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How would Libertarianism work in an Irish context?
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A large market share is how monopoly is determined, and 90% seems an often used figure for determining monopoly, so Microsoft was (may still be) a monopoly in the desktop operating system market.Suryavarman wrote:A large market share is NOT a monopoly. Microsoft has never had a monopoly in either market. They may have had large market shares but they never had a monopoly.
I mean just look at how much lock-in there is to Windows-only software, look at how the majority of games only run on Windows etc..
A monopoly is when there is such a large (>90%) market share and so little competition, that the bigger company is free to exploit its dominance (partly combined with anti-competitive practices usually).Suryavarman wrote:Once again, a large market share is not a monopoly. A monopoly is when there is only one supplier in a market and no substitute goods available. By that definition Standard Oil was never a monopoly.
By your own standards, government does not have a monopoly on schooling in Ireland, because there are some private schools out there.
Standard oil is widely considered one of the best examples of monopoly in history; both of them are listed here:
https://en.wikipedia.org/wiki/Monopoly#Examples_of_monopolies
Remember also, the question wasn't what constituted a monopoly, the question was when had government punished people for giving away cheap/free products in the past; these monopolies weren't punished for that.
How widespread is the view, among Libertarian supporters, that these don't constitute monopolies and competition problems?
If these massively dominant corporations would not be viewed as monopolistic and as a problem in Libertarian society, it would be an extraordinarily exploitative society.
Through technological development the whole industry gradually reduced prices; once competition was out of the way for Standard Oil it is my understanding they did raise prices.Suryavarman wrote:As far as I am aware Standard Oil never raised prices either. Between 1869-1897 Standard Oil cut the price of refined oil by about 80%. Hardly a price raise is it?
I will add the caveat to what I say, in that I can't find good sources on it at the moment. In my searches for information about Standard Oil, it's interesting that the majority of the articles I can find on Google are from Libertarain sites, which appear to be exercising a bit of revisionist history in the 100th anniversary of the antitrust case.
Hehe, ah now I understand where you've made the connectionSuryavarman wrote:Once again Alcoa wasn't a monopoly as it had to compete with scrap aluminium. Alcoa also managed to gain its large market share due to its ability to sell cheap aluminium. So yes it was being prosecuted for charging low prices.
A company being punished for having a monopoly is not a company being punished for having low prices, even if those low prices assist it to monopoly power. It is rather interesting it gets represented that way though.
Okey, though what is your opinion on the issues I did bring up? Do you think those issues are an acceptable price to pay for a switchover to private education?Suryavarman wrote:
I don't see any additional issues.KyussBishop wrote:Did you mean you don't see potential issues with making segregation acceptable, or that you don't see any additional issues past what I mentioned?
A bank only has to play fair until they are relatively dominant or just have a large reserve of gold/precious-metals. There's no reason why a bank has to state the weight of gold on the notes they issues either, no reason at all why they can't decide to have an adjustable exchange rate of notes vs gold.Suryavarman wrote:I think you seem to be hugely overestimating the power of banks here. A bank cannot issue a currency that nobody is willing to hold. For that reason their currency is likely to be backed by a commodity.
The notes banks will be issuing will likely say "this note entitles the bearer to 1 ounce of gold from name of issuing bank". In that scenario I don't see how the bank could devalue their currency.
In addition, banks can individually determine their reserve rate as well (they can change their policy here independent of anything else), which is another method of depleting gold reserves by engaging in risky or even knowingly fraudulent loans, until the bank is bankrupt.
It seems plausible, that individuals conspiring together with the bank, could set up a front of companies for taking the loans, and channel the money to other companies (under the guise of legitimate business) until bankrupt, and those other companies could cash out gold (privately distributing the gains with conspirators), thus depleting bank reserves.
It's fraud, but very hard to prove if done right, and the owner of the bank conspiring in this could not be held to account because nobody could prove he broke any laws.
Any bank, even if it had been run in a 100% legitimate and trustworthy manner up to that point, could do this.
They did, but they undertook deflationary policies to try and maintain gold reserves and the modified gold standard. Britain did something even more drastic after WWI and intentionally pinned themselves to the gold standard (after years of inflation off of it during the war), leading to enormous deflation (something Churchill regards as one of his biggest mistakes).Suryavarman wrote:The US created unbacked money throughout the 20's and continued to do so after the devaluation up until the last link with gold standard was broken in the 70's. So the US could easily have created more money but it chose not to.
This flies in the face of all of economic history. An accepted view among the majority of (nearly all) economists, through most schools of economics, is that history has shown economic downturns will happen at some point, and thus any economic theory/model must support the condition of economic downturn.Suryavarman wrote:It's fair to say that a true free market absent government intervention, that would be espoused by most Austrian economists and libertarians, has never existed. Therefore your claim that recessions must happen under such a system are false. Your claim is also highly illogical. Just because something happened in the past, it does not mean it must happen in the future.
If bubbles (and therefore recessions) are only caused by government intervention then I can say that a world absent government intervention will not experience economic downturns.
To claim that under a 'true' free market, under Libertarian/Austrian principals, would never experience an economic downturn, and the very idea that the way an economy is managed is the sole determinant of whether an economic downturn may take place, is pretty thoroughly wrong.
Just to give an extreme example which can once-off disprove that: If something like the Spanish Flu occurred in a country under such a system, with similar devastation, it would lead to an economic downturn.
Ok so it would do nothing basically; take no special measures.Suryavarman wrote:It would deal with downturns the way economies always deal with downturns. By the allowing markets to return to equilibrium.
Granted it doesn't end it, but entering a period of permanent deflation completely changes the economic dynamics of society.Suryavarman wrote:True. How does deflation = an end to economic growth?
Since money will not lose its value, but in fact be permanently increasing in value, people (particularly the richest) will be motivated to hoard money rather than spend it or invest it, and it will aid the accumulation of wealth.
