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Saturday, August 16, 2014

Monopoly Power

Tim Harford:

Monopoly is a bureaucrat’s friend but a democrat’s foe: ...Large companies are all around us. ... Monopolists can sometimes use their scale and cash flow to produce real innovations – the glory years of Bell Labs come to mind. But the ferocious cut and thrust of smaller competitors seems a more reliable way to produce many of the everyday innovations that matter.
That cut and thrust is no longer so cutting or thrusting as once it was. ... That means higher prices and less innovation, but perhaps the game is broader still..., large companies enjoy power as lobbyists. When they are monopolists, the incentive to lobby increases because the gains from convenient new rules and laws accrue solely to them. Monopolies are no friend of a healthy democracy. ...
No policy can guarantee innovation, financial stability, sharper focus on social problems, healthier democracies, higher quality and lower prices. But assertive competition policy would improve our odds, whether through helping consumers to make empowered choices, splitting up large corporations or blocking megamergers. Such structural approaches are more effective than looking over the shoulders of giant corporations and nagging them; they should be a trusted tool of government rather than a last resort.
As human freedoms go, the freedom to take your custom elsewhere is not a grand or noble one – but neither is it one that we should abandon without a fight.

    Posted by on Saturday, August 16, 2014 at 08:04 AM in Economics, Market Failure | Permalink  Comments (11)

          


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