Archive for April 2009
The monopoly concept is seriously misunderstood. Rather than sticking to the classical definition; “an exclusive grant to sell given by government”, some believe that it’s something to do with market share.
In the video, Reed cites the recent example of the US FTC, which decided to take on five evil cereal manufacturers on charges of “shared monopoly”. What the hell is a “shared monopoly”? Who knows, but anyway, it’s apparently not cool if five competitors have 80% of the market share of ready-to-eat cereal. But isn’t cereal in competition with fruit, toast, pancakes and bacon?
Also, it was apparently not cool that Standard Oil once fleetingly held 90% of market share, despite having 66 other competitors ready to pounce when Standard slipped up.
The lesson: monopoly has nothing to do with market share as the definition of “market” can be whatever the hell you want it to be.
I have almost finished reading Walter Block’s epic treatise The Privatisation of Roads and Highways. It has been a fascinating read that has answered many of the questions I had about how a free society would deal with the insurmountable challenge of private road ownership. Here I will do my best at channelling David Gordon, and summarise the book.
The central pillar of the book is extremely straightforward:
What reasons are there for advocating the free-market approach for the highway industry? First and foremost is the fact that the present government ownership and management has failed. The death toll, the suffocation during urban rush hours, and the poor state of repair of the highway stock are all eloquent testimony to the lack of success which has marked the reign of government control. [p. 12]
Block argues correctly that the government, lacking the profit and loss mechanism, can never be fully motivated to alleviate the problems on our roads. The government will never be financially punished for poor management decisions. It cannot go bankrupt like a private business owner can. Therefore, the chief cause of all misery on our roads is due to government ownership of roads. Block goes on:
Now consider the case where a restaurant goes out of business. The proximate causes are badly cooked and cold food, surly service, dirty conditions, lack of personal safety, poor decor, etc. But the ultimate responsibility, surely, lies with management. It and it alone failed to hire good cooks, to ensure that the waitresses, busboys, cleaners, bouncers, interior decorators, exterior architects, etc., did their assigned tasks in a satisfactory way. [p. 186]
The restaurant analogy is one of the recurring motifs of Block’s book. It is an excellent illustration of Block’s secondary point: proximate vs. ultimate causes. Block argues that instead of focussing on the ultimate cause of road fatalities – government manangement of roads – economists have been too concerned with the proximate causes – drink driving, speed and driver error. The solution to the road problem is the to allow the same market system that provides us with computers, cars and houses to provide our roads.
Writes Dani Rodrik:
The surpluses accumulated during the good years has given the Chilean government unusual latitude in responding to the crisis. As a result, the economy is doing much better than its peers. As Bloomberg reports, “the country’s economy is expected to grow 0.1 percent in 2009, as the region contracts 1.5 percent, according to the International Monetary Fund.”
And does good economics pay off politically? Eventually, yes. Five months after being burned in effigy, Velasco is currently President Bachelet’s most popular minister.
Perhaps “macroeconomics” only applies to South American countries. But elsewhere…
…and I’m sure there are plenty of other examples.
Seriously, I’m getting tired of all this. If our biggest economic problem is governments not spending enough money, then I think we have it pretty good.
Thanks to Cavok at politics.ie who brought our attention to the latest industrial production release by Eurostat, in which the Irish figures for January and February 2009 are the only ones listed as “Confidential”. Who made the decision not to release the figures, why were they not released, and can we assume that Ireland’s annual variation figures are worse than Latvia’s -24%, or Estonia’s -30%?
Two more articles on the state of the Irish economy.
First up is Paul Krugman’s “Erin Go Broke“. Nothing really surprising; he laments that the Irish government isn’t able to
destroy stimulate the economy. Writes Krugman:
But there’s more to it than that: to satisfy nervous lenders, Ireland is being forced to raise taxes and slash government spending in the face of an economic slump — policies that will further deepen the slump.
Next up is John Engle’s “Celtic Kitten: The Failure of Intervention in Ireland“.
Apparently the cure to the social ills brought on by insatiable public spending is simply more public spending. Only now, the money being frivolously dithered away is not from a surplus but borrowing from the future….The government’s only remedy seems to be even further government involvement in the economy. Already it is on the way to nationalizing its major banks and the aforementioned artificial propping up of the housing market.
Good to see an Austrian presence at Trinity College!
I’d also like to remind anyone interested in discussing classical liberal, libertarian and conservative views that our Forumotion message board is the place to do it. All welcome.
CNBC has a spectacular powerpoint of the world’s top 15 debtor nations. External debt is measured as a proportion of GDP. Guess who’s number one?
With an external debt 811% of GDP, Ireland is head and shoulders above second place the UK (336%) and third place Belgium (327%).
I want to feel irrationally exuberant again.