In an inflationary society, people are motivated to spend and invest, as the value of money constantly erodes slightly; in a deflationary society, there is no need for the rich to take any risks with money and put it to work.
So, in an inflationary society the wealth of the rich is always slowly seeping back into the economy, benefiting the economy and the less well off, but the opposite happens in a deflationary society, where the wealth inherently is accumulating more to those who are already rich, with no effort in any way whatsoever being expended.
Also, in a society of permanent deflation, the lender vs borrower dynamic changes significantly, in that the worth of the money the borrower gets is less than the worth of the same amount of money he has to pay back later (on top of the interest).
So in summary, a deflationary society very disproportionately favours the rich, and disincentivizes putting money to work in risky investments (of which some are necessary for stimulating business/growth), which has an impact on economic growth (though would not end it).
Interesting; in my searches, came upon this article, which seems to get to the very core of the fault in Austrian economics plus Libertarianism:
http://www.nakedcapitalism.com/2011/12/philip-pilkington-libertarianism-and-the-leap-of-faith-%E2%80%93-the-origins-of-a-political-cult.html
I actually highly recommend everyone read that article; it is definitely the authors subjective opinion, but it is really extremely good, and I think it has pointed me in the direction of the core economics faults of Libertarianism.
I haven't read up a great deal yet on marginalism/marginal-utility and other value theories, but seems that is the place to look.0 -
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KyussBishop wrote: »A large market share is how monopoly is determined, and 90% seems an often used figure for determining monopoly, so Microsoft was (may still be) a monopoly in the desktop operating system market.
I mean just look at how much lock-in there is to Windows-only software, look at how the majority of games only run on Windows etc..
A large market share is not how a monopoly is defined. You can't go around just making up definitions willy-nilly as you please. The hint as to what it means is in the word itself. Mono is derived from the Greek word for single. Notice how it isn't derived from the Greek word for really big?A monopoly is when there is such a large (>90%) market share and so little competition, that the bigger company is free to exploit its dominance (partly combined with anti-competitive practices usually).
By your own standards, government does not have a monopoly on schooling in Ireland, because there are some private schools out there.
Did I claim that the Government had a monopoly on schooling?Standard oil is widely considered one of the best examples of monopoly in history; both of them are listed here:
https://en.wikipedia.org/wiki/Monopoly#Examples_of_monopolies
Remember also, the question wasn't what constituted a monopoly, the question was when had government punished people for giving away cheap/free products in the past; these monopolies weren't punished for that.
Standard Oil wasn't a monopoly so it cannot be considered a good example of one. If Standard Oil is considered an example of a monopoly then it just goes to show how lazy the people that wrote that section of the article are.
These companies got their large market share by charging low prices, so effectively they were punished.How widespread is the view, among Libertarian supporters, that these don't constitute monopolies and competition problems?
If these massively dominant corporations would not be viewed as monopolistic and as a problem in Libertarian society, it would be an extraordinarily exploitative society.
I'm pretty sure the view is widespread. How on earth can companies that dramatically lower prices be considered exploitative?Through technological development the whole industry gradually reduced prices; once competition was out of the way for Standard Oil it is my understanding they did raise prices.
I will add the caveat to what I say, in that I can't find good sources on it at the moment. In my searches for information about Standard Oil, it's interesting that the majority of the articles I can find on Google are from Libertarain sites, which appear to be exercising a bit of revisionist history in the 100th anniversary of the antitrust case.
You're claiming that Standard Oil was a monopoly. Therefore Standard Oil was the oil market. Therefore Standard Oil is the only explanation for lower oil prices.
I don't claim that though. I claim that Standard Oil was one of many companies in the oil industry. It was far and away the largest though. It became that way through constant innovation and lowering of the price of oil.
If it was the whole industry that lowered oil prices as opposed to Standard Oil then how did Standard Oil get such a large market share?
Does the fact that all the sources you can find contradict your position not tell you something? It's quite hilarious that you then claim that they are engaging in revisionist history. Are you sure it isn't you that is doing so?Hehe, ah now I understand where you've made the connection A company being punished for having a monopoly is not a company being punished for having low prices, even if those low prices assist it to monopoly power. It is rather interesting it gets represented that way though.
If they didn't have those low prices they wouldn't have become a monopoly therefore they are getting punished for having those low prices. If they realised they were going to become a monopoly and decided to raise prices they would be punished for price gouging. If they decided to withhold supply to create a shortage of their product they would be punished for that to. The logical approach is to continue to charge low prices and increase market share. Therefore they are being punished for charging low prices when they are eventually punished for having a dominant market share.Okey, though what is your opinion on the issues I did bring up? Do you think those issues are an acceptable price to pay for a switchover to private education?
I think they are an acceptable price to pay.A bank only has to play fair until they are relatively dominant or just have a large reserve of gold/precious-metals. There's no reason why a bank has to state the weight of gold on the notes they issues either, no reason at all why they can't decide to have an adjustable exchange rate of notes vs gold.
What makes you think the bank is going to stop playing fair?
Are you going to store gold with a bank with an adjustable exchange rate or a bank that allows you to reclaim the gold you deposited in full?In addition, banks can individually determine their reserve rate as well (they can change their policy here independent of anything else), which is another method of depleting gold reserves by engaging in risky or even knowingly fraudulent loans, until the bank is bankrupt.
Yes because business owners are well known for their desire to bankrupt their own businesses :rolleyes:It seems plausible, that individuals conspiring together with the bank, could set up a front of companies for taking the loans, and channel the money to other companies (under the guise of legitimate business) until bankrupt, and those other companies could cash out gold (privately distributing the gains with conspirators), thus depleting bank reserves.
It's fraud, but very hard to prove if done right, and the owner of the bank conspiring in this could not be held to account because nobody could prove he broke any laws.
Any bank, even if it had been run in a 100% legitimate and trustworthy manner up to that point, could do this.
Why would somebody bank with that bank in the first place? Why would anyone ever trust the owner of that bank again?They did, but they undertook deflationary policies to try and maintain gold reserves and the modified gold standard. Britain did something even more drastic after WWI and intentionally pinned themselves to the gold standard (after years of inflation off of it during the war), leading to enormous deflation (something Churchill regards as one of his biggest mistakes).
So in other words it was because they engaged in inflationary policies in the first place that they found themselves in a sticky pickle?This flies in the face of all of economic history. An accepted view among the majority of (nearly all) economists, through most schools of economics, is that history has shown economic downturns will happen at some point, and thus any economic theory/model must support the condition of economic downturn.
It's entirely possible that those majority of economists are wrong. Don't forget that a huge majority of economists accepted the view that a minimum wage was bad for low wage workers. A view you are arguing against right at this moment in another thread on this forum.To claim that under a 'true' free market, under Libertarian/Austrian principals, would never experience an economic downturn, and the very idea that the way an economy is managed is the sole determinant of whether an economic downturn may take place, is pretty thoroughly wrong.
Just to give an extreme example which can once-off disprove that: If something like the Spanish Flu occurred in a country under such a system, with similar devastation, it would lead to an economic downturn.
I do believe that occasionally shocks to the economy such as natural disasters can cause economic downturns. I don't believe that they are common enough to bother worrying about. I was just just pointing out that I could claim that economic downturns are entirely the cause of government intervention.Ok so it would do nothing basically; take no special measures.
An economy recovers from recession by getting back to normal. Austrian economists believe that the best way to do that is by leaving the economy to its own devices. Whereas other economist believe that fiscal or monetary stimulus is the best way to do so.Granted it doesn't end it, but entering a period of permanent deflation completely changes the economic dynamics of society.
Since money will not lose its value, but in fact be permanently increasing in value, people (particularly the richest) will be motivated to hoard money rather than spend it or invest it, and it will aid the accumulation of wealth.
In an inflationary society, people are motivated to spend and invest, as the value of money constantly erodes slightly; in a deflationary society, there is no need for the rich to take any risks with money and put it to work.
People will only stop investing if money is increasing in value faster than assets. In the long run that won't happen.
They also can't hold money for ever, eventually they will need to consume something.
If this all aids to the accumulation of wealth, then how is it a bad thing? Or is making people poor a good thing now?So, in an inflationary society the wealth of the rich is always slowly seeping back into the economy, benefiting the economy and the less well off, but the opposite happens in a deflationary society, where the wealth inherently is accumulating more to those who are already rich, with no effort in any way whatsoever being expended.
Rich people generally tend to hold their wealth in assets such as stocks or bonds as opposed to money. Poor people on the other hand are more likely to hold their wealth in money. So if anything a deflationary environment will favour the poor.Also, in a society of permanent deflation, the lender vs borrower dynamic changes significantly, in that the worth of the money the borrower gets is less than the worth of the same amount of money he has to pay back later (on top of the interest).
Lower interest rates would make up most, if not all, of the difference.So in summary, a deflationary society very disproportionately favours the rich, and disincentivizes putting money to work in risky investments (of which some are necessary for stimulating business/growth), which has an impact on economic growth (though would not end it).
Risky investments generally earn a higher return because of their riskiness. So a deflationary doesn't disincentivise people from putting their money into them.Interesting; in my searches, came upon this article, which seems to get to the very core of the fault in Austrian economics plus Libertarianism:
http://www.nakedcapitalism.com/2011/12/philip-pilkington-libertarianism-and-the-leap-of-faith-%E2%80%93-the-origins-of-a-political-cult.html
I actually highly recommend everyone read that article; it is definitely the authors subjective opinion, but it is really extremely good, and I think it has pointed me in the direction of the core economics faults of Libertarianism.
I haven't read up a great deal yet on marginalism/marginal-utility and other value theories, but seems that is the place to look.
Calling Austrian economics or libertarianism a cult is hardly a good critique of either. In fact it is quite pathetic. It's also quite ridiculous to claim that libertarianism was born out of marginalism considering libertarianism is just the modern form of classical liberalism which was around long before marginalism was first developed.
Marginalism isn't only accepted by the Austrian school. It is accepted by every school of economic thought and even some marxists.0 -
Replying to SupaNova first (just as I have it written down, may as well split to two posts):
You seem to be straw-manning him quite a bit there, putting words/views into his mouth to knock down. Where does he rail on subjective theories of value in general? Seems like that would cover a lot of theories, when he may be focusing on a particular subset.SupaNova wrote:The author also doesn't seem to realize that subjective value theory is accepted by economists of all schools, or maybe he does, and considers Paul Samuelson and Keynesian state interventionists to be a cult too.
Also, while I don't yet know the detailed criticisms behind any economic schools particular theory of value, I do know that not all schools adopt particular theories of value.
For instance, post-Keynesian economists don't seem to actually have an explicit theory of value, which is regarded simultaneously as both a strength and weakness of their school (a strength in avoiding its alleged flaws, a weakness in lack of completeness in theory).
Many people involved in burgeoning econophysics also seem to hold similar post-Keynesian views, though some do adopt more mainstream theories of value.
It seems that current theories of value have shortfalls under certain circumstances, but that is something I need to read up more on to understand better.
Your whole argument actually, appears to be an "an appeal to the people" (i.e. numbers) and to a lesser extent, an "appeal to authority" rather than having any basis to it; i.e. "sure most economists agree with it, therefore it's right".
I could just as easily say "sure most economics agree with neoclassical economics, therefore that's right", but we both know that's wrong.
