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Natural Monopolies and Oligopolies - Cont'd

And there is yet another problem. People say that only “essential” medical services should be provided for “free”. But then again, who defines what is “essential” and based on what criteria? Answer: the government (aka politicians). And then our question is why? Why should politicians dictate what is essential and what is not, considering that it is our money they are spending? Of course, this is all nonsensical.

If you take the time to think this through, it is not a matter of “free” health care, but a question of affordability. The issue is not that health care is expensive, the issue is that we can’t afford it.

But the problem of affordability is easy to solve: just increase everybody’s standards of living and most things become affordable! And how do we do this? Simple, free the markets. Or even better, get rid of all politicians and countries at the same time! That will do it.

Remember, the USSR tried this solution, free everything for everybody; starting with health care. We all know how well this experiment went. Yes, this so-called “solution” is this awful. It simply does not work. Governments with “free” health care are doing one of two things: they are either mortgaging the future of “only” a few generations to come through debt or they have unique resources that are not obtainable anywhere else (e.g. oil). Free anything through governments is a mirage, a delusion pure and simple. Monopolies have absolutely nothing to do with it and as such, governments have no right to interfere. Literally!


Glorious monopoly

Is it glorious to have a monopoly? Of course not! It is painful, annoying and expensive. Anybody in their right mind would have to hate monopolies. Monopolies are not enjoyable. Monopolies are necessary. They are the growing pains and baby steps of a product or service towards full-fledged competition. They provide new goods and services… for a price… which is usually steep. But they do it. Their products may not be the best. But they do it. Their service may leave a lot to be desired. But they do it. You may feel blackmailed. But they still do it. Without monopolies there would be no competition, no choice and no high standards of living. Monopolies is where it all starts. Trying to remove monopolies from the marketplace is like trying to remove DNA from our cells… and expect to live. It is simply not possible. That is the ultimate fact. Free markets and regulated markets alike cannot survive without monopolies…. much that politicians and their circus-trained economic drones may try to burn into your brain.


Artificial Monopolies and Oligopolies

What do we mean by “artificial”? They are monopolies and oligopolies that were created by the government. These monopolies or oligopolies cannot survive in a free market. They are monopolies and oligopolies defined at gunpoint. Literally.

Politicians always hail these monsters as “critical” for the “good of society”. They brainwash you into believing that you must endure the damage and suffering artificial monopolies and oligopolies do to your standards of living because it is for the “better good”. Because “nobody else will do it otherwise”. Because it is “just”. Because it is “righteous”. Nothing can be further from the truth.

Artificial monopolies and oligopolies are always, and in all circumstances, a terrible idea. Of course, there may be some exception to this rule somewhere. Statistically speaking, they can’t be all bad. However, do us a favor. If you actually find one, would you please let us know? Out of curiosity, you know?

We have seen in the lesson Intellectual Property Rights Are Dumb, why copyrights and patents are simply bull shit wrapped in political shiny paper. Yet, they are the most widespread cause of all government imposed monopolies. Just imagine how many options we would have if everybody would be allowed to copy everybody else.

But this is not the whole story. There are other, larger monopolies imposed by governments which are making a lot of damage. Some of these monopolies are there because politicians syphon untold amounts of money out of them, such as Oil monopolies or Mineral monopolies. There are many countries in the world (Mexico, Saudi Arabia, Russia, China, most Latin American countries, etc.) that have one, the other or both. What a surprise… politicians stealing our money. Any why should this be this way? Because the government won’t let you purchase land on an allodial basis. We have seen this in our lesson You Don’t Own The Government The Government Owns You.

Similar monopolies are there because a “concerned group” or a “special interest” or “advisories” or… name them as you wish group… has “convinced” politicians (read “issued donations”) that it is “in the best interest of society” to leave the subject of …(insert your preferred topic here)… in their “expert” hands.

And so we have all kids of associations, groups and organizations that become the legal gatekeepers of a certain good or service. They are the supreme dictators in that area. Whatever they say, goes. Of course, the only purpose of such associations is always the same: to restrict supply therefore increasing the price. To maintain an artificial monopoly. And for those people that say that some associations actually act in the best interest of the “people”, we will go as far as to acknowledge that some actually act in this manner and that they are candidly convinced that they are doing a good.

The only problem is, even when they are fully convinced, they still act to restrict supply. You see, in order for the damage to be done, intent is not ultimately required, just restriction. And this, they all do exceedingly well.

Consider this. In certain countries, the profession of Psychiatry is regulated by law through a Board or a College or a Department in a Ministry (typically Health). Nobody can practice as a psychiatrist without going through all the tests and requirements these organizations set-up. Result? Psychiatrists are in short supply.

Now, let’s take a look at psychologists. In many countries this profession is not regulated by the government. Result? We have an excess of psychologists. Furthermore, they have several Boards, Schools and Professional Associations competing amongst them to be better and better and push standards higher and higher. Additionally, the cost per session of a psychologist is far cheaper than a similar one with a psychiatrist.

These two professions are obviously not exactly the same. They are substitute competitors. However, for the vast majority of patients, either one will do.

In other words, the profession that is legally regulated produces low supply at high cost. The profession that is not legally regulated produces high supply at lower costs. Does this surprise you? We didn’t think so.

Let’s take phones. In most countries there is usually only one phone company providing POTS (Plain-Old-Telephone-Service) per city or town or area. This company is usually inefficient, slow and expensive. This company is usually a leftover, a monopolistic dinosaur that still survives today. Result? Few and expensive telephones and services.

On the other hand, we have cellular phone companies. Typically there are several companies overlapping the same city, town or area. Result? Plenty of good service at much, much lower prices.

Again, whatever is legally restricted produces shortness of supplies and high prices. Whatever is not legally restricted produces large supplies at much more affordable prices.

There are so many artificial monopolies out there that you won’t believe it. From pharmaceuticals to street cleaning; from airport management to highway ownership; from building codes through bus drivers’ sit design; teachers’ qualifications through paint formulation… and so on. Millions upon millions of regulations that prevent people from increasing your standards of living.

We sincerely hope you won’t believe us. Just go through this exercise. Pick an object in your house or your pocket. Any object. Google it. Add the keyword “government” or “regulation” or “law”. You will be amazed! There are almost no objects or professions left on earth that are not restricted in one way or another by this or that regulation. Artificially imposed monopolies. We are saturated with them. Is there a surprise that our economies are so inefficient? That our standards of living are so low? That we can afford so little? Of course not!

Note: please see the Glossary if you are unfamiliar with certain words.

Continue to We don’t need no stinking competition - Part 5





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