Talk:Natural monopoly

Legal Prohibition of Competition

The article currently states: "Claims of natural monopoly are typically used to justify the legal prohibition of competition." I don't think this is entirely accurate. I think it is more accurate to say something like: "Claims of natural monopoly are typically used to justify allowing particular monopolies in certain industries to be exempt from anti-trust laws, in exchange for regulations which limit their profitability and practices, and for protection from competition which could be seen as unfair since they are fettered." And if an example would make this clear, "For example, telephone companies are traditionally required to provide universal service, to bring phone lines to remote rural customers, and to keep residential rates low enough so virtually anyone can afford a phone; generally, this is achieved by cross subsidies from high rates for business customers, and protection from competitors taking advantage of this opportunity."

Original Article?

the following seems to have been intended as part of the overall discussion, but as I am quite confident that I read and understand English perfectly well, and it really doesn't flow here, I'm separating it whilst cleaning up the "sectioning" of this discussion:

This was the original article. I'm not sure it jibes with my understanding of the subject, but maybe I misunderstand what's being said:

a specific case of a monopoly. It's existence is justified by the specific cost structure the monopolist, which barrs other competitors from entering he market by making it impossible for him to produce and sell his goods at a profit. A good practical example is a railway company - a competitor would have to build a second set of tracks in a specific area in order to be able to enter the market. Technically this implicates that the monopolists' long term average costs (LAC) and long term marginal costs (LMC) decrease when the output Q increases.

LA2: Either way, you should keep the pointer back to monopoly. Pointers are always useful, whether they point to related or opposite words. (I have no informed opinion on the economic theory here.)

However, I do have an uninformed opinion: I think it is an open matter of discussion whether any "natural" monopolies exist. It is very hard to do experiments on the national or continental scale, so tradition or ideology has determined what gets to be a monopoly. Radio and TV stations were governmental monopolies in most west European democracies for most of the 20th century. Each city has a municipal monopoly for street lights. Each country has a monopoly currency. Some libertarian economists might think we could handle multiple currencies, regulated by private banks, and there would be no need for a central bank. Maybe this uncertainty should be reflected in the definition.

ACoward: A natural monoploy has a exact meaning in economics and it does exist. It is a good that has the average cost curve above the marginal cost curve at the point that the demand curve intersects the marginal cost curve. If perfect competion exists, the price will be set where the marginal cost curve intersects the demand curve. Since this is below the average cost curve, in the event of perfect competion all the businesses lose money, so perfect competition cannot exist. This causes one of three possibilities: either the government takes over the market, the market dies, or the government grants a monopoly/oligarchy to some party. A classic example of this is the market for a book. If anyone can sell the book, than soon the cost will equal the marginal cost (ie. the cost of the paper) and there will be no money for the author, hence the goverment grants a monopoly of copyright.

External link - Thomas DiLorenzo

What a load of pants. For example, if you're going to write an article heavily using the theory of contestable markets, you ought to use the term, and credit Baumol. (And preferably have read Shapiro's response.) And his argument about regulatory capture would never in a million years lead the man to the conclusion of doing away with the private element doing the capturing. Rd232 21:20, 2 Jan 2005 (UTC)

Having taken the time to read the thing properly (I'd only skimmed it before), I have to say I'm shocked. It's not just bad; in the way it tries to construct arguments out of nothing but hot air and misdirection, it borders on the mendacious. Even beyond that, it's just useless at making its case. It really should go; it's useless for anyone interested in the possibility that there is no such thing as natural monopoly. But (sigh) that would lead to an edit war, plus I can't find anything better in that line of thought, so never mind. Rd232 00:11, 14 Jan 2005 (UTC)

At least http://www.mises.org/journals/scholar/Sechrest7.pdf, on public goods, to take another one from that journal at random, is interesting, though not for the reason the author thinks. The examples of privateering and lighthouses (non-govt provision of public goods) are interesting: the former only works as national defence (as opposed to licenced piracy) to the extent that the privateers are blinded by patriotism to their self-interest; and the latter needs some social mechanism (ie disapproval of free riders) to avoid the tragedy of the commons the purely homo economicus free market would create. Stimulating, at least (rather than pointless and aggravating, like DiLorenzo's article). Rd232 00:47, 14 Jan 2005 (UTC)

Regulation

It strikes me actually that most of the Existence and Persistence belongs in Regulation, which should be made more systematic (noting major forms).

• Only the disruptive technology issue (canals example) really belongs under the Existence and Persistence heading, and that could perhaps be accommodated under the Regulation option of doing nothing (wait for technology change to make the natural monopoly disappear or its effects be mitigated).
• Competition for the market (various forms of franchising) doesn't happen without government intervention; it's a form of regulation. (Private monopolies may outsource parts of the business for efficiency reasons, but they obviously themselves remain monopolies.)
• Common carriage-type competition (eg British Model electricity liberalisation) equally doesn't happen without government intervention; and equally can be considered a form of regulation.
• The contestable markets argument actually doesn't apply to natural monopoly; competitors can't contest such markets when there is an incumbent (though there may be industrial users/household users differences). Only the contestable markets analogy applies, where monopolies can be contested by users complaining to government, which can institute some form of regulation (which in this context includes public ownership as a form of 'direct' regulation).

Also note

• Competition for corporate control via the capital market (takeovers + mergers)
• Surrogate competition ('yardstick' comparison or "benchmarking"), between geographical monopolies
• unbundling of vertically-integrated industries can reduce the scope of natural monopoly (eg electricity liberalisation, separating generation from transmission/distribution), but at the cost of loss of economies of scope (eg electricity liberalisation).

I'm also inclined to point out to RJII that if he really believes there's no such thing as natural monopoly, perhaps he should try raising the capital to build a new water or electricity network for his home town alongside the old. He would of course be laughed all the way out of the bank. Rd232 12:46, 12 Jan 2005 (UTC)

No, you're not going to engage me into a debate about whether a natural monopoly is possible. It doesn't matter. You need to understand that this is not about me. This is about stating the position of the advocates of laissez-faire. Whether their position is correct or incorrect is irrelevant. The purpose of the paragraph is simply to document what that position is. And, the fact that you don't want people to know what that position is is highly suspect. RJII 22:57, 13 Jan 2005 (UTC)

This is an economics entry in an encylopedia. If you want to provide economics arguments against natural monopoly, fine. If you want to find some political article to put views about the creation of regulated monopolies being completely unnecessary, well and good; we can link to it from here. Unless you can find a respected economist or some economic arguments or some empirical data to back it up, what amounts to a simple of statement of "ner, I don't think it exists" is not appropriate. And saying "advocates of laisser-faire" is misleading. Other than the von Mises people, I've yet to see any attempt to deny completely the existence of natural monopoly (I was going to say "serious attempt", but the DiLorenzo effort is too pathetic to count). My point is, in the absence of any actual argument, you do need to show that this view is actually held by people other than yourself plus isolated muppets. You know how many muppets there are who go on about fractional reserve banking being a conspiracy? We don't let their views distort the relevant Wikipedia articles either, because they're patent nonsense. So I'm afraid you do need to engage in some actual debate; that's how Wikipedia works. Rd232 00:26, 14 Jan 2005 (UTC)

If you don't want extensive debate on Talk, how about you agree that the article be unprotected and let me have a go at structuring the regulation section and do some general editing, and if the result doesn't satisfy you, we can discuss your disputed paragraph again? Rd232 00:26, 14 Jan 2005 (UTC)

Go ahead and have the article unlocked. I'll just put the paragraph back in. RJII 00:34, 14 Jan 2005 (UTC)

I know you're probably feeling sore for being banned over it (I would) but how about being a tiny bit more cooperative? Even allow the possibility that the article might end up so that you'll agree your para isn't needed? Rd232 00:56, 14 Jan 2005 (UTC)

No, I'm not sore at all. I don't take it personally...rules are rules..3 reverts, whatever. So don't waste your time trying to patronize me. RJII 01:20, 14 Jan 2005 (UTC)

I was trying to express sympathy with you, as well as elicit a more helpful response, but as you say, that seems to be a waste of time. Rd232 12:39, 14 Jan 2005 (UTC)

"Other than the von Mises people, I've yet to see any attempt to deny completely the existence of natural monopoly" ... well, don't you think that the "von Mises people" (usually called the Austrian school, by the way) should have their arguments about natural monopoly represented in the article about natural monopoly? Wikipedia has a neutral point of view policy -- if you're looking for a sympathetic point of view policy (which would say that the article on natural monopoly needs to present it in the views of those who favor the idea) you should consider editing Wikinfo instead.

I said "von Mises people" because I was looking at www.vonmises.org. I don't know how widespread the viewis even amongst the Austrian school. As for whether they should "have their arguments about natural monopoly represented" - I think I've made perfectly clear that if anybody can actually come up with some arguments, then there is a place for them. 172 and I have been deleting RJII's paragraph not because we disagree with the views, but because it neither makes criticism (by presenting proper arguments) not describes critics neutrally. (Hence the shorthand description in the edit summary of "content-free POV".) NB I don't know what Wikinfo is. Rd232 16:43, 14 Jan 2005 (UTC)

I'm really concerned that you and 172 seem to be more interested in deleting things you don't like than in coming to terms with the fact that we're collaborating on an encyclopedia. That means that instead of just outright deleting contributions and insulting people (you've now added "muppet" to "content-free" and "Randroid", I see) you should consider working on integrating the disparate views into an article.

Look, given RJII's reluctance to engage in reasoned debate, it's hardly surprising that the odd insult creeps in. Sticks and stones, etc. (And in general, the insults haven't been directed at editors so much as at edits and at info sources. A fine distinction, but still.) Rd232 16:43, 14 Jan 2005 (UTC)

It seems to me this article is garishly incomplete lacking text describing the Austrian position, if that position has a lot to say about the idea of natural monopoly. I'm not an expert on Austrian economics; I just don't like seeing what looks to me like a campaign of systematic exclusion, especially one so doctrinaire that it has to reassure itself by insulting those it seeks to exclude. That's not encyclopedist behavior. --FOo 16:08, 14 Jan 2005 (UTC)

Big 'if' in that first sentence. To repeat: actual arguments are not being systematically excluded and won't be in future. And are you seriously suggesting that RJII's para was encyclopedic? Rd232 16:43, 14 Jan 2005 (UTC)

It's worth pointing out that he never made any serious attempt to address the criticisms made. He could have at least tried to NPOV it, if he didn't have more substance to add. (And there are arguments and evidence about the extent of natural monopoly in practice; but he seems too focussed on insisting that the non-argument "it might not exist at all and the concept's probably a con anyway" be included without supporting justification to go look for it.) Rd232 16:43, 14 Jan 2005 (UTC)

Remove "Natural monopoly in technology" section

The "Natural monopoly in technology" section is mostly speculative, unsupported claims. I am tempted to butcher it. This section has 3 sentences:

The first sentence claims that any technology is inherently a natural monopoly, and the citation is a blog entry that no longer exists, and that even cites this Wikipedia entry in the article. (http://web.archive.org/web/20150328031118/http://www.eleven-strategy.com/does-the-arrival-of-the-internet-mean-the-end-of-natural-monopolies/)

The second sentence explains why airlines are not natural monopolies, but has no citation.

The third sentence explains utilities and has a reasonable citation.