A selected quote (the article I found very interesting by the way, ta):
http://www.nakedcapitalism.com/2011/10/philip-pilkington-marginal-utility-theory-as-a-blueprint-for-social-control.htmlThe theory of marginal utility is, like most concepts in neoclassical microeconomics, quite simple. It begins, also like most concepts in neoclassical microeconomics, with a tautology. The economists claim that people choose that which maximises their pleasure and minimises their displeasure. They refer to this as people ‘optimising their utility’ – ‘utility’ here being this supposedly innate tendency to choose that which satisfies us most.
As any even a half-blind observer will note this is complete claptrap. People often make choices that turn out later not to ‘maximise their satisfaction’ (whatever that crude phrase might mean). Have you ever gone clothes shopping and bought an expensive pair of jeans that you never wore? Well, that’s hardly utility maximising behaviour.
In fact people often make choices that lead to less than satisfactory outcomes. This seems to be by design rather than anything else. If we always made the choices that ensured constant satisfaction we would soon find that we had no motivation to do anything new and would simply sit and stew in our own narrow and static world. That we occasionally make less than satisfactory choices allows us to continue to pursue satisfaction all the more. Nothing would smother our drives, our ambitions and our aspirations quite like a constant state of satiation.
Seems a reasonable rebuttal to me; this seems like it's one of the core microeconomic analogies (and weaknesses) between neoclassical economics and Austrian economics.
Another selected quote:
That seems to be another good example of an exception to the theory he is criticizing; the point on advertising is a particularly good one.Adding to the theory of utility the theory of marginality doesn’t really make things any better. The newly constructed theory of marginal utility states that we will derive an ever diminishing amount of satisfaction (that is, utility) from any given product or circumstance.
Impressive, right? Not really. And not strictly true either.
An obvious counter-example would be that of the collector who derives an increase in satisfaction from accumulating a greater number of a certain item. Not to mention the eager capitalist who views money as an end in itself rather than a means to an end and so tries to accumulate ever-increasing amounts right up to infinity.
Eccentrics, surely? Not really. Many people have a passion for collecting a variety of different items and there are certainly no shortage of burgeoning capitalists in this age of popularised stock markets and online Forex trading.
There’s also the issue that advertising can often try to convince consumers to buy ever-increasing volumes of a product – even if the price of the product increases due to the brand becoming more popular. This is often remarkably successful and seems to fly in the face of the theory of marginal utility. In fact, it contradicts it at a very fundamental level. It shows that consumers are not the rationally calculating agents that marginal utility theory says they are. Instead they are agents caught up in trends and fashions and subject to irrational drives that marketers know well how to tap in to.
Another select quote:If people are not seen to have almost wholly static tastes the theory of marginal utility is worthless. If peoples’ tastes are constantly changing due to personal development, outside influence etc. then price signals will be of secondary importance and psychological and cultural changes will have to brought to the fore as explanations for consumer behaviour toward anything beyond the most simple commodities.0 -
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Please excuse the massive massive size of this post; I assure mods that, while there are non-Irish tangents, there are plenty of parts with Ireland in context
(even if not explicitly stated)
You're being pedantic over the semantics of the word here, and funnily, taking the most literal definition in Greek as the authoritative one, rather than that of an actual dictionary:Suryavarman wrote:A large market share is not how a monopoly is defined. You can't go around just making up definitions willy-nilly as you please. The hint as to what it means is in the word itself. Mono is derived from the Greek word for single. Notice how it isn't derived from the Greek word for really big?
http://dictionary.reference.com/browse/monopoly1. exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.
A 90% market share would allow pretty effective manipulation of prices.
Lets try the more expansive Wikipedia definition:
https://en.wikipedia.org/wiki/MonopolyThe verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors.
...
In law, a monopoly is business entity that has significant market power, that is, the power, to charge high prices. Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).
By your definition a country could have one primary oil provider, in control of 99% of the market in a country, able to produce millions of barrels of oil a day, but if there was one other oil provider, only able to provide a single barrel a day, then there would be no monopoly.
Also, by legal definitions, they pretty typically determine it based on market share; for instance, in the US, monopoly conditions are determined (in law) by percent of market share. In the US this seems to be as little as 70%:
http://www.antitrustlaws.org/Sherman-Antitrust-Law.htmlIf a firm owns at least 70 percent of the market share they may be deemed a monopoly.
So, not only does the dictionary definition and other widely regarded definitions of monopoly consider market share, but also the legal interpretation of monopoly conditions (arguably the most important) consider it as well.
By accepted standards of definition of monopoly (including that of the dictionary) Standard Oil did constitute a monopoly; they are one of the most historic examples of monopoly around.Suryavarman wrote:Standard Oil wasn't a monopoly so it cannot be considered a good example of one. If Standard Oil is considered an example of a monopoly then it just goes to show how lazy the people that wrote that section of the article are.
Is there any example in history outside of government-mandated monopoly that, by your standards, meets the definition of monopoly?
Standard Oil was brought to court for a range of anti-competitive tactics, including preferential deals with railroad companies, buying up most of the market, and allegedly having people physically intimidate rival business.Suryavarman wrote:These companies got their large market share by charging low prices, so effectively they were punished.
If you submit that they were brought to court based on low prices, you need to provide some proof on this, because it's completely unsubstantiated.
You're putting arguments in my mouth, and imposing your view of monopoly on me when I explicitly stated my view of what constitutes a monopoly, and then using all of that as a bunch of straw men in an attempt to refute my argument.Suryavarman wrote:You're claiming that Standard Oil was a monopoly. Therefore Standard Oil was the oil market. Therefore Standard Oil is the only explanation for lower oil prices.
