Wednesday, December 10, 2008

Possible Paper on Monopolies, Government Funding, and "Welfare States"

Some rough thoughts:

1. Monopolies
The intuitive idea of a monopoly is something that I have that you don't have and that you can't get: possession.  Colloquially, we say that someone has a "monopoly on good ideas" or is "monopolizing my time".  We mean that someone is the only source of good ideas in the accessible universe and that someone is consuming all of my available time, leaving me none to interact with other people or accomplish other tasks.

So a monopoloy is an intuitive idea.

Attempts to further define this or capture it with definitional rules are really nothing more than attempts to model this intuition.  A perfect model might perfectly capture the entire intuition, but it might be over or under inclusive in certain respects.  This is especially true when what is being modeled is subjective: I might think that a person consuming all my office time is monopolizing my time, while someone else might say they're just "keeping me busy" and my time is monopolized only if all my time, both in and out of the office, is consumed by that person.

2. Legal Views of Monopolies
Antitrust law definition.

This tries to capture the commercial sense of monopoly.  Let's play out the intuition.

A shopowner has, in some sense, a monopoly on that shop.  no one else can sell things in that actual shop.  We don't really worry about this, because in most cases someone else can set up a nearby shop or there already are others shops people can go to.  In some instances, even this might be a problem: shops on army bases, shops in airports and other closed environments where one can't easily leave.

At the other extreme, if someone corners the market we usually do think of that as a monopoly: it's probably the paradigmatic example.  If someone buys all of the silver in the world or owns all of the diamonds, they have a monopoly.  A counterarugment might go along the lines above: you might not be able to get silver, but do you really _need_ silver for anything in particular?  Can't you find a substitute?  In many cases, the answer is probably no.  But in some cases, the answer is yes.  For example, someone may corner the market in light bulbs with GE printed on them (namely, GE may corner that market).  But we have an intuitive judgment that there's nothing particularly wrong with that, and if someone acutally values the GE label on their lightbulbs then they can suffer the monopoly price.

This is how we see intellectual property law (which protects rights by preventing others from using them) with antitrust law (the law of monopolies).

3. Comparison of intuition and the law
My suggestion is that we can easily do what the law does: identify a monopoly first and then determine, on the fact, whether it's good or bad (legal or illegal).  The intuition is a monopoly that doesn't harm the public is probably okay, where harm the public is just another level of indirection to intuition.  If it's reasonable for someone else to compete, or if the monopolized good isn't too expensive (which is basically a function of how easy it is to compete, how important that good is, and my own notion of 'too expesnsive') then the monopoly is okay.

4. what should government do.

could argue that government should only do those things that would otherwise be monopolies and where competition would be artificial.  IE, gov't out of road construction/repair.  Stays in policing, military, national security, and 'welfare' as defined below.  Stays in grant making and research (part of nat'l security?). 

could argue that government funding should be pay as you go for all things that could otherwise be provided by the free market.  that is, if the government choses to provide services that others can readily compete with (USPS) then users of that service should not be 'entitled to it for free because it's a gov't service' but should have to pay per use. (stamps).

could argue that general tax dollars should go to inspect and police minimum standards (how defined?) and avoid corruption (how defined?) in those areas where the goverment is not the service provider.    This is redistributive in that it protects the users more than the non-users, but is probably only mildly distributive in most cases.

could argue that general tax dollars should also go to subsidize the market price for those who can't otherwise afford necessities (health, food, school, child care, housing).  This is clearly redistributive.  Also, what defines a necessity.

conclusion: much more intensive gov't trust busting and regulation.


No comments: