up in trying to deal with the confusing complexity. Any Lesson 2 is necessarily going to be a bridge across the gap from Econ 101 analytic models of perfect competition and monopoly to, “it’s complicated”, but in ways that makes “complicated” somehow digestible and Lesson 1 by itself incredible.

Personally, I wouldn’t affirm Lesson 1, but that’s me. And, being something of a hedgehog myself, I think it takes a hedgehog not a skulk of foxes to beat a hedgehog. ymmv

Anyway, I will continue to root for JQ in this endeavor.

29

Peter T 12.20.16 at 12:57 am

If the audience is the scientifically-minded, to whom doubt is a friend, you have the right note. But what Hazlitt offers his readers is not insight but certainty:

“In seeing that economics is a science of tracing consequences, we must have become aware that, like logic and mathematics, it is a science of recognizing inevitable implications.”

Your two lessons offer less certainty; your (justified) caveats even less again. For a population craving answers rather than questions, this may be less than palatable. I don’t know if this dilemma can be resolved, but a more direct, even dogmatic, tone could help.

30

alfredlordbleep 12.20.16 at 1:18 am

The last big example of trustbusting was the breakup of the AT&T telephone monopoly, which took place in 1982 after nearly a decade of litigation.

I can’t prove it without research, but if memory serves, AT&T was in favor of breakup thinking greater profit lay in its parts.

More defensible (for me at the moment) here’s a parallel point: U.S. cessation of atmospheric nuke tests wasn’t entirely due to considerations of the common good. U.S. military believed it could exploit its superior instrumentation of underground tests to advance faster.

31

alfredlordbleep 12.20.16 at 1:24 am

P. S. add: AT&T was in favor of breakup at some point

32

Main Street Muse 12.20.16 at 1:57 pm

Not an economist. But as a resident of Main Street, I feel that consumers are marks in the great carny game of capitalism. It’s a rigged game – and under Trump, it will only get worse. And I’m already pretty sick of it.

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