Again you're selectively misrepresenting my words: "In my searches for information about Standard Oil, it's interesting that the majority of the articles I can find on Google are from Libertarian sites".Suryavarman wrote:Does the fact that all the sources you can find contradict your position not tell you something? It's quite hilarious that you then claim that they are engaging in revisionist history. Are you sure it isn't you that is doing so?
So a company can be justified in maintaining a monopoly by your standards?Suryavarman wrote:If they didn't have those low prices they wouldn't have become a monopoly therefore they are getting punished for having those low prices.
Right, so you think social segregation is an acceptable price to pay for having private education in the country, and all of the downsides that entails.Suryavarman wrote:I think they are an acceptable price to pay.
These consequences could include:
Creaming off of easy to teach students, and resulting segregation of more expensive to teach students; this includes students that have minor mental or physical ailments that make them more expensive to teach, not just those with severe problems. This creates a whole new societal exclusion of particular people (and is unacceptable in my view).
Giving private educational institutes the right (not just ability, but explicit right) to discriminate against people of a particular social background, race, nationality, religion, socioeconomic status...just, anything basically.
Arguably, this could lead to a society where the poor and disadvantaged (most particularly the disabled, of various degrees) are not just excluded from normal school life (with corresponding effects on social life), but (through social distance) possibly even vilified and looked down on too.
More expensive to teach students being concentrated in schools where the cost of their education is far higher compared to the benefit they receive compared to other schools, in a massively disproportionate fashion.
Among more issues.
A bank will stop playing fair because there is an enormous amount of money to be made.Suryavarman wrote:What makes you think the bank is going to stop playing fair?
Are you going to store gold with a bank with an adjustable exchange rate or a bank that allows you to reclaim the gold you deposited in full?
If there is huge personal gain to be had from it, without legal consequence, then obviously yes.Suryavarman wrote:Yes because business owners are well known for their desire to bankrupt their own businesses
Nobody would know that the bank was a risk in the first place, that is the point. Once all the reserves are depleted, the bank would be gone and nobody would trust it thereafter, but it's too late then because the gold is gone.Suryavarman wrote:
Why would somebody bank with that bank in the first place? Why would anyone ever trust the owner of that bank again?KyussBishop wrote:It seems plausible, that individuals conspiring together with the bank, could set up a front of companies for taking the loans, and channel the money to other companies (under the guise of legitimate business) until bankrupt, and those other companies could cash out gold (privately distributing the gains with conspirators), thus depleting bank reserves.
It's fraud, but very hard to prove if done right, and the owner of the bank conspiring in this could not be held to account because nobody could prove he broke any laws.
Any bank, even if it had been run in a 100% legitimate and trustworthy manner up to that point, could do this.
There is no proposed solution to this method of unprovable fraud in a Libertarian system, so this could happen with any bank, at any time.
In the case of the US, no; in the case of Britain, they found themselves in a "sticky pickle" because they had to fund a war, and then made the foolish attempt at going back to the gold standard.Suryavarman wrote:
So in other words it was because they engaged in inflationary policies in the first place that they found themselves in a sticky pickle?KyussBishop wrote:They did, but they undertook deflationary policies to try and maintain gold reserves and the modified gold standard. Britain did something even more drastic after WWI and intentionally pinned themselves to the gold standard (after years of inflation off of it during the war), leading to enormous deflation (something Churchill regards as one of his biggest mistakes).Suryavarman wrote:
It's entirely possible that those majority of economists are wrong. Don't forget that a huge majority of economists accepted the view that a minimum wage was bad for low wage workers. A view you are arguing against right at this moment in another thread on this forum.KyussBishop wrote:This flies in the face of all of economic history. An accepted view among the majority of (nearly all) economists, through most schools of economics, is that history has shown economic downturns will happen at some point, and thus any economic theory/model must support the condition of economic downturn.
These two points are inherently contradictory.Suryavarman wrote:I do believe that occasionally shocks to the economy such as natural disasters can cause economic downturns.
The problem is it turns the economic balance on its head, inherently disincentivizes (though does not eliminate) investments, and punishes borrowers, whilst even more greatly rewarding lenders.Suryavarman wrote:People will only stop investing if money is increasing in value faster than assets. In the long run that won't happen.
They also can't hold money for ever, eventually they will need to consume something.
If this all aids to the accumulation of wealth, then how is it a bad thing? Or is making people poor a good thing now?
If rich people are made gradually poorer through inflation, then that is a good thing yes, as it incentivizes them to invest their money lest it lose value sitting idle.
The poor will be the ones who have to take out loans and go into debt to get by, which means they will be disproportionately harmed by it, because the value they get out of their loaned money is less than the value they have to pay back (plus interest).Suryavarman wrote:Rich people generally tend to hold their wealth in assets such as stocks or bonds as opposed to money. Poor people on the other hand are more likely to hold their wealth in money. So if anything a deflationary environment will favour the poor.
Anyway, think this part has gotten pretty far off topic now.Suryavarman wrote:Calling Austrian economics or libertarianism a cult is hardly a good critique of either. In fact it is quite pathetic. It's also quite ridiculous to claim that libertarianism was born out of marginalism considering libertarianism is just the modern form of classical liberalism which was around long before marginalism was first developed.
Marginalism isn't only accepted by the Austrian school. It is accepted by every school of economic thought and even some marxists. Well my post replying to SupaNova covered this well; his critique is a lot more thorough than labeling Libertarianism a cult.
As I explained earlier, the court case was against a wide range of anti-competitive practices. I've moved this to the end of my post because it is such a large reply on this point (warranting a whole other post in itself probably).Suryavarman wrote:If they realised they were going to become a monopoly and decided to raise prices they would be punished for price gouging. If they decided to withhold supply to create a shortage of their product they would be punished for that to. The logical approach is to continue to charge low prices and increase market share. Therefore they are being punished for charging low prices when they are eventually punished for having a dominant market share.
