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February 14, 2006

Thoughts?

by Eric

“The bigger the information media, the less courage and information they allow. Bigness means weakness.”
– Eric Sevareid (1912-1992) American newsman, journalist, author

This is right in line with the libertarian line of thought on small, competitive entities being better, all around, than larger, non-competitive ones. Your thoughts?

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13 Comments

  1. I think the sentiment is certainly true in the public sector, but I don’t think it really applies to the business world or the media. I’ve always believed that there should not be any “libertarian position” on whether large corporations or small businesses are preferable; that is something for the market to determine, even if that means that a so-called monopoly is created.

    In the business world, bigness is certainly not always a bad thing. Take a look at the top of the Fortune 500 and you’ll find some of the most innovative companies around, and I certainly wouldn’t characterize any of them as weak. Standard Oil, the devil of anti-corporatists everywhere, did great things in its day and look at the thanks it got.

    Comment by Doug — February 14, 2006 @ 9:36 am
  2. Oh, I don’t think there should be any sort of regulation creating smallness or bigness. Generally speaking, though, a libertarian position is that more small groups create more freedom and competition and innovation than do a smaller number of large groups.

    Comment by Eric — February 14, 2006 @ 11:49 am
  3. I agree. I think that cliques and non-competitiveness are vices in the libertarian world view. There’s a small article on this in relation to the current economic situation in Germany in this week’s Economist. Good read but it’s behind a subscriber firewall.

    Comment by Bret — February 14, 2006 @ 1:47 pm
  4. Eric,

    Generally I agree, but it the market that creates innovation and I think that applies regardless of the size of the organization in question.

    While government involvement has distorted the economy signifcantly, large corporations make sense in terms generally understood by free market economists. The economies of scale that are created by large organizations are, I think, pretty obvious. For example, it makes more sense for Buick, Pontiac, Chevrolet, et al to exist as brands under the General Motors banner than for each of them to be seperate companies that would have to create their own supply and distribution chains.

    I also agree that competition creates innovation, but I think that libertarians and others who advoate free markets need to be careful when dealing with this issue. Its easy to fall into the collectivist trap and accept the argument that, for example, Microsoft has a monopoly when it doesn’t. Monopolies only exist when they are created by government fiat, which is why the most egregious monoply in existence today is the United States Postal Service.

    Comment by Doug — February 14, 2006 @ 8:58 pm
  5. Doug, monopolies can, and do, exist without government fiat. That said, however, it should be noted that the across the board adoption of Microsoft Windows and Office for federal and state government computing environments was a significant contributing factor to Microsoft having enough cash on hand to use coercive tactics against PC manufacturers to gain a market monopoly in the consumer PC market.

    Don’t confuse economies of scale with innovation, either. Markets dominated by a few, large players are naturally not innovative. Look at the 1970′s auto market, for example. The Big 3 were not responding to market forces and introducing innovative approaches to styling, fuel economy, safety and other areas that were market issues. It took Japanese and European auto manufacturers getting on the leading edge of what consumers wanted to put enough pressure on the Big 3 to reintroduce innovation.

    The greatest innovations in technology are not coming from the big players like IBM, Sun, HP, etc. Dell revolutionized supply chain management and commoditized the PC market when it was small and struggling. Now they are under pressure from smaller companies, exactly the position they put Compaq, IBM, Gateway, Packard-Bell, etc. in themselves. Large and small competitors in a market creates an effective tension based on a healthy diversity between economies of scale and innovation. It leads to significant choice over a wide variety of areas for the consumer.

    That said, in general, large organizations are weak and susceptible to small competitors that can find the right tipping point in the market.

    Comment by Eric — February 14, 2006 @ 9:27 pm
  6. I can already see that this is going to call for a longer post about this issue on my part, but that’s going to take a day or two for me to put together.

    In the meantime, two points.

    If the operation of the market results in the creation of a so-called “monopoly”, then who are we to argue with it ? The only time that a monopoly is a bad thing, I submit, is when its enforced by government fiat, as in the case of the USPS, where Federal law says that you and I are forbidden from using anyone else to deliver first class mail to each other.

    As far as Microsoft is concerned, there is no coercive monopoly. You don’t want to deal with them if you don’t have to. The fact that they are in the position they are in owes as much to the fact that the average computer user (and by thgat I mean people other than you, me, and pretty much anyone else reading this) doesn’t want to have to deal with the issue of choosing an operating system or internet browser. They are happy with their Dell PC with Windows XP…..and who are we to argue with them ? Perhaps the day will come with Linux or something else will displace Windows as the dominant OS, but that doesn’t mean that Microsoft’s so-called monopoly is, somehow, anti-libertarian.

    I agree with your point that small organizations can, sometimes, displace larger less efficient ones. What concerns me, though, is that I don’t think that there needs to be a libertarian position on what the “right size” of a business needs to be. For that matter, the existence of a monopoly is not inherently against libertarian principles either.