Here is a collection of select quotes from the case of Standard Oil Vs US:
https://supreme.justia.com/cases/federal/us/221/1/case.htmlThe bill was divided into thirty numbered sections, and sought relief upon the theory that the various defendants were engaged in conspiring
"to restrain the trade and commerce in petroleum, commonly called 'crude oil,' in refined oil, and in the other products of petroleum, among the several States and Territories of the United States and the District of Columbia and with foreign nations, and to monopolize the said commerce."
...
"That during said first period, the said individual defendants, in connection with the Standard Oil Company of Ohio, purchased and obtained interests through stock ownership and otherwise in, and entered into agreements with, various persons, firms, corporations, and limited partnerships engaged in purchasing, shipping, refining, and selling petroleum and its products among the various States for the purpose of fixing the price of crude and refined oil and the products thereof, limiting the production thereof, and controlling the transportation therein, and thereby restraining trade and commerce among the several States, and monopolizing the said commerce."
...
To establish this charge, it was averred that John D. and William Rockefeller and several other named individuals, who, prior to 1870, composed three separate partnerships engaged in the business of refining crude oil and shipping its products in interstate commerce, organized in the year 1870 a corporation known as the Standard Oil Company of Ohio and transferred to that company the business of the said partnerships, the members thereof becoming, in proportion to their prior ownership, stockholders in the corporation. It was averred that the other individual defendants soon afterwards became participants in the illegal combination and either transferred property to the corporation or to individuals to be held for the benefit of all parties in interest in proportion to their respective interests in the combination; that is, in proportion to their stock ownership in the Standard Oil Company of Ohio. By the means thus stated, it was charged that, by the year 1872, the combination had acquired substantially all but three or four of the thirty-five or forty oil refineries located in Cleveland, Ohio. By reason of the power thus obtained and in further execution of the intent and purpose to restrain trade and to monopolize the commerce, interstate as well as intrastate, in petroleum and its products, the bill alleged that the combination and its members obtained large preferential rates and rebates in many and devious ways over their competitors from various railroad companies, and that, by means of the advantage thus obtained, many, if not virtually all, competitors were forced either to become members of the combination or were driven out of business, and thus, it was alleged, during the period in question , the following results were brought about: a. that the combination, in addition to the refineries in Cleveland which it had acquired as previously stated, and which it had either dismantled to limit production or continued to operate, also from time to time acquired a large number of refineries of crude petroleum, situated in New York, Pennsylvania, Ohio and elsewhere. The properties thus acquired, like those previously obtained, although belonging to and being held for the benefit of the combination, were ostensibly divergently controlled, some of them being put in the name of the Standard Oil Company of Ohio, some in the name of corporations or limited partnerships affiliated therewith, or some being left in the name of the original owners, who had become stockholders in the Standard Oil Company of Ohio, and thus members of the alleged illegal combination. b. That the combination had obtained control of the pipelines available for transporting oil from the oil fields to the refineries in Cleveland, Pittsburgh, Titusville, Philadelphia, New York and New Jersey. c. That the combination during the period named had obtained a complete mastery over the oil industry, controlling 90 percent of the business of producing, shipping, refining and selling petroleum and its products, and thus was able to fix the price of crude and refined petroleum and to restrain and monopolize all interstate commerce in those products.
...
For the stocks and property so acquired, the trustees issued trust certificates. It was alleged that, in 1888, the trustees
"unlawfully controlled the stock and ownership of various corporations and limited partnerships engaged in such purchase and transportation, refining, selling, and shipping of oil,"
...
a decree adjudging the trust agreement to be void, not only because the Standard Oil Company of Ohio was a party to the same, but also because the agreement, in and of itself,
was in restraint of trade and amounted to the creation of an unlawful monopoly. It was alleged that shortly after this decision, seemingly for the purpose of complying therewith, voluntary proceedings were had apparently to dissolve the trust, but that these proceedings were a subterfuge and a sham, because they simply amounted to a transfer of the stock held by the trust in 64 of the companies which it controlled to some of the remaining 20 companies, it having controlled before the decree 84 in all, thereby, while seemingly in part giving up its dominion, yet in reality preserving the same by means of the control of the companies as to which it had retained complete authority.
...
Without attempting to follow the elaborate averments on these subjects spread over fifty-seven pages of the printed record, it suffices to say that such averments may properly be grouped under the following heads: rebates, preferences and other discriminatory practises in favor of the combination by railroad companies; restraint and monopolization by control of pipelines, and unfair practises against competing pipelines; contracts with competitors in restraint of trade; unfair methods of competition, such as local price-cutting at the points where necessary to suppress competition; espionage of the business of competitors, the operation of bogus independent companies, and payment of rebates on oil, with the like intent; the division of the United States into districts and the limiting of the operations of the various subsidiary corporations as to such districts so that competition in the sale of petroleum products between such corporations had been entirely eliminated and destroyed, and, finally, reference was made to what was alleged to be the "enormous and unreasonable profits" earned by the Standard Oil Trust and the Standard Oil Company as a result of the alleged monopoly, which presumably was averred as a means of reflexly inferring the scope and power acquired by the alleged combination.
It goes into quite a lot of detail at-length.
Some of the more important bits (from the actual judgment and ruling of the case, rather than the precursory allegations above):
That's a pretty definite ruling, outlining a myriad of issues; it's simply false to say they were punished for having low prices.By the decree which was entered, it was adjudged that the combining of the stocks of various companies in the hands of the Standard Oil Company of New Jersey in 1899 constituted a combination in restraint of trade and also an attempt to monopolize and a monopolization under § 2 of the Anti-Trust Act. The decree was against seven individual defendants, the Standard Oil Company of New Jersey, thirty-six domestic companies, and one foreign company which the Standard Oil Company of New Jersey controls by stock ownership; these 38 corporate defendants being held to be parties to the combination found to exist.
...
Beyond dispute, the proofs establish substantially as alleged in the bill the following facts:
[...]
2. The organization of the Standard Oil Trust of 1882, and also a previous one of 1879, not referred to in the bill, and the proceedings in the Supreme Court of Ohio, culminating in a decree based upon the finding that the company was unlawfully a party to that trust; the transfer by the trustees of stocks in certain of the companies; the contempt proceedings; and, finally, the increase of the capital of the Standard Oil Company of New Jersey and the acquisition by that company of the shares of the stock of the other corporations in exchange for its certificates.
...
the court below held that the acts and dealings established by the
proof operated to destroy the "potentiality of competition" which otherwise would have existed to such an extent as to cause the transfers of stock which were made to the New Jersey corporation and the control which resulted over the many and various subsidiary corporations to be a combination or conspiracy in restraint of trade in violation of the first section of the act, but also to be an attempt to monopolize and a monopolization bringing about a perennial violation of the second section.
...
the unification of power and control over petroleum and its products which was the inevitable result of the combining in the New Jersey corporation by the increase of its stock and the transfer to it of the stocks of so many other corporations, aggregating so vast a capital, gives rise, in and of itself, in the absence of countervailing circumstances, to say the least, to the prima facie presumption of intent and purpose to maintain the dominancy over the oil industry, not as a result of normal methods of industrial development, but by new means of combination which were resorted to in order that greater power might be added than would otherwise have arisen had normal methods been followed, the whole with the purpose of excluding others from the trade, and thus centralizing in the combination a perpetual control of the movements of petroleum and its products in the channels of interstate commerce.
[...]
the prima facie presumption of intent to restrain trade, to monopolize, and to bring about monopolization resulting from the act of expanding the stock of the New Jersey corporation and vesting it with such vast control of the oil industry, is made conclusive by considering, 1, the conduct of the persons or corporations who were mainly instrumental in bringing about the extension of power in the New Jersey corporation before the consummation of that result and prior to the formation of the trust agreements of 1879 and 1882 2, by considering the proof as to what was done under those agreements and the acts which immediately preceded the vesting of power in the New Jersey corporation, as well as by weighing the modes in which the power vested in that corporation has been exerted and the results which have arisen from it.
...
we think no disinterested mind can survey the period in question without being irresistibly driven to the conclusion that the very genius for commercial development and organization which it would seem was manifested from the beginning soon begot an intent and purpose to exclude others which was frequently manifested by acts and dealings wholly inconsistent with the theory that they were made with the single conception of advancing the development of business power by usual methods, but which, on the contrary, necessarily involved the intent to drive others from the field, and to exclude them from their right to trade, and thus accomplish the mastery which was the end in view.
...
The exercise of the power which resulted from that organization fortifies the foregoing conclusions, since the development which came, the acquisition here and there which ensued of every efficient means by which competition could have been asserted, the slow but resistless methods which followed by which means of transportation were absorbed and brought under control,
the system of marketing which was adopted by which the country was divided into districts and the trade in each district in oil was turned over to a designated corporation within the combination and all others were excluded, all lead the mind up to a conviction of a purpose and intent which we think is so certain as practically to cause the subject not to be within the domain of reasonable contention.
...
The inference that no attempt to monopolize could have been intended, and that no monopolization resulted from the acts complained of, since it is established that a very small percentage of the crude oil produced was controlled by the combination, is unwarranted.
As substantial power over the crude product was the inevitable result of the absolute control which existed over the refined product, the monopolization of the one carried with it the power to control the other, and if the inferences which this situation suggests were developed, which we deem it unnecessary to do, they might well serve to add additional cogency to the presumption of intent to monopolize which we have found arises from the unquestioned proof on other subjects.0 -
KyussBishop wrote: »Please excuse the massive massive size of this post; I assure mods that, while there are non-Irish tangents, there are plenty of parts with Ireland in context (even if not explicitly stated)
You're being pedantic over the semantics of the word here, and funnily, taking the most literal definition in Greek as the authoritative one, rather than that of an actual dictionary:1. exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.
http://dictionary.reference.com/browse/monopoly
A 90% market share would allow pretty effective manipulation of prices.
Well here's the definition from a different dictionary:The exclusive possession or control of the supply or trade in a commodity or service
Any market share could allow manipulation of prices. I'm currently selling petrol for €100 a litre. Sue me.Lets try the more expansive Wikipedia definition:The verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors.
...
In law, a monopoly is business entity that has significant market power, that is, the power, to charge high prices. Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).
https://en.wikipedia.org/wiki/Monopoly
So in other words you're skipping over the economics definition:In economics, a monopoly is a single seller.
Or to take the definition from page 346 of Paul Krugman's textbook Economics: European Edition (emphasis mine):A monopolist is a firm that is the only producer of a good. When an industry is controlled by a monopolist, it is known as a monopoly.By your definition a country could have one primary oil provider, in control of 99% of the market in a country, able to produce millions of barrels of oil a day, but if there was one other oil provider, only able to provide a single barrel a day, then there would be no monopoly.
I don't know how a firm could have a 1% market share by selling one barrel of oil a day when its competitor is producing millions. I doubt it would be actually possible to only produce one barrel a day either.Also, by legal definitions, they pretty typically determine it based on market share; for instance, in the US, monopoly conditions are determined (in law) by percent of market share. In the US this seems to be as little as 70%:
http://www.antitrustlaws.org/Sherman-Antitrust-Law.htmlIf a firm owns at least 70 percent of the market share they may be deemed a monopoly.
Why is it 70%? Why not 80%, 60% or 69.99999999999999%?So, not only does the dictionary definition and other widely regarded definitions of monopoly consider market share, but also the legal interpretation of monopoly conditions (arguably the most important) consider it as well.