    Comment by Doug — February 14, 2006 @ 9:42 pm
  7. Sorry, perhaps I’m not being clear. Microsoft is not coercing the end consumer, the PC owner. The coercion that is happening is at the OEM level. When we use Microsoft as an example, many people assume that there’s no problem because MS did not, and does not, coerce retail consumers. The actual monopoly exists in the OEM market. Actually, I would argue that the average consumer is not particularly happy with Microsoft products but does not perceive that they have a choice because a monopoly exists at a level that is mostly invisible to them. If consumers actually didn’t care, then AMD would never have stood a chance against Intel in the PC chip wars because consumers would have just blandly accepted what they were offered.

    The USPS argument is a bad one. The truth is, I don’t have to do business with the USPS either. I can choose to never send a letter. The choice of not purchasing from the monopoly always exists, that doesn’t change the fact that the monopoly exists. Monopolies are bad because they are inefficient. Worse, though, is that they are immoral, whether it is a government creating the coercion or a corporation. By creating a situation where your liberty to choose and to fully control your property, they are immoral.

    I fail to see how we can consider government monopoly to be immoral but non-government monopoly to be moral.

    Comment by Eric — February 14, 2006 @ 10:02 pm
  8. Eric,

    Here’s the problem I have……

    From a libertarian perspective, there is no coercion in a market transaction. If you don’t want to deal with Microsoft, you don’t have to. Many people have chosen not to, and many others have decided that they don’t want to deal with the issue of decided what operating system is right for them.

    Even if a so-called monopoly does exist, it still isn’t necessarily a problem. If it resulted from the operation of market forces, and nobody is being forced by operating of law to utilize the monoopoly exclusively, then the field is still open for a competitor (i.e., Linux, Firefox, etc.) to challenge the dominant player.

    This is not the case when the so-called monoply is protected by the state. If you or I tried to deliver first-class mail, we’d be arrested. Similarly, for a long time there was no free market in the delivery of electricity or telephone services; fortunately, that has changed in many states. Today, though, there are still markets where competitors are forbidden from entering the market by virtue of government fiat (i.e., cable television, natural gas delivery, etc.). These are the true monopolies, each of which is antithetical to the idea of a free market economy.

    I guess what I’m trying to say, and I’ll expand on this at some point, is that the mere fact that there is a dominant company in a particular industry (i.e., Microsoft), does not mean that anything for libertarians. In a libertarian society, I can’t conceive of any permissible law that would prevent Microsoft from doing what it has done (outside of patent and copyright laws, which I haven’t fully reconciled myself).

    Comment by Doug — February 14, 2006 @ 10:23 pm
  9. Just one more thought, and then I’ll wait for your post.

    One premise of “libertarian” or “classic liberal” thought is that competition creates wealth and liberty both. Coercive monopoly detracts from both. The only distinction I see between government and private monopoly is whether the coercion is achieved by the threat of force or threat of financial impact. In fact, it seems to me a failing of current libertarians that they embrace one coercive monopoly and rail against another merely because it is a “government”. From a practical perspective, I see little difference.

    That said, I don’t think that a coercive monopoly (i.e. the government) can fix another monopoly. That’s like asking the fox to guard the henhouse. Competitive markets can, and will, correct the problem. That doesn’t change the fact that, while it exists, the private monopoly should be viewed as a problem. Yes, you could choose a Mac instead of a PC. And yes, you could choose FedEx instead of USPS. But there is a cost to bucking the monopoly, and it is generally prohibitive. If it wasn’t prohibitive we would have bucked the monopoly. I wouldn’t mistake acceptance of a condition that seems to be unchangable for actually liking the situation.

    Comment by Eric — February 14, 2006 @ 10:37 pm
  10. Take a quick look at the actual quote made. While it can be extrapolated to other corporations, he’s making a direct statement about the fact that those who acheive a level of power tend to fear the loss of that power. Thus, rather than being aggressive (for example, like a blogger who has no real financial stake in their blog), they tend to play “safe”.

    I think these two links might have some examples of that:

    Catallarchy

    Committees of Correspondence

    Large media outlets, for fear of “offending” people and losing the power they have, stop the behaviors which got them to where they are, and become weak, ineffective distributors of “safe” information.

    Comment by Brad Warbiany — February 15, 2006 @ 6:55 am
  11. Oh, we’re way off that portion of the thought Brad! :-)

    Comment by Eric — February 15, 2006 @ 7:16 am
  12. [...] Eric, Brad and I have been having quite a lively exchange (see here and here and here) over the issue of monopolies, the market economy, and morality. [...]

    Pingback by The Liberty Papers»Blog Archive » Markets and Morality — February 15, 2006 @ 4:53 pm
  13. Markets and Morality

    I’ve been involved in a lively and interesting discussion over at The Liberty Papers. It started with this post by Eric Cowperthwaite that quickly led into a discussion on the libertarian position on monopolies and large corporation. Then, Brad p ……

    Trackback by Below The Beltway — February 15, 2006 @ 5:03 pm

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