The dictionary, the literal meaning of the word and the economic definition all concur that a monopoly means only one seller. They don't concur with some wishy washy definition made up in order to give useless government bureaucrats something to do.By accepted standards of definition of monopoly (including that of the dictionary) Standard Oil did constitute a monopoly; they are one of the most historic examples of monopoly around.
No, Standard Oil wasn't a monopoly because it did not control the entire market.Is there any example in history outside of government-mandated monopoly that, by your standards, meets the definition of monopoly?
Any company that controls 100% of a market is a monopoly. So if there is a company that meets that definition then it's a monopoly.Standard Oil was brought to court for a range of anti-competitive tactics, including preferential deals with railroad companies, buying up most of the market, and allegedly having people physically intimidate rival business.
If you submit that they were brought to court based on low prices, you need to provide some proof on this, because it's completely unsubstantiated.
They were brought to court because of the large market share that they got through charging low prices. Low prices that they managed to offer by engaging in these so called "anti-competitive" practices. When in fact it was their competitors that were anti-competitive by refusing to compete. Their competitors were very reminiscent of the child that takes up the ball and runs home because they are losing.You're putting arguments in my mouth, and imposing your view of monopoly on me when I explicitly stated my view of what constitutes a monopoly, and then using all of that as a bunch of straw men in an attempt to refute my argument.
No you are mistaken, I used the actual definition of a monopoly, not a made up one that is self evidently wrong.Again you're selectively misrepresenting my words: "In my searches for information about Standard Oil, it's interesting that the majority of the articles I can find on Google are from Libertarian sites".
Yes, libertarian sites that are busy trying to correct many of the wrong arguments that people like you are making.So a company can be justified in maintaining a monopoly by your standards?
Obviously. As long as a company achieves monopoly status through its own abilities then there is nothing wrong with it.Right, so you think social segregation is an acceptable price to pay for having private education in the country, and all of the downsides that entails.
Yes.These consequences could include:
Creaming off of easy to teach students, and resulting segregation of more expensive to teach students; this includes students that have minor mental or physical ailments that make them more expensive to teach, not just those with severe problems. This creates a whole new societal exclusion of particular people (and is unacceptable in my view).
Giving private educational institutes the right (not just ability, but explicit right) to discriminate against people of a particular social background, race, nationality, religion, socioeconomic status...just, anything basically.
Arguably, this could lead to a society where the poor and disadvantaged (most particularly the disabled, of various degrees) are not just excluded from normal school life (with corresponding effects on social life), but (through social distance) possibly even vilified and looked down on too.
So because people go to different schools they are going to be vilified for their entire lives?More expensive to teach students being concentrated in schools where the cost of their education is far higher compared to the benefit they receive compared to other schools, in a massively disproportionate fashion.
Among more issues.
Yes because god forbid that people actually pay the true cost of what they get.A bank will stop playing fair because there is an enormous amount of money to be made.
Why would people bank with a bank that isn't going to play fair?If there is huge personal gain to be had from it, without legal consequence, then obviously yes.
There isn't any huge gain to be had by making a business go bankrupt. Considering owners have their shares in a business completely wiped out when that business goes bankrupt there is in fact a huge price to pay for going bankrupt.Nobody would know that the bank was a risk in the first place, that is the point. Once all the reserves are depleted, the bank would be gone and nobody would trust it thereafter, but it's too late then because the gold is gone.
There is no proposed solution to this method of unprovable fraud in a Libertarian system, so this could happen with any bank, at any time.
If the gold is gone then the bank owner can sue the other businesses for fraud. If he did not do that, then the depositors would sue him for fraud. So no it would not happen.In the case of the US, no; in the case of Britain, they found themselves in a "sticky pickle" because they had to fund a war, and then made the foolish attempt at going back to the gold standard.
So in other words it was governments fault yet again.These two points are inherently contradictory.
How so? I don't see how claiming economists could be wrong on something and claiming that an economy could occasionally experience a downturn are in anyway related, never mind contradictory.The problem is it turns the economic balance on its head, inherently disincentivizes (though does not eliminate) investments, and punishes borrowers, whilst even more greatly rewarding lenders.
How does it disincentivise investment?
Also, so what if it punishes borrowers?If rich people are made gradually poorer through inflation, then that is a good thing yes, as it incentivizes them to invest their money lest it lose value sitting idle.
Why is it a good thing to deliberately make people poorer?
Rich people do not leave their money sit idle. That is kind of how they become rich in the first place.
Rich people do on the other hand generally get their hands on new money first. Thereby getting the most benefit from inflation. JP Morgan and the other captains of industry didn't help set up the federal reserve to help the poor at the expense of themselves.The poor will be the ones who have to take out loans and go into debt to get by, which means they will be disproportionately harmed by it, because the value they get out of their loaned money is less than the value they have to pay back (plus interest).
The poor don't have to take out loans to get by. They could save up if they wanted to but they don't. That is why they are poor. Well my post replying to SupaNova covered this well; his critique is a lot more thorough than labeling Libertarianism a cult.
Sorry, he also claims that Austrian Economics is flawed because it adopts marginalism into its economic teachings. Such a well thought out critique.As I explained earlier, the court case was against a wide range of anti-competitive practices. I've moved this to the end of my post because it is such a large reply on this point (warranting a whole other post in itself probably).
Here is a collection of select quotes from the case of Standard Oil Vs US:
https://supreme.justia.com/cases/federal/us/221/1/case.html
It goes into quite a lot of detail at-length.
Some of the more important bits (from the actual judgment and ruling of the case, rather than the precursory allegations above):
That's a pretty definite ruling, outlining a myriad of issues; it's simply false to say they were punished for having low prices.
All the acts they were punished for were acts undertaken in order to ensure low prices. So it is quite fair to claim that they were punished for low prices.0 -
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